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<TITLE>S-1</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

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<DIV align="center" style="font-size: 10pt;">
<B>As filed with the Securities and Exchange Commission on
December&nbsp;13, 2005</B>
</DIV>

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<DIV align="right" style="font-size: 10pt;">
<B>Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>
</DIV>

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</FONT></DIV>

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<B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>Washington,&nbsp;D.C. 20549</B>
</DIV>

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<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
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<B>Form&nbsp;S-1</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center" style="font-size: 12pt;">
<B>REGISTRATION STATEMENT</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>UNDER</B>
</DIV>

<DIV align="center" style="font-size: 12pt;">
<B>THE SECURITIES ACT OF 1933</B>
</DIV>

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<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>American Railcar Industries, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Exact name of Registrant as specified in its charter)</I>
</DIV>

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<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

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</FONT></DIV>

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<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Delaware</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>3743</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>43-1481791</B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I>(State or other jurisdiction of<BR>
    incorporation or organization)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(Primary Standard Industrial<BR>
    Classification Code Number)</I></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <I>(I.R.S. employer<BR>
    identification number)</I></TD>
</TR>

</TABLE>
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</FONT></DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>100 Clark Street</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>St. Charles, MO 63301</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>(636)&nbsp;940-6000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Address, including zip code, and telephone number, including
area code, of registrant&#146;s principal executive offices)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>James J. Unger</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>President and Chief Executive Officer</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>American Railcar Industries, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>100 Clark Street</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>St. Charles, MO 63301</B>
</DIV>

<DIV align="center" style="font-size: 9pt;">
<B>(636)&nbsp;940-6000</B>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>(Name, address, including zip code, and telephone number,</I>
</DIV>

<DIV align="center" style="font-size: 8pt;">
<I>including area code, of agent for service)</I>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Copies To:</I></B>
</DIV>

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<TR style="font-size: 1pt;">
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B>Philip J. Flink, Esquire<BR>
    Samuel P. Williams, Esquire<BR>
    BROWN RUDNICK BERLACK ISRAELS LLP<BR>
    One Financial Center<BR>
    Boston, MA 02111<BR>
    (617) 856-8200</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    <B>Lisa L. Jacobs, Esquire<BR>
    SHEARMAN&nbsp;&#38; STERLING LLP<BR>
    599 Lexington Avenue<BR>
    New York, NY 10022<BR>
    (212) 848-4000</B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>Approximate date of commencement of proposed sale to the
public:</B> As soon as practicable after the effectiveness of
this registration statement.
</DIV>

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</FONT></DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule&nbsp;415 under the Securities Act of 1933, please check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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If this form is filed to register additional securities for an
offering pursuant to Rule&nbsp;462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If this form is a post-effective amendment filed pursuant to
Rule&nbsp;462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
If delivery of the prospectus is expected to be made pursuant to
Rule&nbsp;434, please check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;
</FONT>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center" style="font-size: 9pt; margin-top: 20pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

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</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 2pt; ">

<TR style="font-size: 1pt;">
    <TD width="46%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- Right VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Proposed maximum aggregate</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Amount of</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Title of each class of securities to be registered</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>offering price(a)(b)</B></TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>registration fee(c)</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common Stock, par value $0.01&nbsp;per share</DIV>
    </TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $150,000,000</TD>
    <TD style="border-right:1.5pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="bottom">
    $17,655</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(a)&nbsp;</TD>
    <TD align="left">
    Includes shares of Common Stock to cover over-allotments, if any.</TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 7pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(b)&nbsp;</TD>
    <TD align="left">
    Estimated solely for the purpose of calculating the registration
    fee in accordance with Rule&nbsp;457(o) promulgated under the
    Securities Act, as amended.</TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 7pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(c)&nbsp;</TD>
    <TD align="left">
    A registration fee in the amount of $17,655 was previously paid
    by American Railcar Industries, Inc., a Missouri corporation
    (&#147;American Railcar Industries Missouri&#148;) in connection
    with the filing of a Registration Statement on Form&nbsp;S-1
    (Registration No.&nbsp;333-128177) on September&nbsp;8, 2005.
    The Registrant is a wholly owned subsidiary of American Railcar
    Industries Missouri. Pursuant to Rule&nbsp;457(p) under the
    Securities Act, the filing fee of $17,655 previously paid by
    American Railcar Industries Missouri is to be offset against the
    filing fee of $17,655 required for the filing of this
    Registration Statement. As a result, no filing fee is due in
    connection with this filing.</TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;
<B>The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section&nbsp;8(a)
of the Securities Act, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to said Section&nbsp;8(a), may determine.</B>
</DIV>

<DIV align="center" style="font-size: 3pt; margin-top: 8pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="center" style="font-size: 4pt;">
<DIV style="width: 100%; border-top: 2.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<TABLE width="100%" cellpadding="5" style="border: 3pt double #000000; margin-bottom: 6pt; font-size: 10pt"><TR><TD>
<B><FONT style="font-size: 9pt" color="#E8112D" face="helvetica,arial">The
information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell these securities and we are not soliciting offers
to buy these securities in any jurisdiction where the offer or
sale is not
permitted.</FONT><FONT style="font-size: 9pt" face="helvetica,arial">
<BR>

</FONT></B>
</TD></TR></TABLE>

<DIV style="margin-top: 1pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="33%"></TD>
    <TD width="33%"></TD>
    <TD width="33%"></TD>
</TR>

<TR valign="top">
    <TD align="left"> <FONT style="font-size: 8pt" color="#E8112D" face="helvetica,arial">PRELIMINARY PROSPECTUS</FONT></TD>
    <TD align="center"><FONT color="#E8112D" face="helvetica,arial">Subject to Completion</FONT></TD>
    <TD align="right"><FONT color="#E8112D" face="helvetica,arial">December&nbsp;13, 2005</FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10848s1y1084806.gif" alt="(ARI LOGO)">
</DIV>

<DIV align="left" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">American Railcar Industries,
Inc.</FONT></B>
</DIV>

<DIV align="left" style="font-size: 14pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><FONT face="helvetica,arial">Common Stock</FONT></B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This is our initial public offering of our common stock. No
public market currently exists for our common stock. We are
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock by this prospectus. We expect the public
offering price to be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect to apply to have our common stock approved for
quotation on the Nasdaq National Market under the trading symbol
&#147;ARII.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Investing in our common stock involves a high degree of risk.
Before buying any shares, you should carefully read the
discussion of material risks of investing in our common stock in
&#147;Risk factors&#148; beginning on page&nbsp;14 of this
prospectus.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Per Share</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Total</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Public offering price</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underwriting discounts and commissions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds, before expenses, to us</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters may also purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock at the public offering price, less the
underwriting discounts and commissions, to cover
over-allotments, if any, within 30&nbsp;days from the date of
this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters are offering the common stock as set forth
under &#147;Underwriting.&#148; Delivery of the shares will be
made on or
about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><B><FONT face="helvetica,arial">UBS Investment Bank</FONT></B></TD>
    <TD align="right"><B><FONT face="helvetica,arial">Bear, Stearns&nbsp;&#38; Co. Inc.</FONT></B></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 3pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 26%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 16pt;">
<B>
<FONT style="font-size: 14pt" face="helvetica,arial">BB&#38;T
Capital Markets</FONT></B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;">

<TR>
    <TD width="21%"></TD>
    <TD width="79%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B> <FONT style="font-size: 14pt" face="helvetica,arial">CIBC
    World Markets</FONT></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 16pt;">

<TR>
    <TD width="43%"></TD>
    <TD width="57%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B> <FONT style="font-size: 14pt" face="helvetica,arial">Morgan
    Keegan &#38; Company, Inc.</FONT></B></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The date of this prospectus
is &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2005.
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV align="center"><img src="y10848s1y1084811.gif" alt="Cover art">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- TOC -->
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name="tocpage"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with additional information or
information different from that contained in this prospectus. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of shares
of our common stock.
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
TABLE OF CONTENTS
</DIV>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; ">

<TR style="font-size: 1pt;">
    <TD width="93%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#101'>Prospectus summary</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    1</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    &nbsp;<A HREF='#102'>Risk factors</A></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    14</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#103'>Special note regarding forward-looking
    statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    37</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#104'>Use of proceeds</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    39</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#105'>Dividend policy and restrictions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    41</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#106'>Capitalization</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    42</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#107'>Dilution</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    43</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#108'>Selected consolidated financial data</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    44</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#109'>Management&#146;s discussion and analysis
    of financial condition and results of operations</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    47</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#110'>Industry</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    77</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#111'>Business</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    84</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#112'>Management</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    104</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#113'>Certain relationships and related party
    transactions</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    117</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#121'>Principal stockholders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    132</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#114'>Description of capital stock</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    135</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#115'>Shares eligible for future sale</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    139</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#116'>Material U.S.&nbsp;income tax
    considerations for non-U.S.&nbsp;holders</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    141</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#117'>Underwriting</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    145</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#118'>Legal matters</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    149</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#119'>Experts</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    149</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#120'>Where you can find more information</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    149</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Index to financial statements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">
    F-1</TD>
</TR>

<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv2w1.htm">EX-2.1: FORM OF AGREEMENT AND PLAN OF MERGER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv3w1.htm">EX-3.1: CERTIFICATE OF INCORPORATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv3w2.htm">EX-3.2: BYLAWS</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv3w3.htm">EX-3.3: FORM OF CERTIFICATE OF OWNERSHIP AND MERGER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv4w1.htm">EX-4.1: SPECIMEN COMMON STOCK CERTIFICATE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv4w2.htm">EX-4.2: FORM OF REGISTRATION RIGHTS AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w1.htm">EX-10.1: ASSET TRANSFER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w2.htm">EX-10.2: LICENSE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w3.htm">EX-10.3: LICENSE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w4.htm">EX-10.4: MANUFACTURING SERVICES AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w5.htm">EX-10.5: AMENDED AND RESTATED SERVICING AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w6.htm">EX-10.6: BUSINESS CONSULATION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w7.htm">EX-10.7: BUSINESS CONSULATION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w8.htm">EX-10.8: GUARANTY OF THE MASTER LEASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w9.htm">EX-10.9: LOAN AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w9wa.htm">EX-10.9.A: BOND GUARANTY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w9wb.htm">EX-10.9.B: DEED OF TRUST AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w10.htm">EX-10.10: LOAN AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w10wa.htm">EX-10.10.A: BOND GUARANTY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w10wb.htm">EX-10.10.B: DEED OF TRUST AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w11.htm">EX-10.11: LEASE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w11wa.htm">EX-10.11.A: BOND GUARANTY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w12.htm">EX-10.12: AMENDED AND RESTATED SERVICES AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w13.htm">EX-10.13: INDENTURE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w14.htm">EX-10.14: PROMISSORY NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w15.htm">EX-10.15: EXCHANGE AND REDEMPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w16.htm">EX-10.16: LOAN AND SECURITY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w17.htm">EX-10.17: CORBITT EQUIPMENT ACQUISITION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w18.htm">EX-10.18: MULTI-YEAR PURCHASE AND SALE AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w19.htm">EX-10.19: 2005 EQUITY INCENTIVE PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w20.htm">EX-10.20: EMPLOYMENT AGREEMENT WITH WILLIAM P. BENAC</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w21.htm">EX-10.21: PROMISSORY NOTE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w22.htm">EX-10.22: ASSIGNMENT AND ASSUMPTION, NOVATION AND RELEASE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w23.htm">EX-10.23: INTEREST TRANSFER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w24.htm">EX-10.24: FORM OF REDEMPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w25.htm">EX-10.25: OHIO CASTINGS COMPANY, LLC AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w26.htm">EX-10.26: EMPLOYMENT AGREEMENT WITH JAMES J. UNGER</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w27.htm">EX-10.27: LETTER AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w28.htm">EX-10.28: FORM OF OPTION AGREEMENT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w29.htm">EX-10.29: 2005 EXECUTIVE INCENTIVE PLAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv10w30.htm">EX-10.30: EMPLOYMENT AGREEMENT WITH JAMES A. COWAN</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv21w1.htm">EX-21.1: SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv23w1.htm">EX-23.1: CONSENT OF GRANT THORNTON LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv23w2.htm">EX-23.2: CONSENT OF GRANT THORNTON LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv23w3.htm">EX-23.3: CONSENT OF KPMG LLP</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv23w4.htm">EX-23.4: CONSENT OF GLOBAL INSIGHT</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv24w1.htm">EX-24.1: POWER OF ATTORNEY</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv99w1.htm">EX-99.1: CONSENT OF JAMES M. LAISURE</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="y10848s1exv99w2.htm">EX-99.2: CONSENT OF JAMES C. PONTIOUS</A></FONT></TD></TR>
</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<!-- /TOC -->
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI&#174;, Pressureaide&#174;, Center Flow&#174; and our railcar
logo are our U.S.&nbsp;registered trademarks. Each trademark,
trade name or service mark of any other company appearing in
this prospectus belongs to its respective holder.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The market and industry data and forecasts included in this
prospectus are based upon independent industry sources,
including the Association of American Railroads, the Railway
Supply Institute, Inc., Global Insight and the
U.S.&nbsp;Department of Agriculture. Although we believe that
these independent sources are reliable, we have not
independently verified the accuracy and completeness of this
information, nor have we independently verified the underlying
economic assumptions relied upon in preparing any forecasts. See
&#147;Risk factors&#151;Risks related to our business&#151;The
market and industry data contained in this prospectus, including
estimates and forecasts relating to the growth of the railcar
market, cannot be verified with certainty and may prove to be
inaccurate.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been advised by Global Insight that forecasts and
projections included in this prospectus that have been
attributed to Global Insight should not be construed as a
guarantee that the forecasts and projections will, in fact, be
achieved. These forecasts and projections have been prepared on
the basis of certain assumptions, judgments and hypotheses and
accordingly no representation or warranty of any kind is or can
be made with respect to the accuracy or completeness of, and no
representation or warranty shall be inferred from, the forecasts
and projections. The forecasts and projections made by Global
Insight herein are based on assumptions as to future events and,
therefore, are subject to varying degrees of uncertainty.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="center" style="font-size: 8pt;">
<B>i</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<A name='101'></A>
</DIV>

<!-- link1 "Prospectus summary" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prospectus summary
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>This summary highlights information contained elsewhere in
this prospectus. It is not complete and may not contain all the
information that may be important to you. You should read the
entire prospectus carefully before making an investment
decision, especially the information presented under the heading
&#147;Risk factors&#148; and our consolidated financial
statements and the related notes included elsewhere in this
prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR COMPANY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a leading North American manufacturer of covered hopper
and tank railcars. We also repair and refurbish railcars,
provide fleet management services and design and manufacture
certain railcar and industrial components used in the production
of our railcars as well as railcars and non-railcar industrial
products produced by others. We provide our railcar customers
with integrated solutions through a comprehensive set of high
quality products and related services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our primary customers include companies that purchase railcars
for lease by third parties, or leasing companies, industrial
companies that use railcars for freight transport, or shippers,
and Class&nbsp;I railroads. In servicing this customer base, we
believe our integrated railcar repair and refurbishment and
fleet management services and our railcar components
manufacturing business help us further penetrate the general
railcar manufacturing market. These products and services
provide us with significant cross-selling opportunities and
insights into our customers&#146; railcar needs that we use to
improve our products and services and enhance our reputation for
high quality. Although we build, service and manage railcars
through an integrated, complementary set of products and
services, we have chosen not to offer railcar leasing services
so that we do not compete with our leasing company customers,
which represent a significant source of our revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the year ended December&nbsp;31, 2004, we generated total
revenues of $355.1&nbsp;million and net earnings of
$1.9&nbsp;million. For the nine months ended September&nbsp;30,
2005, we generated total revenues of $442.1&nbsp;million and net
earnings of $14.5&nbsp;million. As of September&nbsp;30, 2005,
our total railcar backlog was 15,567 railcars, compared to a
total backlog of 5,653 railcars as of September&nbsp;30, 2004.
The reported backlog as of September&nbsp;30, 2005 includes
9,000&nbsp;railcars relating to the CIT Group&#146;s minimum
purchase obligations under its agreement with us based upon an
assumed product mix consistent with CIT&#146;s orders for
railcars. This agreement is described below under
&#147;Management&#146;s discussion and analysis of financial
conditions and results of operations &#151; Backlog.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR HISTORY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Since our formation in 1988, we have grown our business from
being a small provider of railcar components and maintenance
services to one of North America&#146;s leading integrated
providers of railcars, railcar components, railcar maintenance
services and fleet management services. In October 1994, we
acquired railcar components manufacturing and railcar
maintenance assets from ACF Industries, Incorporated (now known
as ACF Industries LLC), or ACF, a company controlled by
Carl&nbsp;C. Icahn, our principal beneficial stockholder and the
chairman of our board of directors. Through this acquisition, we
also hired members of ACF&#146;s management, many of whom,
including our president, remain a significant part of our
current management team. These executives brought with them
established relationships with important customers and suppliers
and extensive industry knowledge, as ACF and its predecessor
companies have roots in the railcar manufacturing industry that
trace back to 1873. Led by this management team, we entered the
railcar manufacturing business through the construction of new
manufacturing facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In October 1995, we produced our first railcar at our Paragould,
Arkansas manufacturing facility. We primarily manufacture
covered hopper railcars at our Paragould facility, but we have
the ability to manufacture many other types of railcars at this
facility. The Paragould facility initially had two railcar
manufacturing lines. We added painting and lining capabilities
to this facility in 1999 and a third
</DIV>

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<DIV align="right" style="font-size: 8pt;">
<B> 1</B>
</DIV>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
manufacturing line in December 2004. We are currently
constructing additional painting and lining capabilities at our
Paragould facility to increase efficiency, which we expect to
open at the end of 2005. Our Paragould facility also features
component manufacturing capabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In January 2000, we produced our first railcar at our Marmaduke,
Arkansas manufacturing facility. We manufacture tank railcars at
this facility. The design of this facility enables us to
manufacture many different types of tank railcars at the same
time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Since 1994, we have significantly expanded our components
manufacturing and railcar services operations. Our operations
now include three railcar assembly, sub-assembly and fabrication
facilities, three railcar and industrial component manufacturing
facilities, six railcar repair plants and four mobile repair
units. Our services business has grown to include online access
by customers, remote fleet management, expanded painting, lining
and cleaning offerings, regulatory consulting and engineering
support. Additionally, members of our management team helped
found and develop, and continue to operate, a joint venture,
Ohio Castings Company, LLC, which we refer to as Ohio Castings,
in which we own a one-third interest and that manufactures and
sells sideframes, bolsters, couplers and yokes for distribution
to third parties and to us. We believe that our involvement in
this joint venture helps us maintain our levels of production at
competitive prices, despite industry-wide shortages of these
potentially capacity constraining components.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR INDUSTRY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Overview.</I> Demand for railcars reflects their importance
to the North American economy in moving goods and raw materials.
In periods of rising economic activity, fleet utilization
typically increases, driving an increase in demand for new
railcars, which also increases backlog for new railcars.
Conversely, during economic slowdowns, fleet utilization
typically declines, resulting in reduced demand, deliveries and
backlog for new railcars. According to Global Insight&#146;s
Freight Car Outlook Third Quarter 2005, orders for new railcars
are expected to be strong with deliveries projected to
average&nbsp;59,400 railcars per year from 2005 through 2010.
This compares to deliveries of 17,714 railcars in 2002, 32,184
railcars in 2003 and 46,871 railcars in 2004, as reported by
Railway Supply Institute, or RSI. RSI reported that at the end
of 2004, the total backlog for the railcar manufacturing
industry reached 58,677 railcars. This growth trend has
continued through the first nine months of 2005, with 54,134 new
railcars ordered and 50,682 railcars delivered, with total
backlog increasing to 60,986 railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe the main characteristics and trends affecting the
North American railcar industry are:
</DIV>

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<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the cyclical nature of the railcar
    market;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the replacement demand for the
    aging North American railcar fleet;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the shift in the customer base
    from railroads to leasing companies and shippers;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the consolidation of railcar
    manufacturers.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Covered hopper railcars.</I> North American demand for
covered hopper railcars has shown renewed strength due to
increased shipments of a variety of products including plastics,
chemicals and food. We believe there will be strong demand for
covered hopper railcars in the North American market over the
next several years. Global Insight&#146;s Freight Car Outlook
Third Quarter 2005 forecasts a significant increase in
deliveries of covered hopper railcars, from 3,801 in 2003 and
5,602 in 2004 to 14,927 in 2005 and 16,926 in 2006, with
deliveries averaging approximately 15,800 railcars per year from
2007 through 2010. We believe the main characteristics and
trends affecting the North American covered hopper railcar
market are:
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the health of the
    U.S.&nbsp;economy;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">increases in production of a
    number of consumer and business durable goods;
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 2</B>
</DIV>
</DIV>

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    <TD width="97%"></TD>
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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">increases in domestic and
    international demand for U.S.&nbsp;agricultural products;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">increases in demand for corn used
    in ethanol production;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the need to replace aging covered
    hopper railcars.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Tank railcars.</I> Tank railcars are in higher demand in
North America as manufacturing activity and the need for liquids
and gases used in manufacturing increases. The manufacturing of
tank railcars is highly regulated and their production requires
a specially trained workforce and dedicated manufacturing
facilities. As a result, the tank railcar market is difficult to
enter and competition is concentrated. We believe the demand for
tank railcars in the North American market will continue to be
strong and stable over the next several years. Global
Insight&#146;s Freight Car Outlook Third-Quarter 2005 projects
an increase in tank railcar deliveries, from 8,176 in 2003 and
8,939 in 2004, to 11,069 in 2005 and 11,075 in 2006, with
deliveries averaging approximately 9,900 tank railcars per year
from 2007 through 2010. We believe the main characteristics and
trends affecting the North American tank railcar market are:
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">increases in manufacturing
    activity and the resulting demand for higher volumes of
    chemicals and gases;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">increases in demand for
    petrochemicals, ethanol, edible and lubricating oils and liquid
    food products;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the need to replace aging tank
    railcars.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These trends affecting the railcar industry and the covered
hopper and tank railcar markets are discussed in the section
entitled &#147;Industry.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR BUSINESS STRENGTHS AND COMPETITIVE ADVANTAGES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that the following key business strengths and
competitive advantages will contribute to our growth:
</DIV>

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    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Leading railcar manufacturer
    with focus on the covered hopper and tank railcar
    markets.</FONT></I></B><FONT style="font-size: 10pt"> We are a
    leading North American manufacturer of covered hopper and tank
    railcars. Over the last three years, we believe we have produced
    an estimated 33% of the covered hopper railcars and an estimated
    16% of the tank railcars delivered in North America. Based on a
    report by the Association of American Railroads, these represent
    the two largest segments of the North American railcar industry,
    with covered hopper railcars representing approximately 30% and
    tank railcars representing approximately 19% of the total North
    American railcar fleet, based on the number of railcars in
    service. We believe our railcars are differentiated by their
    superior quality, innovation and reliability.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Modern non-union, low-cost
    railcar manufacturing facilities in strategic
    locations.</FONT></I></B><FONT style="font-size: 10pt"> Unlike
    many of our competitors, we manufacture all of our railcars in
    modern facilities built in the last ten years. We designed these
    facilities to provide manufacturing flexibility and allow for
    the production of a variety of railcar sizes and types. We
    strategically located these facilities in close proximity to our
    main customers and suppliers. This reduces freight time and
    costs for the components we purchase and the time for delivery
    of completed railcars. Over the past several years, we increased
    our production capacity and efficiency and reduced our costs per
    railcar through a number of targeted operational and design
    improvements, which has also reduced the amount of raw materials
    necessary for production of railcars. Currently none of our over
    1,100 employees at our Paragould and Marmaduke railcar
    manufacturing facilities are represented by a union. However,
    employees of three of our repair facilities and one of our
    component manufacturing facilities, representing 16% of our
    total workforce as of September&nbsp;30, 2005, are represented
    by a union.
    </FONT></TD>
</TR>

</TABLE>

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<DIV align="right" style="font-size: 8pt;">
<B> 3</B>
</DIV>
</DIV>

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
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<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Preferred access to
    components through in-house production, a joint venture and
    strategic sourcing
    arrangements.</FONT></I></B><FONT style="font-size: 10pt"> We
    produce many of the components necessary to our railcar
    manufacturing business ourselves and we own a one-third interest
    in, and our management team operates, our Ohio Castings joint
    venture, from which we obtain certain other components. We
    believe our in-house production capabilities and our involvement
    in this joint venture help us maintain access to components at
    competitive prices, despite industry-wide shortages of these
    potentially capacity constraining components. We also have
    developed and actively maintain strategic sourcing arrangements
    and strong relationships with our suppliers. These arrangements
    and relationships help ensure our continued access to critical
    components and raw materials that we use to produce railcars,
    including steel, wheels, and heavy castings. We believe our
    attention to strengthening our supply chain helps us maintain
    operational continuity and high production levels.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Integrated railcar repair
    and refurbishment and fleet management services complement
    railcar
    manufacturing.</FONT></I></B><FONT style="font-size: 10pt"> We
    provide a wide array of complementary products and services to
    the railcar industry. Unlike some other railcar manufacturers,
    we also repair, maintain and provide fleet management services
    for existing railcars, including railcars built by others, and
    manufacture railcar components for third parties and us. We
    believe this diverse product and service offering provides us
    with a competitive advantage relative to other railcar
    manufacturers, primarily in the form of cross- selling
    opportunities. We also believe that our ability to address the
    needs of our customers throughout the lifecycle of a railcar
    enhances our customer relationships and provides us with
    additional growth opportunities and unique insights into
    industry trends.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Strong relationships with a
    long-term customer
    base.</FONT></I></B><FONT style="font-size: 10pt"> We believe
    that our customers value our products and services. Many of our
    major customers have been doing business with us for a number of
    years, including CIT, Dow Chemical Company, GE Capital
    Corporation and Solvay America, Inc. Many of our customers have
    demonstrated a willingness to purchase several different types
    of our products and services over time. We believe we deliver
    high quality products and services to our customers with low
    operating and maintenance costs, while maintaining what we
    believe are low levels of warranty claims.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Strong management team with
    long-standing industry
    experience.</FONT></I></B><FONT style="font-size: 10pt"> We have
    an experienced senior operations management team that has an
    average of over 25&nbsp;years of experience in the railcar and
    related manufacturing industries. Our senior operations
    management team, including our president, James J. Unger, has
    been with us since we began manufacturing railcars. This team
    conceived and built our Paragould and Marmaduke railcar
    manufacturing facilities and has been responsible for growing
    our revenues from $80.9&nbsp;million in 1994 to
    $355.1&nbsp;million in 2004.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR STRATEGY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The key elements of our business strategy are as follows:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Maintain and expand presence
    in covered hopper and tank railcar
    markets.</FONT></I></B><FONT style="font-size: 10pt"> We intend
    to maintain and expand our presence in the covered hopper and
    tank railcar markets by continuing to deliver high quality and
    innovative products. We believe our excellent customer
    relationships have enabled us to identify market demands that we
    then target through our product development and marketing
    efforts. We intend to continue the close collaboration between
    our customers and our engineering, marketing, operations and
    management personnel to meet demand and, where appropriate, to
    selectively expand production capacity.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Continue to improve
    operating
    efficiencies.</FONT></I></B><FONT style="font-size: 10pt"> We
    intend to build on the success of our production initiatives at
    our Paragould and Marmaduke railcar manufacturing facilities and
    plan to continue to identify opportunities to enhance operating
    efficiencies across these and our other manufacturing
    facilities. These opportunities include our continued
    streamlining of our manufacturing processes and our quality
    control initiatives. We also intend to continue the efforts
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 4</B>
</DIV>
</DIV>

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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    of our design cost reduction team, formed in 2003, which has
    already significantly reduced our railcar production costs
    through standardization of components used in our railcars,
    implemented design changes to reduce the amount of raw material
    required for our railcars, and improved manufacturing techniques
    that reduce our labor requirements. These efforts should allow
    us to reduce our costs and maintain competitive prices.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt"><FONT face="webdings">4</FONT></FONT></TD>
    <TD align="left">
    <B><I>Continue to grow railcar service and fleet management
    businesses and increase sales of railcar and industrial
    components.</I></B> As the existing North American railcar fleet
    continues to age, we anticipate increased demand for maintenance
    and repair services and railcar components used in the
    maintenance and repair of railcars. Additionally, we expect
    growing demand for our fleet management services as ownership of
    railcars continues to shift away from the railroads and toward
    the shippers and leasing companies, which often outsource their
    fleet management activities to third-party service providers
    such as us. We intend to capitalize on these trends and we
    believe we are well positioned to provide increased services
    through our strategically located network of railcar repair and
    service facilities.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt"><FONT face="webdings">4</FONT></FONT></TD>
    <TD align="left">
    <B><I>Leverage manufacturing expertise to selectively expand
    product portfolio.</I></B> We may seek to expand our product
    portfolio to other selected types of railcars. Our management
    designed and constructed our Paragould manufacturing facility to
    be able to produce most railcar types, and we believe our
    adaptive production lines and flexible employees are able to
    shift production among various railcar types with minimal
    interruption to our operations. In addition, as the existing
    fleet of North American railcars is aging, expansion of our
    product portfolio into new railcar types will allow us to grow
    our business by capturing a portion of the natural replacement
    demand for existing railcar types. Our ability to produce other
    types of railcars positions us to respond to customer requests
    for production outside of our traditional markets and provides
    us additional manufacturing flexibility in the event the covered
    hopper or tank railcar markets weaken.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 8pt"><FONT face="webdings">4</FONT></FONT></TD>
    <TD align="left">
    <B><I>Selectively pursue strategic external growth
    opportunities.</I></B> By significantly reducing our debt
    through this offering and with the establishment of a public
    market for our common stock, we believe we will have increased
    financial flexibility to supplement internal growth with select
    acquisitions, alliances or joint ventures. We also believe our
    in-house fabrication of railcar components and our Ohio Castings
    joint venture provide us with competitive advantages and we
    intend to enhance these advantages by selectively acquiring or
    establishing strategic relationships with railcar component
    manufacturers and suppliers of critical raw materials. While we
    have in the past engaged in preliminary discussions with certain
    parties regarding potential strategic acquisitions, alliances or
    joint ventures, as of the date of this prospectus, we are not
    currently engaged in any such discussions and do not have any
    commitments to enter into any acquisition, alliance or joint
    venture. We may also seek to expand our railcar components
    business into international markets on an opportunistic basis.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>THE TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to use the proceeds of this offering to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

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    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">repay outstanding borrowings under
    our existing revolving credit facility and amend and restate our
    revolving credit facility;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">repay the notes payable that we
    issued to ACF Industries Holding Corp. in connection with the
    acquisition of our joint venture interest in Ohio Castings, and
    that we issued to Arnos Corp., both of which are entities
    controlled by Carl C. Icahn, our principal beneficial
    stockholder and the chairman of our board of directors;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">redeem all of our industrial
    revenue bonds;
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 5</B>
</DIV>
</DIV>

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<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">redeem all of the outstanding
    shares of our preferred stock, all of which are held by Carl C.
    Icahn and his affiliates;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">pay fees and expenses related to
    this offering and the transactions identified above.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For more information, see &#147;Use of proceeds.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our outstanding shares of preferred stock include our
mandatorily redeemable preferred stock and our new preferred
stock. See &#147;Description of capital stock.&#148;
Concurrently with this offering, we expect to issue to our
president and chief executive officer, James&nbsp;J. Unger, the
number of shares of our common stock obtained by dividing
$6.0&nbsp;million by the public offering price set forth on the
cover page of this prospectus. See
&#147;Management&#151;Executive compensation&#151;Employment
agreements.&#148; Concurrently with this offering, we also
intend to amend and restate provisions of our existing revolving
credit facility to increase its size to $75&nbsp;million and
extend its term to three years from the closing of this
offering, pursuant to a commitment letter we have obtained from
North Fork Business Capital Corporation and our other lenders.
See &#147;Management&#146;s discussion and analysis of financial
condition and results of operations&#151; Liquidity and capital
reserves&#151;Outstanding debt&#151;Revolving credit
facility&#148; for a description of our existing revolving
credit facility and the expected terms of our new revolving
credit facility. Immediately prior to the closing of this
offering, our parent company will merge with and into us
pursuant to which all of the outstanding shares of our parent
company&#146;s capital stock will be exchanged for shares of our
capital stock in the manner described below in
&#147;&#151;Corporate Information.&#148; We refer to this
offering, the application of the proceeds of this offering as
described above, the issuance of shares of our common stock to
James&nbsp;J. Unger, the amendment and restatement of our
revolving credit facility and the merger described below
collectively as the &#147;Transactions.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<!-- link1 "OUR RELATIONSHIP WITH CARL C. ICAHN AND ENTITIES AFFILIATED WITH CARL C. ICAHN" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR RELATIONSHIP WITH CARL C. ICAHN AND ENTITIES AFFILIATED
WITH CARL C. ICAHN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Overview.</I> Carl C. Icahn is our principal beneficial
stockholder and is the chairman of our board of directors. Since
our formation, we have entered into agreements relating to the
acquisition of assets from and disposition of assets to entities
controlled by Mr.&nbsp;Icahn, the provision of goods and
services to us by entities controlled by Mr.&nbsp;Icahn, the
provision of goods and services by us to entities affiliated
with Mr.&nbsp;Icahn and other matters involving entities
controlled by Mr.&nbsp;Icahn. We receive substantial benefit
from these agreements and we expect that in the future we will
continue to conduct business with entities affiliated with or
controlled by Mr.&nbsp;Icahn. In 2002, 2003, 2004 and the first
nine months of 2005, our revenues from affiliates of
Mr.&nbsp;Icahn accounted for 45%, 34%, 24% and 14% of our total
revenues, respectively. In addition, we receive other benefits
from our affiliation with Mr.&nbsp;Icahn and companies
controlled by Mr.&nbsp;Icahn, such as financial and advisory
support, sales support and our participation in buying groups
and other arrangements with entities controlled by
Mr.&nbsp;Icahn. Until recently, most of our capital needs have
been provided by entities controlled by Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Application of the net proceeds of this offering.</I> We
intend to use the net proceeds of this offering to, among other
things, repay
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of indebtedness that we owe to entities controlled by
Mr.&nbsp;Icahn. We also intend to use
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
of the net proceeds of this offering to redeem all of our new
preferred stock, all of which is held by Mr.&nbsp;Icahn and his
affiliates, including all accumulated and unpaid dividends due
on our preferred stock. For more information, see &#147;Use of
proceeds.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Mr.&nbsp;Icahn&#146;s holdings of our common stock.</I> We
have been advised that in December 2005, Modal&nbsp;LLC, a
company controlled by Mr.&nbsp;Icahn, entered into a stock
purchase agreement with the Foundation for a Greater
Opportunity, or the Foundation, our other significant beneficial
stockholder, to acquire all of our common stock held by the
Foundation. The consummation of this acquisition of our common
stock requires the completion of this offering and the approval
of applicable authorities of the State of New York. If the
parties obtain this approval, we have been advised that the
parties expect that the purchase would be completed in the first
three months of 2006. Pending the closing of this purchase, and
for so long as the stock purchase agreement has not been
terminated, the
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 6</B>
</DIV>
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<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Foundation has granted Modal LLC an irrevocable proxy to vote
all of the shares of our common stock held by the Foundation.
The stock purchase agreement may be terminated by either party
if the purchase does not occur by May 2006. As a result of these
contemplated arrangements, we expect that Mr.&nbsp;Icahn will
control
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the voting power of our capital stock following the offering.
As a result, Mr.&nbsp;Icahn is, and will be, able to exert
substantial influence over us, elect our directors and control
most matters requiring board or shareholder approval. If,
following this offering, Mr.&nbsp;Icahn does not acquire all of
the shares of our common stock held by the Foundation, following
the termination of the irrevocable proxy granted to Modal LLC,
Mr.&nbsp;Icahn will continue to beneficially
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock and will still be able to exert substantial
influence over us. See &#147;Principal stockholders&#151; Icahn
agreement to purchase Foundation shares.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For information about the risks associated with our
relationships with Carl&nbsp;C. Icahn and entities affiliated
with Carl&nbsp;C. Icahn, see &#147;Risk factors&#151;Risks
related to our business&#151;After this offering, companies
affiliated with Carl C. Icahn will continue to be important
suppliers and customers,&#148; &#147;Risk factors&#151;Risks
related to our business&#151;Services being provided to us by
ARL, an entity controlled by Carl C. Icahn, may not be
sufficient to meet our needs, which may require us to incur
additional costs,&#148; &#147;Risk factors&#151;Risks related to
our business&#151;After this offering, we may have reduced
access to resources of, and benefits provided by, entities
affiliated with Carl C. Icahn,&#148; &#147;Risk
factors&#151;Risks related to our business&#151;We could be
liable for liabilities associated with pension plans sponsored
by companies controlled by Carl&nbsp;C. Icahn,&#148; &#147;Risk
factors&#151;Risks related to the purchase of our common stock
in this offering&#151;Our stock price may decline due to sales
of shares by Carl C. Icahn and other stockholders,&#148;
&#147;Risk factors&#151;Risks related to the purchase of our
common stock in this offering&#151;Carl C. Icahn will continue
to exert significant influence over us,&#148; &#147;Risk
factors&#151;Risks related to the purchase of our common stock
in this offering&#151;Mr.&nbsp;Icahn&#146;s interests may
conflict with the interest of our stockholders,&#148; &#147;Risk
factors&#151;Risks related to the purchase of our common stock
in this offering&#151;Upon the closing of this offering we may
be a &#147;controlled company&#148; within the meaning of the
Nasdaq National Market rules and you will not have the same
protections afforded to shareholders of companies that are not
&#147;controlled companies&#148; and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements.&#148; Also, see &#147;Certain relationships and
related party transactions&#151;Transactions with Carl C. Icahn
and entities affiliated with Carl C. Icahn&#148; for more
information about our affiliation with Mr. Icahn and entities
affiliated with Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CORPORATE INFORMATION</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
American Railcar Industries, Inc., a Delaware corporation formed
on November&nbsp;16, 2005 (referred to as American Railcar
Industries Delaware), will be the issuer of the common stock
offered hereby. American Railcar Industries Delaware is a wholly
owned subsidiary of American Railcar Industries, Inc., a
Missouri corporation (referred to as American Railcar Industries
Missouri). Immediately prior to the closing of this offering,
American Railcar Industries Missouri will merge with and into
American Railcar Industries Delaware, with American Railcar
Industries Delaware being the surviving corporation. As a part
of this merger American Railcar Industries Missouri will
exchange all of its shares of common stock for shares of
American Railcar Industries Delaware&#146;s common stock on a
one-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;basis.
In addition, American Railcar Industries Missouri will also
exchange all of its new preferred stock for shares of American
Railcar Industries Delaware&#146;s new preferred stock on a
one-for-one basis. We refer to the merger of American Railcar
Industries Missouri with and into American Railcar Industries
Delaware and these share exchanges collectively as the merger.
The surviving corporation of the merger will be incorporated in
Delaware and will be named American Railcar Industries, Inc. In
this prospectus, references to &#147;our company,&#148;
&#147;we,&#148; &#147;us&#148; and &#147;our,&#148; except where
the context otherwise indicates, refer to American Railcar
Industries Delaware and its consolidated subsidiaries and its
predecessors, assuming the merger has occurred. The address of
our principal executive offices is 100&nbsp;Clark Street, St.
Charles, Missouri, 63301. Our telephone number is
(636)&nbsp;940-6000. Our website address is
www.americanrailcar.com. Information contained in or connected
to our website is not part of this prospectus.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 7</B>
</DIV>
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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The offering
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Unless otherwise indicated, all of the information in this
prospectus assumes the underwriters do not exercise their
over-allotment option to purchase additional shares of our
common stock. Please see &#147;Description of capital
stock&#148; for a summary of the terms of our common stock.</I>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt;">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    Common stock offered by us</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock outstanding after this&nbsp;offering</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Common stock subject to the over-allotment option</TD>
    <TD></TD>
    <TD valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Use of proceeds</TD>
    <TD></TD>
    <TD valign="top">
    We expect to receive net proceeds from the offering of
    approximately
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
    after deducting underwriting discounts and commissions and
    estimated expenses of this offering payable by us, assuming an
    initial offering price of
    $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
    share, which represents the midpoint of the range on the cover
    of this prospectus.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    We intend to use the net proceeds from this offering to repay
    amounts outstanding under our revolving credit facility, repay
    notes due to our affiliates, redeem all of our industrial
    revenue bonds, redeem all shares of our outstanding preferred
    stock, all of which are held by affiliates of Mr.&nbsp;Icahn,
    and pay the fees and expenses related to the Transactions. See
    &#147;Use of proceeds.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD valign="top">
    Dividend policy</TD>
    <TD></TD>
    <TD valign="top">
    Although our board of directors has never declared or paid any
    cash dividends on our common stock, following this offering we
    intend to pay cash dividends on our common stock. Payment of
    dividends will be at the discretion of our board of directors
    and will depend upon our operating results, strategic plans,
    capital requirements, financial condition, provisions of our
    borrowing arrangements, applicable law and other factors our
    board of directors considers relevant. As of the date of this
    prospectus, our board of directors has not determined the amount
    of any specific dividend, if any. See &#147;Risk
    factors&#151;Risks related to the purchase of our common stock
    in this offering&#151;Payments of cash dividends on our common
    stock may be made only at the discretion of our board of
    directors and Delaware law may restrict, and the agreements
    governing our revolving credit facility contain provisions that
    limit, our ability to pay dividends&#148; and &#147;Dividend
    policy and restrictions.&#148;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Proposed Nasdaq symbol</TD>
    <TD></TD>
    <TD valign="top">
    ARII.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    Risk factors</TD>
    <TD></TD>
    <TD valign="top">
    You should carefully read and consider the information set forth
    under the caption &#147;Risk factors&#148; beginning on
    page&nbsp;14 and all other information set forth in this
    prospectus before investing in our common stock.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 8</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Unless otherwise indicated, all of the information in this
prospectus relating to the number of shares of common stock to
be outstanding after this offering:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD><FONT face="Wingdings">&#216;</FONT></TD>
    <TD align="left">
    gives effect to the merger immediately prior to the closing of
    this offering;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="Wingdings">&#216;</FONT></TD>
    <TD align="left">
    gives effect to the issuance of the number of shares of our
    common stock obtained by dividing $6.0&nbsp;million by the
    public offering price set forth on the cover page of this
    prospectus to our president and chief executive officer,
    James&nbsp;J. Unger, see &#147;Management&#151;Executive
    compensation&#151;Employment agreements&#148;;&nbsp;and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="Wingdings">&#216;</FONT></TD>
    <TD align="left">
    excludes shares of our common stock that will be available for
    future issuance under stock options granted under our 2005
    Equity Incentive Plan, none of which will be exercisable upon
    the completion of this offering. See
    &#147;Management&#151;Executive compensation&#151;Equity
    incentive plan.&#148;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 9</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Summary consolidated financial data
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth our summary consolidated
financial data for the periods presented. The consolidated
statements of operations and cash flow data for the years ended
December&nbsp;31, 2002, 2003 and 2004 and the consolidated
balance sheet data as of December&nbsp;31, 2003 and 2004 are
derived from our audited consolidated financial statements and
related notes included elsewhere in this prospectus. The
consolidated statements of operations and cash flow data for the
years ended December&nbsp;31, 2000 and 2001 and the consolidated
balance sheet data as of December&nbsp;31, 2000, 2001 and 2002
are derived from our historical consolidated financial
statements not included in this prospectus. The consolidated
statements of operations and cash flow data for the nine months
ended September&nbsp;30, 2004 and 2005 and the consolidated
balance sheet data as of September&nbsp;30, 2005 have been
derived from unaudited consolidated financial statements and
related notes included elsewhere in this prospectus and reflect
all adjustments (consisting only of normal, recurring
adjustments) which are, in the opinion of management, necessary
for a fair presentation of our financial position, the results
of operations and cash flows for the periods presented.
Operating results for the nine months ended September&nbsp;30,
2005 are not necessarily indicative of the results that may be
expected for the year ended December&nbsp;31, 2005 or any other
future period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should read this information together with
&#147;Capitalization,&#148; &#147;Management&#146;s discussion
and analysis of financial condition and results of
operations&#148; and our consolidated financial statements and
the related notes thereto included elsewhere in this prospectus.
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 10</B>
</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Summary Consolidated Financial Data</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="26%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Years ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="31" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="24">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands, except share data and number of railcars)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated statement of operations data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Manufacturing operations(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>200,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>181,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>138,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>188,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>316,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>226,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>409,208</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar services(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,940</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>238,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>217,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>254,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442,148</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of manufacturing operations(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>216,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>377,181</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of railcar services(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,538</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>340,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404,719</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,429</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administrative and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,573</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,265</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,687</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,525</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,853</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,616</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,667</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,216</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,577</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(604</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(609</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(351</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before income tax (benefit) expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,305</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,040</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,807</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax (benefit) expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,074</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,611</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,913</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less preferred dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,070</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,139</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,690</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,241</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,296</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,171</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) available to common shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,036</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,052</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,423</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,361</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares outstanding, basic and diluted(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) per common share, basic and diluted(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,036</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,052</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,414</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated balance sheet data (at period end):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net working capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,197</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>356,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>190,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,489</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>77,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>89,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>205,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>107,535</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated other operating data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA(8)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,427</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Items decreasing EBITDA(9)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,848</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,586</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,265</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,617</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>16,356</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New railcars delivered</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,766</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,557</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,260</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,980</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New railcar orders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New railcar backlog</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,031</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,567</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Estimated backlog value(10)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>60,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>129,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>494,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>365,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,132,788</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated cash flow data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,639</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(17,082</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,831</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,782</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,189</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,251</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,037</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,369</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,783</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 11</B>
</DIV>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (1)&nbsp;</TD>
    <TD align="left">
    Includes revenues from transactions with affiliates of
    $52.8&nbsp;million, $64.8&nbsp;million, $63.6&nbsp;million,
    $62.9&nbsp;million and $64.4&nbsp;million in 2000, 2001, 2002,
    2003 and 2004, respectively and $44.6&nbsp;million and
    $44.5&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (2)&nbsp;</TD>
    <TD align="left">
    Includes revenues from transactions with affiliates of
    $16.1&nbsp;million, $8.6&nbsp;million, $12.8&nbsp;million,
    $11.0&nbsp;million and $19.4&nbsp;million in 2000, 2001, 2002,
    2003 and 2004, respectively and $12.7&nbsp;million and
    $16.0&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (3)&nbsp;</TD>
    <TD align="left">
    Including costs from transactions with affiliates of
    $46.6&nbsp;million, $57.6&nbsp;million, $55.7&nbsp;million,
    $54.4&nbsp;million and $59.1&nbsp;million in 2000, 2001, 2002,
    2003 and 2004, respectively and $40.2&nbsp;million and
    $41.4&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (4)&nbsp;</TD>
    <TD align="left">
    Includes costs from transactions with affiliates of
    $12.8&nbsp;million, $7.2&nbsp;million, $12.2&nbsp;million,
    $10.1&nbsp;million and $15.5&nbsp;million in 2000, 2001, 2002,
    2003 and 2004, respectively and $9.6&nbsp;million and
    $12.7&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (5)&nbsp;</TD>
    <TD align="left">
    Includes interest income from affiliates of $5.6&nbsp;million,
    $4.3&nbsp;million, $3.4&nbsp;million, $3.0&nbsp;million and
    $3.9&nbsp;million in 2000, 2001, 2002, 2003 and 2004,
    respectively and $1.2&nbsp;million and $0.8&nbsp;million for the
    nine months ended September&nbsp;30, 2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (6)&nbsp;</TD>
    <TD align="left">
    Includes interest expense to affiliates of $0.2&nbsp;million in
    2001, and $1.5&nbsp;million in 2004 and $0.2&nbsp;million and
    $1.7&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>&nbsp; (7)&nbsp;</TD>
    <TD align="left">
    Share and per share data have not been restated to give effect
    to the merger.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (8)&nbsp;</TD>
    <TD align="left">
    EBITDA represents net earnings (loss) before income tax expense
    (benefit), interest (income) expense, net and amortization and
    depreciation of property and equipment. We believe EBITDA is
    useful to investors in evaluating our operating performance
    compared to that of other companies in our industry. In
    addition, our management uses EBITDA to evaluate our operating
    performance. The calculation of EBITDA eliminates the effects of
    financing, income taxes and the accounting effects of capital
    spending. These items may vary for different companies for
    reasons unrelated to the overall operating performance of a
    company&#146;s business. EBITDA is not a financial measure
    presented in accordance with U.S.&nbsp;generally accepted
    accounting principles, or U.S.&nbsp;GAAP. Accordingly, when
    analyzing our operating performance, investors should not
    consider EBITDA in isolation or as a substitute for net earnings
    (loss), cash flows from operating activities or other statements
    of operations or statements of cash flow data prepared in
    accordance with U.S.&nbsp;GAAP. Our calculation of EBITDA is not
    necessarily comparable to that of other similarly titled
    measures reported by other companies.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
The following is a reconciliation of net earnings (loss) to
EBITDA:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="30%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Years ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2005</B></TD><TD></TD>
</TR>



<TR valign="bottom" style="font-size: 1px">
    <TD colspan="28" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,913</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax (benefit) expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,074</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,611</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,577</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,777</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,770</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,619</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,161</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,422</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,122</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,265</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,597</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,049</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,972</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    EBITDA</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>12,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,698</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,427</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="1%"></TD>
    <TD width="4%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(9)</TD>
    <TD align="left">
    Our net earnings (loss) and EBITDA decreased in the periods
    specified below as a result of the following items:</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(a)</TD>
    <TD align="left">
    In 2000 and 2001, we incurred start-up expenses totaling
    $8.6&nbsp;million and $1.8&nbsp;million, respectively, in
    connection with our Marmaduke tank railcar manufacturing
    facility. The start-up expenses related to costs associated with
    introducing new tank railcar products, learning new
    manufacturing processes and commencing new operating procedures
    to reach normal productive capacity.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
    <TD width="3%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(b)</TD>
    <TD align="left">
    In 2002 and 2003, we recorded an asset impairment charge of $0.2
    million and $0.8&nbsp;million respectively to reduce the
    carrying value of buildings and improvements, and equipment
    related to our Milton, Pennsylvania railcar repair plant.
    Inventory value was also reduced by $0.4&nbsp;million in</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 12</B>
</DIV>
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<DIV style="width: 100%; border: 1px solid black; padding: 12px;">

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="90%"></TD>
    <TD width="3%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 9pt">2003 to reflect the lower of cost
    or market value. Due to reduced demand for railcar repairs at
    this location, we elected to idle this facility until business
    conditions warrant its reopening.
    </FONT></TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(c)</TD>
    <TD align="left">
    In 2004 and in the nine months ended September&nbsp;30, 2004 and
    September&nbsp;30, 2005, we incurred an estimated
    $7.9&nbsp;million, $4.9&nbsp;million and $1.5&nbsp;million,
    respectively, in increased raw materials costs, consisting
    primarily of costs relating to steel and railcar components
    which we were unable to pass on to our customers under our then
    existing fixed-price customer contracts. Since the first quarter
    of 2004, we have renegotiated most of our railcar manufacturing
    contracts to include provisions that adjust the selling prices
    of our railcars to reflect increases or decreases in the costs
    of certain raw materials and components. As a result of this
    change to our railcar manufacturing contracts, we were able to
    pass on to our customers approximately 32% of the increased raw
    material and component costs with respect to the railcars that
    we produced and delivered in 2004. Most of our railcar
    manufacturing contracts covering railcars to be produced after
    September&nbsp;30, 2005 allow for variable pricing to protect us
    against future changes in the cost of certain raw materials and
    components.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(10)</TD>
    <TD align="left">
    Estimated backlog reflects the total sales attributable to the
    backlog reported at the end of the particular period as if such
    backlog were converted to actual sales. Estimated backlog does
    not reflect potential price increases or decreases under most of
    our customer contracts that provide for variable pricing based
    on changes in the cost of certain raw materials and railcar
    components or the possibility that contracts may be canceled or
    railcar delivery dates delayed and does not reflect the effects
    of any cancellation or delay of railcar orders that may occur.
    See &#147;Management&#146;s discussion and analysis of financial
    condition and results of operations&#151;Backlog.&#148;</TD>
</TR>

</TABLE>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 13</B>
</DIV>
</DIV>
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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='102'></A>
</DIV>

<!-- link1 "Risk factors" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Risk factors
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Investing in our common stock involves a high degree of risk.
Before you invest in our common stock, you should understand and
carefully consider the risks below, as well as all of the other
information contained in this prospectus and our financial
statements and the related notes included elsewhere in this
prospectus. Any of these risks could materially adversely affect
our business, financial condition, results of operations and the
trading price of our common stock, and you may lose all or part
of your investment.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISKS RELATED TO OUR BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Due in part to the highly cyclical nature of the railcar
industry, we have incurred substantial operating losses in the
past and may experience declines in revenue and substantial
operating losses in the future.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Historically, the North American railcar market has been highly
cyclical and we expect it to continue to be highly cyclical.
During the most recent industry cycle, industry-wide railcar
deliveries declined from a peak of 75,704 in 1998 to a low of
17,714 railcars in 2002. During this downturn, our revenues
dropped from $238.8&nbsp;million in 2000 to $168.8&nbsp;million
in 2002 and we incurred losses of $1.6&nbsp;million,
$2.0&nbsp;million and $3.9&nbsp;million in 2000, 2001 and 2002,
respectively. We believe that downturns in the railcar
manufacturing industry will occur in the future and will result
in decreased demand for our products and services. The cycles in
our industry result from many factors that are beyond our
control, including economic conditions in the United States.
Although railcar production has increased since 2002, industry
professionals believe that demand for railcars may have reached
a peak and may not persist if favorable economic and other
conditions are not sustained. Even if a sustained economic
recovery occurs in the United States, demand for our railcars
may not match or exceed expected levels. An economic downturn
may result in increased cancellations of railcar orders which
could have a material adverse effect on our ability to convert
our railcar backlog into revenues. If industry backlog for
railcars declines below certain levels, CIT, one of our
customers which accounts for 71% of our backlog as of
September&nbsp;30, 2005, will be permitted to cancel some or, in
certain circumstances, all its orders with at least
180&nbsp;days written notice, which could have a material
adverse effect on our business, financial condition and results
of operations. In addition, an economic downturn in the United
States could result in lower sales volumes, lower prices for
railcars and a loss of profits for us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A substantial number of the end users of our railcars acquire
railcars through leasing arrangements with our leasing company
customers. Economic conditions that result in higher interest
rates would increase the cost of new leasing arrangements, which
could cause our leasing company customers to purchase fewer
railcars. A reduction in the number of railcars purchased by our
leasing company customers could have a material adverse effect
on our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The cost of the raw materials that we use to manufacture
railcars, particularly steel, are high and these costs are
expected to increase. Any increase in these costs or delivery
delays of these raw materials may materially adversely affect
our business, financial condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The production of railcars requires substantial amounts of
steel. The cost of steel and all other materials, including
scrap metal, used in the production of our railcars represents
approximately 80% to 85% of our manufacturing costs. Although we
have negotiated variable pricing provisions in most of our
railcar manufacturing contracts that pass certain increases or
decreases in our steel costs on to
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 14</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
our customers, our business remains subject to risks related to
price increases and periodic delays in the delivery of steel and
other raw materials, all of which are beyond our control. The
price for steel, the primary raw material component of our
railcars, increased sharply in 2004 as a result of strong
worldwide demand and supply limitations caused, in part, by
steel industry consolidation and import trade barriers. Price
levels for steel have increased again in 2005 and we expect
worldwide demand for steel to increase, supplies to be more
limited and prices to continue to increase in 2006. In addition,
the price and availability of other railcar components that are
made of steel have been adversely affected by the increased cost
and limited availability of steel. Any fluctuations in the price
or availability of steel, or any other material used in the
production of our railcars, may have a material adverse effect
on our business, financial condition and results of operations.
In addition, if any of our raw material suppliers were unable to
continue its business or were to seek bankruptcy relief, the
availability or price of the materials we use could be adversely
affected. Deliveries of our raw materials, and the components
made from those raw materials, may also fluctuate depending on
supply and demand for the raw material or governmental
regulation relating to the raw material, including regulation
relating to the importation of the raw material.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have entered into contracts with most of our railcar
customers that allow for variable pricing to protect us against
future increases in the cost of certain raw materials and
components, including steel. However, in 2004 and in the nine
months ended September&nbsp;30, 2005, we were unable to pass on
an estimated $7.9&nbsp;million and $1.5&nbsp;million,
respectively, in increases in raw material and components costs.
As prices for steel, other raw materials and components
increase, we may not be able to pass on such price increases to
our customers in the future, which could adversely affect our
operating margins and cash flows. Even if we are able to
increase prices, any such price increases may reduce demand for
our railcars. In addition, our customers may not be willing to
accept contractual terms that provide for variable pricing and
our competitors, in an effort to gain market share or otherwise,
have agreed in the past, and may in the future agree, to railcar
supply arrangements that provide for fixed pricing. As a result,
we may lose railcar orders or we may be required to agree to
supply railcars with fixed pricing provisions or be subject to
less favorable contract terms, any of which could have a
material adverse effect on our business, financial condition and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fluctuations in the supply of components and raw materials we
use in manufacturing railcars could cause production delays or
reductions in the number of railcars we manufacture, which could
materially adversely affect our business, financial condition
and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our railcar manufacturing business depends on the adequate
supply of numerous components, such as railcar wheels, brakes,
tank railcar heads, sideframes, axles, bearings, yokes, bolsters
and other heavy castings, and raw materials, such as normalized
steel plate. Over the last few years many suppliers have been
acquired or ceased operations, which has caused the number of
alternative suppliers of components and raw materials to
decline. The combination of industry consolidation and high
demand has caused recent industry-wide shortages of many
critical components as reliable suppliers are frequently at or
near production capacity. For example, with respect to railcar
wheels, there are only two significant suppliers that continue
to produce the type of component we use in our products. We rely
on one of these suppliers for most of our railcar wheels. Also,
a small percentage of the railcar wheels we use are refurbished
and are obtained from scrapped railcars. Supply of these
refurbished railcar wheels is available in limited quantities
and is unpredictable because the supply of refurbished railcar
wheels depends on the level and type of railcars being scrapped
in any given period. The supply of steel is similarly limited.
While we receive regular steel from three suppliers, we have
entered into agreements this year requiring us to buy the lesser
of a fixed volume or 75% of our steel requirements from one
supplier. In addition, there is currently only one North
American supplier of the types and sizes of normalized steel
plate we use in the production of many of our tank railcars.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 15</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Supply constraints are exacerbated in our industry because,
although multiple suppliers may produce certain components,
railcar manufacturing regulations and the physical capabilities
of manufacturing facilities restrict the types and sizes of
components and raw materials that manufacturers may use. In
addition, we do not carry significant inventories of components
and procure many of our components on a just-in-time basis. With
the recent increased demand for railcars, our remaining
suppliers are facing significant challenges in providing
components and materials on a timely basis to all railcar
manufacturers, including to us. In the event that our suppliers
of railcar components and raw materials were to stop or reduce
the production of railcar components and raw materials that we
use, go out of business, refuse to continue their business
relationships with us or become subject to work stoppages, our
business would be disrupted. Our inability to obtain components
and raw materials in required quantities or of acceptable
quality could result in significant delays or reductions in
railcar shipments. Any of these events would materially and
adversely affect our operating results. Furthermore, our ability
to increase our railcar production to expand our business
depends on our ability to obtain an increased supply of these
railcar components and raw materials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
While we believe that we may, in certain circumstances, secure
alternative sources of these components and materials, we may
incur substantial delays and significant expense in doing so,
the quality and reliability of alternative sources may not be
the same and our operating results may be materially adversely
affected. Alternative suppliers might charge significantly
higher prices for railcar components and materials than we
currently pay. Even if alternative suppliers are available to
us, these suppliers may be unacceptable to our customers because
our customers often specify the components we may use in
railcars manufactured for them. Under such circumstances, the
disruption to our business could have a material adverse impact
on our customer relationships, business, financial condition and
results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We operate in a highly competitive industry and we may be
unable to compete successfully, which would materially adversely
affect our results of operations.</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We face intense competition in all of our markets. In each of
our covered hopper and tank railcar manufacturing businesses, we
have two principal competitors. Both of our principal
competitors in the tank railcar market, Trinity Industries, Inc.
and the Union Tank Car Company, and one of our principal
competitors in the covered hopper railcar market, Trinity
Industries, Inc., have substantially greater resources and
produce substantially more railcars than we do. For example,
according to Trinity Industries, Inc.&#146;s annual report for
the year ended December&nbsp;31, 2004 and its quarterly report
for the nine months ended September&nbsp;30, 2005, Trinity
delivered a total of approximately 15,100 and 17,016 railcars,
respectively, during those periods in North America. By
comparison, for the year ended December&nbsp;31, 2004 and for
the nine months ended September&nbsp;30, 2005, we delivered a
total of approximately 4,384 and 4,980 railcars, respectively,
during those periods in North America. In addition, some of
these and other railcar manufacturers produce railcars primarily
for use in their own railcar leasing operations, competing
directly with leasing companies, some of which are our largest
customers. Some of our competitors have greater financial and
technological resources than we have. Our competitors may
increase their participation in the railcar markets in which we
compete and other railcar manufacturers that currently do not
manufacture covered hopper or tank railcars may choose to
compete directly with us. Railcar purchasers&#146; sensitivity
to price and strong price competition within the industry have
historically limited our ability to increase prices to obtain
better margins on our railcars. Additionally, as we selectively
seek to manufacture different types of railcars we will be
competing against railcar manufacturers with significantly more
experience than we have with regard to such railcar types. Our
competition for the sale of railcar components includes our
competitors in the railcar manufacturing market as well as a
concentrated group of companies whose primary business focus is
the production of one or more specialty components. We compete
with numerous
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 16</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
companies in our railcar fleet management and railcar repair
services business, ranging from companies with greater resources
than we have to small, local companies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In all our markets, in addition to price, competition is based
on quality, reputation, reliability of delivery, product
performance, customer service and other factors. In particular,
technological innovation by any of our existing competitors, or
new competitors entering any of the markets in which we do
business, could put us at a competitive disadvantage. We may be
unable to compete successfully or retain our market share in our
established markets. Increased competition for the sales of our
railcars, our fleet management and repair services and our
railcar components could result in price reductions, reduced
margins and loss of market share, which could materially
adversely affect our prospects, business, financial condition
and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equipment failures, delays in deliveries or extensive damage
to our facilities, particularly our railcar manufacturing
facilities in Paragould or Marmaduke, Arkansas, could lead to
production or service curtailments or shutdowns.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We manufacture our railcars at manufacturing facilities in
Paragould and Marmaduke, Arkansas. An interruption in
manufacturing capabilities at either of these facilities, as a
result of equipment failure or other reasons, could reduce or
prevent the production of our railcars. A halt of production at
either facility could severely delay scheduled railcar delivery
dates to our customers and affect our production schedule, which
would delay future production. Any significant delay in
deliveries to our customers could result in the termination of
orders, cause us to lose future sales and negatively affect our
reputation among our customers and in the railcar industry, all
of which would materially adversely affect our business and
results of operations. Additionally, production delays or
interruptions at our Jackson, St.&nbsp;Charles or Kennett,
Missouri components manufacturing facilities or at our Ohio
Castings joint venture, all of which provide key components to
our Paragould and Marmaduke railcar manufacturing facilities,
could contribute to delays of railcar deliveries and order
cancellations. Interruptions at our repair, cleaning and
maintenance facilities, including our mobile repair units, may
also have a material adverse effect on our business. All of our
manufacturing and service facilities are also subject to the
risk of catastrophic loss due to unanticipated events, such as
fires, earthquakes, explosions, floods or weather conditions. We
may experience plant shutdowns or periods of reduced production
as a result of equipment failures, loss of power, gray outs,
delays in deliveries or extensive damage to any of our
facilities, which could have a material adverse effect on our
business, results of operations or financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We depend upon a small number of customers that represent a
large percentage of our revenues. The loss of any single
customer, or a reduction in sales to any such customer, could
have a material adverse effect on our business, financial
condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Railcars are typically sold pursuant to large, periodic orders
and, therefore, a limited number of customers typically
represents a significant percentage of our railcar sales in any
given year. Our top ten customers based on revenues represented,
in the aggregate, approximately 77%, 79% and 79% in 2002, 2003
and 2004, respectively, of our total revenues. Moreover, our top
three customers based on revenues represented, in the aggregate,
approximately 65%, 70% and 59% in 2002, 2003 and 2004,
respectively, of our total revenues. In 2004, sales to our top
three customers accounted for approximately 23%, 20% and 16%,
respectively, of our total revenues. In the nine months ended
September&nbsp;30, 2005, sales to our top three customers
accounted for approximately 17%, 16% and 15%, respectively, of
our total revenues. The loss of any significant portion of our
sales to any major customer, the loss of a single major customer
or a material adverse change in the financial condition of any
one of our major customers could have a material adverse effect
on our business, financial condition and financial results.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 17</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If we lose any of our executive officers or key employees, or
Carl C. Icahn, the chairman of our board of directors, our
operations and ability to manage the day-to-day aspects of our
business may be materially adversely affected.</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe our success depends to a significant degree upon the
continued contributions of our executive officers and key
employees, both individually and as a group. Our future
performance will substantially depend on our ability to retain
and motivate them. If we lose any of our executive officers or
key employees or are unable to recruit qualified personnel, our
ability to manage the day-to-day aspects of our business may be
materially adversely affected. It would be difficult to replace
any of our executive officers or key employees without
materially adversely affecting our business operations because
our executive officers and key employees have many years of
experience with our company and within the railcar industry and
other manufacturing industries and strong personal ties with
many of our important customers and suppliers. Additionally,
Mr.&nbsp;Icahn and his affiliated entities have been key
resources for strategic and management advice, which we have
obtained at no cost. We believe the availability and access to
these resources has provided us with a competitive advantage. If
Mr.&nbsp;Icahn were no longer the chairman of our board of
directors we could lose access to these resources. Furthermore,
if Mr.&nbsp;Icahn were no longer the chairman of our board of
directors, certain other risks we face relating to our customer,
supplier and service relationships with, and competition between
us and Mr.&nbsp;Icahn and affiliates of Mr.&nbsp;Icahn,
described below, may be exacerbated. The loss of the services of
one or more of our executive officers or key employees or the
chairman of our board of directors could have a material adverse
effect on our business, financial condition and results of
operations. We do not currently maintain &#147;key person&#148;
life insurance.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If we face labor shortages or increased labor costs our
growth and results of operations could be materially adversely
affected.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Due to the cyclical nature of the demand for our products, we
have had to reduce and then rebuild our workforce as our
business has gone through downturns followed by upturns in
business activity. Due to the competitive and rural nature of
the labor markets in which we operate, this type of employment
cycle increases our risk of not being able to retain and recruit
the personnel we require in our railcar manufacturing and other
businesses, particularly in periods of economic expansion. Our
Paragould and Marmaduke facilities are located in sparsely
populated communities and we have experienced a high turnover
rate at these locations among newly-hired employees. The
additional painting and lining capabilities that we are adding
to our Paragould facility, which we expect will be completed by
the end of 2005, will require additional employees to operate.
Our inability to recruit, retain and train adequate numbers of
qualified personnel on a timely basis could materially adversely
affect our ability to operate our businesses, our financial
condition and our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The variable purchase patterns of our railcar customers and
the timing of completion, delivery and acceptance of customer
orders may cause our revenues and income from operations to vary
substantially each quarter, which could result in significant
fluctuations in our quarterly results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Most of our individual railcar customers do not make railcar
purchases every year because they do not need to replace or
replenish their railcar fleets on a yearly basis. Many of our
customers place orders for railcars on an as-needed basis,
sometimes only once every few years. As a result, the order
levels for railcars, the mix of railcar types ordered and the
railcars ordered by any particular customer have varied
significantly from quarterly period to quarterly period in the
past and may continue to vary significantly in the future.
Railcar sales comprised approximately 75% of our total revenue
in 2004 and 81% of our total revenue in the nine months ended
September&nbsp;30, 2005, and our results of
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 18</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
operations in any particular quarterly period may be
significantly affected by the number and type of railcars
manufactured and delivered in any given quarterly period. For
example, our net income increased 156% from the first quarter to
the second quarter of this year while it decreased 207% from the
third quarter to the fourth quarter of fiscal 2004. We record
the sale of a railcar after completion of production of the
railcar, the railcar is accepted by the customer following
inspection, the risk for any damage or loss with respect to the
railcar passes to the customer and title to the railcar
transfers to the customer. This revenue recognition policy
determines when we record the revenues associated with our
railcar sales and, as a result, will cause fluctuations in our
quarterly results. As a result of these fluctuations, we believe
that comparisons of our sales and operating results between
quarterly periods within the same fiscal year and between
quarterly periods within different fiscal years may not be
meaningful and, as such, these comparisons should not be relied
upon as indicators of our future performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our relationships with our partners in our Ohio Castings
joint venture may not be successful, which could materially
adversely affect our business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Effective on January&nbsp;1, 2005, we acquired from ACF
Industries Holding Corp., an affiliate of Carl C. Icahn, our
principal beneficial stockholder and the chairman of our board
of directors, its one-third ownership interest in Ohio Castings,
our joint venture with affiliates of Amsted Industries Inc., a
railcar components manufacturing company, and The Greenbrier
Companies, a railcar manufacturer and leasing company. We
acquired this joint venture interest in order to increase our
supply alternatives for heavy castings, which are critical
components for the manufacture of railcars and the supply of
which is constrained. The companies that supply the railcar
industry with heavy castings have been unable to meet the
short-term or long-term demand of railcar manufacturers and, as
such, the production capacity of many railcar manufacturers,
including ours, is restricted by the limited availability of
these components. Although the allocation of castings that we
receive from Ohio Castings does not provide us with all of our
castings requirements, the joint venture does provide us with a
committed source for a critical portion of the castings that we
require for the successful operation of our business. If Ohio
Castings is unable to provide us with our allocation of castings
on a timely basis or at all, our manufacturing costs could
increase and we may have to delay or cancel the production of
ordered railcars, all of which could materially adversely affect
our business, financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The level of our reported railcar backlog may not necessarily
indicate what our future revenues will be and our actual
revenues may fall short of the estimated revenue value
attributed to our railcar backlog.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We define backlog as the number of railcars, and the revenue
value in dollars attributed to these railcars, to which our
customers have committed in writing to purchase from us that
have not yet been recognized as revenues. Our competitors may
not define railcar backlog in the same manner as we do, which
could make comparisons of our railcar backlog with theirs
misleading. In this prospectus, we have disclosed our railcar
backlog for various periods and the estimated revenue value in
dollars that would be attributed to this railcar backlog once
the railcar backlog is converted to actual sales. We consider
railcar backlog to be an indicator of future revenues. However,
our reported railcar backlog may not be converted into revenues
in any particular period, if at all, and the actual revenues
from such sales may not equal our reported estimates of railcar
backlog value. For example, if the price for raw materials, such
as steel, and other components used in the production of our
railcars decreases or increases and we have entered into
applicable variable pricing contracts with a customer or we are
otherwise able to pass on these price changes to a customer, our
actual revenues will differ from the estimated revenue value
attributed to our railcar backlog. In addition, our railcar
manufacturing business relies on third-party suppliers for heavy
castings, wheels and other components and raw
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 19</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
materials and if these third parties were to stop or reduce
their supply of components or raw materials, our production
would decline and our actual revenues would fall short of the
estimated revenue value attributed to our railcar backlog.
Customer orders may be subject to cancellation, inspection
rights and other customary industry terms, all of which could
affect our recognition of revenue currently reflected in our
September&nbsp;30, 2005 backlog. If industry backlog for
railcars declines below certain levels, CIT, one of our
customers which accounts for 71% of our September&nbsp;30, 2005
backlog, will be permitted to cancel some or, in certain
circumstances, all its orders after at least 180 days written
notice, which could have a material adverse effect on our
business, financial condition and results of operations.
Furthermore, delivery dates may be subject to deferral, thereby
delaying the date on which we will deliver the associated
railcars and realize revenues attributable to such railcar
backlog. Therefore, our current level of reported railcar
backlog may not necessarily represent the level of revenues that
we may generate in any future period. Furthermore, any contract
included in our reported railcar backlog that actually generates
revenues may not be profitable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our management and auditors have identified three significant
deficiencies in our internal controls as of December&nbsp;31,
2004, which, if not properly remediated could result in
misstatements in our financial statements in future periods.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our independent auditors, Grant Thornton LLP, issued a letter to
our board of directors in which they identified three
significant deficiencies in the design and operation of our
internal controls as of December&nbsp;31, 2004. A significant
deficiency is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that
a misstatement of the financial statements that is more than
inconsequential will not be prevented or detected. A control
deficiency exists when the design or operation of a control does
not allow management or employees, in the normal course of
performing their assigned functions, to prevent or detect
misstatements on a timely basis. The letter specifically noted
the following significant deficiencies:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Inventory
    cut-off.</FONT></I></B><FONT style="font-size: 10pt"> Our
    manufacturing facilities recorded inventory shipped by our
    vendors to us on the date we received the inventory in our
    facilities, rather than on the date of shipment.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Construction in
    process.</FONT></I></B><FONT style="font-size: 10pt"> We
    transferred assets from construction in process to fixed assets
    on a quarterly basis rather than at the time assets are actually
    placed into service. There was insufficient documentation
    authorizing the movement of assets from construction in process
    to fixed assets. Certain assets were still being classified as
    construction in process even though the asset was in service.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Fixed asset recording and
    reconciliation.</FONT></I></B><FONT style="font-size: 10pt"> Our
    fixed asset subsidiary ledgers were not updated in a timely
    manner. Supporting ledgers for depreciation schedules were
    tracked using Microsoft Excel. The schedules were not reconciled
    on a timely basis. The procedures surrounding the compilation of
    the data was manual and subject to error.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In light of the noted significant deficiencies, we have
instituted control improvements that we believe will reduce the
likelihood of similar errors. If the remedial policies and
procedures we have implemented are insufficient to address the
three significant deficiencies or if additional significant
deficiencies or other conditions relating to our internal
controls are discovered in the future, we may fail to meet our
future reporting obligations, our financial statements may
contain misstatements and our operating results may be adversely
affected. Any such failure could also adversely affect the
results of the periodic management evaluations and annual
auditor attestation reports regarding the effectiveness of our
internal controls over financial reporting, which will be
required when the SEC&#146;s rules under Section&nbsp;404 of the
Sarbanes-Oxley Act of 2002 become applicable to us beginning
with the filing of our Annual Report on Form&nbsp;10-K for the
year ended December&nbsp;31, 2006. Although we believe we have
addressed our significant deficiencies in internal controls with
the remedial measures
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 20</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
we have implemented, we cannot guarantee that the measures we
have taken to date or any future measures will remediate the
significant deficiencies identified or that any additional
significant deficiencies will not arise in the future due to a
failure to implement and maintain adequate internal controls
over financial reporting. Internal control deficiencies could
cause investors to lose confidence in the reliability of our
financial statements and other reported financial information,
which in turn could harm our business and negatively impact the
trading price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Once we become a public company, we will need to comply with
the reporting obligations of the Exchange Act and
Section&nbsp;404 of the Sarbanes-Oxley Act. If we fail to comply
with the reporting obligations of the Exchange Act and
Section&nbsp;404 of the Sarbanes-Oxley Act, or if we fail to
achieve and maintain adequate internal controls over financial
reporting, our business, results of operations and financial
condition, and investors&#146; confidence in us, could be
materially adversely affected.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a public company, we will be required to comply with the
periodic reporting obligations of the Exchange Act, including
preparing annual reports, quarterly reports and current reports.
Our failure to prepare and disclose this information in a timely
manner could subject us to penalties under federal securities
laws, expose us to lawsuits and restrict our ability to access
financing. In addition, we will be required under applicable law
and regulations to integrate our systems of internal controls
over financial reporting. We plan to evaluate our existing
internal controls with respect to the standards adopted by the
Public Company Accounting Oversight Board. During the course of
our evaluation, we may identify areas requiring improvement and
may be required to design enhanced processes and controls to
address issues identified through this review. This could result
in significant delays and cost to us and require us to divert
substantial resources, including management time, from other
activities. For example, during the audit of our 2004 fiscal
year, our independent registered public accounting firm issued a
letter to our board of directors noting certain significant
deficiencies, as described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect to dedicate significant management, financial and
other resources in connection with our compliance with
Section&nbsp;404 of the Sarbanes-Oxley Act in the second half of
2005. We expect these efforts to include a review of our
existing internal control structure. As a result of this review,
we may either hire or outsource additional personnel to expand
and strengthen our finance function. There have been no external
costs associated with this effort through September&nbsp;30,
2005, and we cannot be certain at this time that we will be able
to comply with all of our reporting obligations and successfully
complete the procedures, certification and attestation
requirements of Section&nbsp;404 of the Sarbanes-Oxley Act by
the time that we are required to file our Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2006. If we
fail to achieve and maintain the adequacy of our internal
controls and do not address the deficiencies identified by our
auditors, we may not be able to ensure that we can conclude on
an ongoing basis that we have effective internal controls over
financial reporting in accordance with the Sarbanes-Oxley Act.
Moreover, effective internal controls are necessary for us to
produce reliable financial reports and are important to help
prevent fraud. As a result, our failure to satisfy the
requirements of Section&nbsp;404 of the Sarbanes-Oxley Act on a
timely basis could result in the loss of investor confidence in
the reliability of our financial statements, which in turn could
harm our business and negatively impact the trading price of our
common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Rapid growth is straining our operations and requiring us to
incur costs to upgrade our infrastructure.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the last five quarters, we have experienced rapid growth
in our operations, number of our employees and our product
offerings. Our growth places a significant strain on our
management, operations and financial systems and also on our
ability to retain employees. Our future operating results will
depend in part on our ability to continue to implement and
improve our operating and
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 21</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
financial controls and management information systems. If we
fail to manage our growth effectively, our business, financial
condition and results of operations could be materially
adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>After this offering, companies affiliated with Carl C. Icahn
will continue to be important suppliers and customers.</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We manufacture railcars and railcar components and provide
railcar services for companies affiliated with Carl C. Icahn,
our principal beneficial stockholder and the chairman of our
board of directors. To the extent our relationships with
affiliates of Mr.&nbsp;Icahn change due to the sale of his
interest in us or otherwise, our business, results of operations
and financial condition may be materially adversely affected.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Affiliates of Mr.&nbsp;Icahn have accounted for approximately
45%, 34%, 24% and 14% of our revenues in 2002, 2003, 2004 and
the nine months ended September&nbsp;30, 2005, respectively.
This revenue is primarily attributable to our sale of railcars.
American Railcar Leasing LLC, or ARL, a railcar leasing company
owned by affiliates of Mr.&nbsp;Icahn, currently purchases all
of its railcars from us. However, we have no long-term
agreements with ARL or any other affiliates of Mr.&nbsp;Icahn to
purchase our railcars, and we cannot assure you that ARL or
other affiliates of Mr.&nbsp;Icahn will continue to do so. ARL
could, in the future, purchase railcars from one of our
competitors. In addition, we have a railcar servicing agreement
with ARL, under which we provide fleet management services for
the entire railcar fleet of ARL and its subsidiaries. These
railcars represented approximately 39% of the railcars for which
we provided fleet management services as of September&nbsp;30,
2005. This agreement is terminable by either party at the end of
any contract year upon six months prior notice and ARL is not
restricted from using the services of our competitors for its
existing fleet of railcars or any other railcars it may
purchase. A significant change in the nature of the business
relationship with ARL and other affiliates of Mr.&nbsp;Icahn
could have a material adverse effect on our business, financial
condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We also purchase railcar and industrial components from ACF,
another entity affiliated with Mr.&nbsp;Icahn. ACF has been the
supplier of approximately $19.0&nbsp;million, $31.3&nbsp;million
and $56.2&nbsp;million of our inventory purchases in 2003, 2004
and the nine months ended September&nbsp;30, 2005, respectively.
Currently, ACF is our sole supplier of tank railcar heads and
one of a limited number of suppliers for other important railcar
components that we use in our manufacturing operations. These
railcar components are manufactured and sold to us under a
supply agreement that is terminable by ACF at the end of any
contract year on six months prior notice. We cannot guarantee
that we would be able to obtain alternative supplies of these
railcar components on a timely basis and on comparable terms if
we were no longer able to purchase these railcar components from
ACF. A failure to obtain component supplies from ACF could
materially adversely affect our business, financial condition
and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For more information on these arrangements, see &#147;Certain
relationships and related party transactions.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Services being provided to us by ARL, an entity controlled by
Carl C. Icahn, may not be sufficient to meet our needs, which
may require us to incur additional costs.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We use certain outsourced information technology and
administrative services from ARL, an entity controlled by
Mr.&nbsp;Icahn. We also sublease our headquarters office space
in St. Charles, Missouri from ARL. We cannot assure you that
these services will be provided at the same level as they are
currently being provided or that we will be able to maintain our
sublease on the same terms as currently in effect. These
arrangements may be terminated by ARL or by us upon six months
notice and, if they were terminated, we would be required to
find a third-party provider of these services or begin to
provide them for ourselves and relocate our office headquarters.
As these agreements were negotiated
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 22</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
with ARL, an entity affiliated with us, the prices and rates
charged to us under these agreements may be lower than the
prices and rates that may be charged by unaffiliated third
parties for similar services and an office sublease or for us to
provide these services on our own. We cannot assure you that, if
these agreements are terminated, we will be able to replace
these services and the sublease in a timely manner or on terms
and conditions, including cost, as favorable as those we are
currently receiving. Additional expenses incurred in replacing
these services and relocation of our office facilities or the
failure to replace these services could materially adversely
affect our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>After this offering, we may have reduced access to resources
of, and benefits provided by, entities affiliated with Carl C.
Icahn.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have in the past obtained access to significant financial and
other resources from entities affiliated with Carl C. Icahn. For
example, until recently, most of our capital needs have been
satisfied by entities affiliated with Mr.&nbsp;Icahn. In
addition, we believe that our relationship with entities
affiliated with Mr.&nbsp;Icahn have, in many cases, provided us
with a competitive advantage in identifying opportunities for
sales of our products and identifying and attracting partners
for critical supply arrangements. For example, we participate in
product and service purchasing arrangements with entities
controlled by Mr.&nbsp;Icahn, which we believe may provide us
with favorable pricing as a result of larger aggregate purchases
by the Icahn-affiliated buying group. If we were unable to
participate in these buying group arrangements our manufacturing
costs would increase and our results of operations and financial
condition may be materially adversely affected. Also, lease
sales agents of ARL and ACF, in connection with their own
leasing sales activities have, from time to time, referred their
customers or contacts to us if the customer or contact prefers
to purchase rather than lease railcars, which has, in some
cases, led to us selling railcars to these customers or
contacts. ACF and ARL have in the past accepted orders to
purchase railcars for us on our behalf. ARL and ACF have
discontinued accepting orders to sell railcars on our behalf. At
this time there is no formal arrangement under which referral
services are provided and we do not compensate ARL, ACF or any
of their leasing sales agents for any railcar sales that we may
make as a result of these referrals. To the extent that ARL or
ACF discontinue referring potential customers to us, or require
us to compensate them for these referrals, our business, results
of operations and financial condition may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Lack of acceptance of our new railcar offerings by our
customers could materially adversely affect our business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our strategy depends in part on our continued development and
sale of new railcar designs to expand or maintain our market
share in the railcar markets in which we currently compete. The
investment required by us in connection with the development of
new railcar designs is considerable and we usually make
decisions to develop and market new railcars and railcars with
modified designs without firm indications of customer
acceptance. New or modified railcar designs may require
customers to alter their existing business methods or displace
existing equipment in which these customers may have a
substantial capital investment. Additionally, many railcar
purchasers prefer to maintain a standardized fleet of railcars
and railcar purchasers with established railcar fleets are
generally resistant to railcar design changes. Therefore, any
new or modified railcar designs that we develop may not gain
widespread acceptance in the marketplace and any such products
may not be able to compete successfully with existing railcar
designs or new railcar designs that may be introduced by our
competitors.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 23</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our production of new railcar product lines may not be
initially profitable and may result in financial losses.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our strategy includes developing new railcars and selectively
expanding beyond the covered hopper and tank railcar markets.
When we begin production of a new railcar product line, we
usually experience higher initial costs of production due to
training and labor and operating inefficiencies associated with
new manufacturing processes. Due to pricing pressures in our
industry, the pricing for new railcars in customer contracts
usually does not reflect the initial additional costs, and our
costs of production may exceed the anticipated revenues until we
are able to gain labor efficiencies. For example, in 2004 and
2005, we used a portion of the railcar production capacity at
our Paragould facility, which we primarily use to manufacture
covered hopper railcars, to manufacture centerbeam platform
railcars. This was the first time we manufactured centerbeam
platform railcars and primarily as a result of initial training
and start-up costs, we incurred a loss on this product. To the
extent that the total costs of production significantly exceed
our anticipated costs of production, we may incur a loss on our
sale of new railcar product lines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may pursue acquisitions or joint ventures that involve
inherent risks, any of which may cause us not to realize
anticipated benefits.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our business strategy includes the potential acquisition of
businesses and entering into joint ventures and other business
combinations that we expect will complement and expand our
business. We may not be able to successfully identify suitable
acquisition or joint venture opportunities or complete any
particular acquisition, combination, joint venture or other
transaction on acceptable terms. Our identification of suitable
acquisition candidates and joint venture opportunities involves
risks inherent in assessing the values, strengths, weaknesses,
risks and profitability of these opportunities including their
effects on our business, diversion of our management&#146;s
attention and risks associated with unanticipated problems or
unforeseen liabilities. If we are successful in pursuing future
acquisitions or joint ventures, we may be required to expend
significant funds, incur additional debt or issue additional
securities, which may materially adversely affect our results of
operations and be dilutive to our stockholders. If we spend
significant funds or incur additional debt, our ability to
obtain financing for working capital or other purposes could
decline and we may be more vulnerable to economic downturns and
competitive pressures. In addition, we cannot guarantee that we
will be able to finance additional acquisitions or that we will
realize any anticipated benefits from acquisitions or joint
ventures that we complete. Should we successfully acquire
another business, the process of integrating acquired operations
into our existing operations may result in unforeseen operating
difficulties and may require significant financial resources
that would otherwise be available for the ongoing development or
expansion of our existing business. Our failure to identify
suitable acquisition or joint venture opportunities may restrict
our ability to grow our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>If we are unable to protect our intellectual property and
prevent its improper use by third parties, our ability to
compete in the market may be harmed.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We rely on patent protection and a combination of copyright,
trade secret and trademark laws to protect our proprietary
technology and prevent others from duplicating our products.
However, these means afford only limited protection and may not
prevent our competitors from duplicating our products or gaining
access to our proprietary information and technology. These
means also may not permit us to gain or maintain a competitive
advantage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Any of our patents may be challenged, invalidated, circumvented
or rendered unenforceable. We cannot guarantee that we will be
successful should one or more of our patents be challenged for
any reason. If our patent claims are rendered invalid or
unenforceable, or narrowed in scope, the patent coverage
afforded our products could be impaired, which could
significantly impede our ability to
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 24</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
market our products, negatively affect our competitive position
and materially adversely affect our business and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We cannot assure you that any pending or future patent
applications held by us will result in an issued patent, or that
if patents are issued to us, that such patents will provide
meaningful protection against competitors or against competitive
technologies. The issuance of a patent is not conclusive as to
its validity or its enforceability. The United States federal
courts may invalidate our patents or find them unenforceable.
Competitors may also be able to design around our patents. Our
patents and patent applications cover particular aspects of our
products. Other parties may develop and obtain patent protection
for more effective technologies, designs or methods. If these
developments were to occur, it could have an adverse effect on
our sales. If our intellectual property rights are not
adequately protected, we may not be able to commercialize our
technologies, products or services and our competitors could
commercialize our technologies, which could result in a decrease
in our sales and market share and could materially adversely
affect our business, financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our products could infringe the intellectual property rights
of others, which may lead to litigation that could itself be
costly, could result in the payment of substantial damages or
royalties, and could prevent us from using technology that is
essential to our products.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We cannot guarantee you that our products, manufacturing
processes or other methods do not infringe the patents or other
intellectual property rights of third parties. Infringement and
other intellectual property claims and proceedings brought
against us, whether successful or not, could result in
substantial costs and harm our reputation. Such claims and
proceedings can also distract and divert management and key
personnel from other tasks important to the success of our
business. In addition, intellectual property litigation or
claims could force us to do one or more of the following:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">cease selling or using any of our
    products that incorporate the asserted intellectual property,
    which would adversely affect our revenue;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">pay substantial damages for past
    use of the asserted intellectual property;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">obtain a license from the holder
    of the asserted intellectual property, which license may not be
    available on reasonable terms, if at all;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">redesign or rename, in the case of
    trademark claims, our products to avoid infringing the
    intellectual property rights of third parties, which may not be
    possible and could be costly and time-consuming if it is
    possible to do.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In the event of an adverse determination in an intellectual
property suit or proceeding, or our failure to license essential
technology, our sales could be harmed and our costs could
increase, which could materially adversely affect our business,
financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We are subject to a variety of environmental laws and
regulations and the cost of complying, or our failure to comply,
with such requirements may have a material adverse effect on our
business, financial condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are subject to a variety of federal, state and local
environmental laws and regulations relating to the release or
discharge of materials into the environment, the management,
use, processing, handling, storage, transport or disposal of
hazardous materials, or otherwise relating to the protection of
human health and the environment. These laws and regulations
expose us to liability for the environmental condition of our
current or formerly owned or operated facilities, and also may
expose us to liability for the conduct of others or for our
actions that were in compliance with all applicable laws at the
time these actions were taken. Despite our intention to be in
compliance, we cannot guarantee that we
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 25</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
will at all times be in compliance with all such requirements.
The cost of complying with environmental requirements may also
increase substantially in future years. If we violate or fail to
comply with these regulations, we could be fined or otherwise
sanctioned by regulators. In addition, these requirements are
complex, change frequently and may become more stringent over
time, which could have a material adverse effect on our
business. We are also required to maintain a variety of
environmental permits. Our failure to maintain and comply with
these permits could result in fines or penalties or other
sanctions and have a material adverse effect on our operations
or results. Future events, such as new environmental regulations
or changes in or modified interpretations of existing laws and
regulations or enforcement policies, or further investigation or
evaluation of the potential health hazards of products or
business activities, may give rise to additional compliance and
other costs that could have a material adverse effect on our
business, financial conditions and operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are involved in investigation and remediation activities at
properties that we now own or lease to address historic
contamination and potential contamination by third parties. We
are also involved with state agencies in the cleanup of two
sites under these laws. These investigations are at a
preliminary stage, and it is impossible to estimate, with any
certainty, the timing and extent of remedial actions that may be
required, and the costs that would be involved in such
remediation. Substantially all of the issues identified relate
to the use of the properties prior to their transfer to us in
1994 by ACF and for which ACF has retained liability and agreed
to indemnify us. However, if ACF fails to honor its obligations
to us, we would be responsible for the cost of such remediation.
We have been advised that ACF estimates that, for the remainder
of 2005, ACF will spend approximately $0.1&nbsp;million on
environmental investigation and, in 2006 and 2007, respectively,
it will spend approximately $0.2&nbsp;million on environmental
investigation, relating to contamination that existed at
properties prior to their transfer to us in 1994 and for which
ACF has retained liability and agreed to indemnify us. We
expense all costs associated with environmental investigation
and remediation relating to our properties even if we receive
indemnification from ACF. ACF&#146;s indemnification is not
treated as an offset to that expense, but rather as an
additional capital contribution. The discovery of historic
contamination or the release of substances into the environment
at our current or formerly owned or operated facilities could
require ACF or us in the future to incur investigative or
remedial costs or other liabilities that could be material or
that could interfere with the operation of our business. Any
environmental liabilities that we may incur that are not covered
by adequate insurance or indemnification from a party other than
ACF will also increase our costs and have a negative impact on
our profitability. See &#147;Business&#151; Environmental
matters&#148; for more information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Failure of ACF to honor its indemnification obligations to us
may have a material adverse effect on our business and financial
condition.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with our 1994 acquisition from ACF of assets and
certain properties relating to ACF&#146;s railcar components
manufacturing and railcar manufacturing and railcar maintenance
businesses, ACF agreed to retain and indemnify us for certain
liabilities relating to its ownership of those assets and
operation of its business prior to the transfer, including
liabilities relating to employee benefit plans, worker&#146;s
compensation, environmental contamination and third-party
litigation. The total of such accrued liabilities was $11.1
million as of December&nbsp;31, 2004. Additional such
liabilities may accrue in the future. If ACF fails to honor its
indemnification obligations, whether as a result of a dispute
related to the applicability of the indemnification, ACF having
insufficient assets to pay liabilities or otherwise, our
business and financial condition could be materially adversely
affected.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 26</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Changes in assumptions or investment performance of pension
and other postretirement benefit plans that we either sponsor or
participate in could materially adversely affect our financial
condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We either sponsor or participate in several pension plans,
including two plans that were frozen effective April&nbsp;1,
2004, and in which our employees are therefore no longer
accruing additional benefits. To the extent we continue to
sponsor or participate in these plans, we will be responsible
for making funding contributions to the plans, including the
frozen pension plans, and may be liable for a share of any
unfunded liabilities that may exist at the time we cease to
participate in the plans or the plans are terminated. Our
liability and resulting costs for these plans may increase or
decrease based upon a number of factors, including actuarial
assumptions used, the discount rate used in calculating the
present value of future liabilities, and investment performance.
An adverse change or result in one or more of these factors
could have a material adverse effect on our financial condition
and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We also provide other postretirement benefits to certain of our
employees. Our postretirement benefit obligations and related
expense with respect to these postretirement benefits also
increase or decrease based on several factors, including changes
in health care cost trend rates, and could similarly be
materially adversely affected by adverse changes in these
factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We could be liable for liabilities associated with pension
plans sponsored by companies controlled by Carl C. Icahn.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Icahn, our principal beneficial stockholder and the
chairman of our board of directors, and his affiliates currently
hold over 80% of our outstanding voting securities. Applicable
pension and tax laws make each member of a plan sponsor&#146;s
controlled group, generally defined as entities in which there
is at least an 80% common ownership interest, jointly and
severally liable for pension plan obligations sponsored by other
members of the controlled group. These pension obligations
include liability for any unfunded liabilities that may exist at
the time the plans are terminated. We and our subsidiaries are
currently members of a controlled group that includes ACF, an
entity in which Mr.&nbsp;Icahn has an indirect ownership
interest of at least 80%. ACF is the sponsor of several pension
plans that are underfunded, as of December&nbsp;31, 2004, by a
total of approximately $24.1&nbsp;million on an ongoing
actuarial basis and $172.4&nbsp;million if those plans were
terminated, as most recently reported by the plans&#146;
actuaries. These liabilities could increase or decrease,
depending on a number of factors, including future changes in
promised benefits, investment returns and the assumptions used
to calculate the liability. As members of the controlled group,
we would be jointly and severally liable for any failure of ACF
to pay the unfunded liabilities upon a termination of the ACF
pension plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon completion of this offering, we believe that we should no
longer be a member of the ACF controlled group. As a result, we
should no longer be subject to ACF&#146;s pension liabilities,
unless it were determined that we were otherwise a member of the
ACF controlled group or that a principal purpose of the offering
or other transactions that resulted in our ceasing to be a
member of the ACF controlled group was to evade pension
liabilities and the termination date of the underfunded plan was
within five years after the offering or other transactions. If
such a determination were made and upheld by a court, we could
remain jointly and severally liable for pension plan obligations
of ACF, which could have a material adverse effect on our
financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with Trans World Airlines, Inc.&#146;s (or TWA)
1992 bankruptcy proceedings under Chapter 11 of the Bankruptcy
Code, the Pension Benefit Guarantee Corporation (or the PBGC)
asserted that ACF as well as the other entities in which Mr.
Icahn had a controlling interest were obligated along with TWA
to satisfy any underfunding of obligations under TWA&#146;s
defined benefit plan. Subsequently, and in response to a
petition of another member of the Icahn control group, the PBGC
terminated the TWA pension plan and obligated an affiliate of
ours, Highcrest Investors Corp (or Highcrest), to make
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 27</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
eight annual termination payments of $30 million, totaling $240
million. We have been advised that as of December 31, 2004,
Highcrest had made termination payments totaling $130 million
and still owed $110 million of this obligation. The obligation
to make termination payments is non-recourse except to the
common stock of ACF Industries Holding Corp., which is also a
member of the Icahn control group. The authority of the PBGC to
enter into the settlement agreement is currently being
contested. If such a contest were to succeed, we could be
jointly and severally liable with the other members of the Icahn
control group for the termination liability associated with the
TWA pension plan, which may be in excess of the remaining
termination payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our manufacturer&#146;s warranties expose us to potentially
significant claims.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We warrant the workmanship and materials of many of our products
under express limited warranties. Accordingly, we may be subject
to significant warranty claims in the future such as multiple
claims based on one defect repeated throughout our mass
production process or claims for which the cost of repairing the
defective component is highly disproportionate to the original
cost of the part. These types of warranty claims could result in
costly product recalls, significant repair costs and damage to
our reputation, which could materially adversely affect our
business, financial condition and results of operations.
Unresolved warranty claims could result in users of our products
bringing legal actions against us. For example, we have been
named as the defendant in a lawsuit in which the plaintiff, OCI
Chemical Company, claims we were responsible for the damage
caused by allegedly defective railcars that were manufactured by
us. OCI Chemical Company alleges that failures in certain
components caused the contents transported by these railcars to
spill out of the railcars causing property damage, clean-up
costs, monitoring costs, testing costs and other costs and
damages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Increasing insurance claims and expenses could lower
profitability and increase business risk.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The nature of our business subjects us to product liability,
property damage and personal injury claims, especially in
connection with our manufacture and repair of products that
transport hazardous or volatile materials, such as pressure tank
railcars. We maintain reserves and liability insurance coverage
at levels based upon commercial norms in the industries in which
we operate and our historical claims experience. Over the last
several years, insurance carriers have raised premiums for many
companies operating in our industry. Increased premiums may
further increase our insurance expense as coverages expire or
cause us to raise our self-insured retention. If the number or
severity of claims within our self-insured retention increases,
we could suffer costs in excess of our reserves. An unusually
large liability claim or a series of claims based on a failure
repeated throughout our mass production process may exceed our
insurance coverage or result in direct damages if we were unable
or elected not to insure against certain hazards because of high
premiums or other reasons. In addition, the availability of, and
our ability to collect on, insurance coverage is often subject
to factors beyond our control. Moreover, any accident or
incident involving us, even if we are fully insured or not held
to be liable, could negatively affect our reputation among
customers and the public, thereby making it more difficult for
us to compete effectively, and could materially adversely affect
the cost and availability of insurance in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Covenants in our revolving credit facility currently restrict
and, following amendments to our revolving credit facility that
we expect to enter into concurrently with this offering,
covenants in our revolving credit facility will continue to
restrict our discretion in operating our business and provide
for certain minimum financial requirements.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect to amend and restate our revolving credit facility
concurrently with this offering. Our amended and restated
revolving credit facility will contain various covenants,
similar to those in our
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 28</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
existing revolving credit facility, that, among other things,
will require us to satisfy certain financial covenants and will
limit our management&#146;s discretion by restricting our
ability to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">incur additional debt;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">redeem our capital stock;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">enter into certain transactions
    with affiliates;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">pay dividends and make other
    distributions;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">make investments and other
    restricted payments;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">create liens.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our failure to comply with any covenants under the amended and
restated revolving credit facility could lead to an event of
default under the agreements governing our indebtedness that we
may have outstanding at the time, permitting our lenders to
accelerate our borrowings and to foreclose on any collateral.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Some of our railcar services and component manufacturing
employees belong to labor unions and strikes or work stoppages
by them or unions formed by some or all of our other employees
in the future could adversely affect our operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a party to collective bargaining agreements with labor
unions at our Longview, Texas, North Kansas City, Missouri and
our Milton, Pennsylvania repair facilities and at our Longview,
Texas steel foundry and components manufacturing facility. As of
September&nbsp;30, 2005, the covered employees at these sites
collectively represent approximately 16% of our total workforce.
Disputes with regard to the terms of these agreements or our
potential inability to negotiate acceptable contracts with these
unions in the future could result in, among other things,
strikes, work stoppages or other slowdowns by the affected
workers. We cannot guarantee that our relations with our railcar
services workforce will remain positive. We cannot guarantee
that union organizers will not be successful in future attempts
to organize our railcar manufacturing employees or our other
employees at some of our other facilities. If our workers were
to engage in a strike, work stoppage or other slowdown, or other
employees were to become unionized or the terms and conditions
in future labor agreements were renegotiated, we could
experience a significant disruption of our operations and higher
ongoing labor costs. In addition, we could face higher labor
costs in the future as a result of severance or other charges
associated with layoffs, shutdowns or reductions in the size and
scope of our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The market and industry data contained in this prospectus,
including estimates and forecasts relating to the growth of the
railcar market, cannot be verified with certainty and may prove
to be inaccurate.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This prospectus contains market and industry data obtained
primarily from industry publications of the Association of
American Railroads, the Railway Supply Institute, Global Insight
and information from the U.S.&nbsp;Department of Agriculture.
Industry publications typically indicate that they have derived
the published data from sources believed to be reasonable,
including other railcar manufacturers, but do not guarantee the
accuracy or completeness of the data. While we believe these
publications to be reliable, we have not independently verified
the data or any of the assumptions on which the estimates and
forecasts are based, and the data may prove to be inaccurate.
This data includes estimates and forecasts regarding future
growth in these industries, specifically data related to railcar
production, railcar growth and the historical average age of
active railcars in North America. Forecasts and estimates
regarding future growth of the railcar industry included in
these reports are based on assumptions of the growth and
improvement of certain sectors of the U.S.&nbsp;economy. The
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 29</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
growth and improvement of these sectors of the U.S.&nbsp;economy
during the period of these forecasts and estimates are not
assured. The failure of these sectors of the U.S.&nbsp;economy
to perform as assumed in these forecasts and estimates would
cause the forecasted expansion of the railcar industry not to
occur or to occur to a lesser extent than predicted. The failure
of the rail industry or the railcar supply industry to continue
to grow as forecasted by the market and industry data included
in this prospectus may have a material adverse effect on our
business and the market price of our common stock. See
additional information on industry data on page&nbsp;(i).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our failure to comply with regulations imposed by federal and
foreign agencies could negatively affect our financial
results.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our railcar operations are subject to extensive regulation by
governmental regulatory and industry authorities and by federal
and foreign agencies. These organizations establish rules and
regulations for the railcar industry, including construction
specifications and standards for the design and manufacture of
railcars; mechanical, maintenance and related standards; and
railroad safety. New regulatory rulings and regulations from
these federal or foreign agencies may impact our financial
condition and results of operations. If we fail to comply with
the requirements and regulations of these agencies, we may face
sanctions and penalties that could materially adversely affect
our results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Further consolidation of the railroad industry may materially
adversely affect our business.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Over the past ten years, there has been a consolidation of
railroad carriers operating in North America. Railroad carriers
are large purchasers of railcars and represent a significant
portion of our historical customer base. With fewer railroad
carriers, each railroad carrier will have proportionately
greater buying power and operating efficiency. This may
intensify competition among railcar manufacturers to retain
customer relationships with the consolidated railroad carriers
and cause our prices to decline. Future consolidation of
railroad carriers may materially adversely affect our sales and
reduce our income from operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Reductions in the availability of energy supplies or an
increase in energy costs may increase our operating costs.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We use electricity and natural gas at our manufacturing
facilities and to operate our equipment. Over the past three
years, prices for electricity and natural gas have fluctuated
significantly. An outbreak or escalation of hostilities between
the United States and any foreign power and, in particular, a
prolonged armed conflict in the Middle East, or a natural
disaster such as the recent hurricane and related flooding in
the oil producing region of the Gulf Coast of the United States,
could result in a real or perceived shortage of petroleum and/or
natural gas, which could result in an increase in the cost of
electricity or energy generally. Future limitations on the
availability or consumption of petroleum products and/or an
increase in energy costs, particularly electricity for plant
operations, could have a materially adverse effect upon our
business and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may be required to reduce our inventory carrying values,
which could materially adversely affect our financial condition
and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are required to record our inventories at the lower of cost
or market. In assessing the ultimate realization of inventories,
we are required to make judgments as to future demand
requirements and compare them with the current or committed
inventory levels. We have recorded reductions in inventory
carrying values in recent periods due to the discontinuance of
product lines and changes in market conditions due to changes in
demand requirements. We may be required to reduce inventory
carrying values in the future due to a decline in market
conditions in the railcar business, which could have a material
adverse effect on our financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 30</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may be required to reduce the value of our long-lived
assets, which could materially adversely affect our financial
condition and results of operations.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We periodically evaluate the carrying values of our long-lived
assets for potential impairment. The carrying value of a
long-lived asset is considered impaired when the carrying value
is not recoverable through undiscounted future cash flows and
the fair value of the asset is less than the carrying value
reduced by the estimated cost to dispose of the asset. Any
resulting impairment loss related to reductions in the value of
our long-lived assets could materially adversely affect our
financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RISKS RELATED TO THE PURCHASE OF OUR COMMON STOCK IN THIS
OFFERING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>As a new investor, you will experience immediate and
substantial dilution.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You will pay a price for each share of our common stock that
exceeds the per share value attributed from our tangible assets
less our total liabilities. Therefore, if we distributed our
consolidated tangible assets after deducting our consolidated
liabilities to our stockholders following this offering, our
stockholders would receive less per share of common stock than
you paid in this offering. After giving effect to the sale of
our shares of common stock in this offering at the assumed
initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which represents the midpoint of the range on the cover
of this prospectus, after deducting the underwriting discount
and estimated offering expenses payable by us and after giving
effect to the Transactions, our net tangible book value would
have been approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. Accordingly, if you purchase shares of our common stock
in this offering you will suffer immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share in net tangible book value. Net tangible book value per
share represents the amount of our total consolidated tangible
assets less our total consolidated liabilities, divided by the
total number of shares of common stock outstanding adjusted for
this offering and the expected use of the proceeds of this
offering, based on an assumed initial offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share of common stock, which represents the midpoint of the
range on the cover of this prospectus. This dilution is due in
large part to the fact that our earlier investors paid
substantially less than the initial public offering price when
they purchased their shares of our capital stock. You may suffer
additional dilution to the extent outstanding options to
purchase shares of our common stock are exercised. For more
information, see &#147;Dilution.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our common stock may trade at prices below the initial public
offering price and may be susceptible to declines based on
securities analysts&#146; or industry research and reports.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to this offering, you could not buy or sell our common
stock publicly. We cannot predict the extent to which an active
trading market for our common stock will develop or be sustained
after this offering. The initial public offering price will be
determined by negotiations between us and representatives of the
underwriters based on factors that may not be indicative of
future performance and may not bear any relationship to the
price at which our common stock will trade upon completion of
this offering. You may not be able to resell our common stock at
or above the initial public offering price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, the trading market for our common stock will be
influenced by the research and reports that industry or
securities analysts publish about us or our business. If one or
more of the analysts who cover us or our industry downgrade our
stock or project a downturn in our industry, our stock price
would likely decline. If one or more of these analysts cease
coverage of our company or fail to regularly publish reports on
us, we could lose visibility in the financial markets, which in
turn could cause our stock price or trading volume to decline.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 31</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The price of our common stock is subject to volatility and
you could lose all or part of your investment.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Various factors, such as general economic changes in the
financial markets, announcements or significant developments
with respect to the railcar industry, actual or anticipated
variations in our or our competitors&#146; quarterly or annual
financial results, the introduction of new products or
technologies by us or our competitors, changes in other
conditions or trends in our industry or in the markets of any of
our significant customers, changes in governmental regulation,
our financial results failing to meet expectations of analysts
or investors, or changes in securities analysts&#146; estimates
of our future performance or of that of our competitors or our
industry, could cause the market price of our common stock to
fluctuate substantially. In addition, our customers&#146;
practice of placing large, periodic orders for products on an as
needed basis makes our quarterly sales and operating results
difficult to predict and could cause our operating results in
some quarters to vary from market expectations and also lead to
volatility in our stock price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Our stock price may decline due to sales of shares by Carl C.
Icahn and other stockholders.</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sales of substantial amounts of our common stock, or the
perception that these sales may occur, may adversely affect the
price of our common stock and impede our ability to raise
capital through the issuance of equity securities in the future.
There will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding immediately after this offering.
Of these
shares, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
will be beneficially owned by our principal beneficial
stockholder and the chairman of our board of directors, Carl C.
Icahn. These include shares of our common stock,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our shares of common stock outstanding immediately after this
offering, held by the Foundation for Greater Opportunity, which
an affiliate of Mr.&nbsp;Icahn has agreed to purchase pursuant
to a stock purchase agreement entered into in December 2005. The
consummation of this acquisition requires the completion of this
offering and the approval of applicable authorities of the State
of New York. If the parties obtain this approval, we have been
advised that the parties expect that the acquisition would be
completed in the first three months of 2006. Pending the closing
of this acquisition, and for so long as the stock purchase
agreement has not been terminated, the Foundation has granted
the affiliate of Mr.&nbsp;Icahn purchasing the shares owned by
the Foundation an irrevocable proxy to vote all of the shares of
our common stock held by the Foundation. All shares sold in this
offering will be freely transferable without restriction or
further registration under the Securities Act of 1933. All of
our other outstanding shares of common stock are subject to
restrictions applicable to our &#147;affiliates,&#148; as that
term is defined in Rule&nbsp;144 of the Securities Act and
subject to 180-day lock-up agreements. See &#147;Shares eligible
for future sale&#148; and &#147;Underwriting.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We and our executive officers, directors and all our existing
stockholders have entered, and certain individuals who purchase
shares of our common stock in this offering through the directed
share program may enter, into 180-day lock-up agreements with
the underwriters. The lock-up agreements prohibit us and our
executive officers, directors, existing stockholders and certain
individuals who have purchased shares of our common stock
through the directed share program from selling or otherwise
disposing of shares of common stock, except in limited
circumstances. The terms of the lock-up agreements can be
waived, at any time, by UBS Securities LLC and Bear, Stearns
&#38; Co. Inc. in their sole discretion, without prior notice or
announcement, to allow us or our officers, directors, existing
stockholders and certain individuals who have purchased shares
of our common stock through the directed share program to sell
shares of our common stock. If the terms of the lock-up
agreements are waived, shares of our common stock will be
available for sale in the public market, which could reduce the
price of our common stock. See &#147;Shares eligible for future
sale&#151; Lock-up agreements&#148; and Underwriting&nbsp;&#151;
Directed share program.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 32</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Following the expiration of the lock-up period, certain
shareholders under our new registration rights agreement will be
entitled, subject to certain exceptions, to exercise their
demand registration rights to register their shares under the
Securities Act. If this right is exercised, holders of any of
our common stock subject to the registration rights agreement
will be entitled to participate in such registration. In
addition, in our letter agreement with James Unger, we have
agreed to use commercially reasonable efforts to file a
registration statement on Form&nbsp;S-8 with the SEC to cover
the registration
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock (assuming an initial public offering price
of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
which represents the midpoint of the range on the cover page of
this prospectus). We have agreed to include the balance of
Mr.&nbsp;Unger&#146;s shares in any registration statement we
file on behalf of Mr.&nbsp;Icahn with regard to the registration
for sale of our shares held by Mr.&nbsp;Icahn, provided the
contractual restrictions and applicable lock-up period of
Mr.&nbsp;Unger&#146;s shares have lapsed. By exercising their
registration rights, and selling a large number of shares, these
holders could cause the price of our common stock to decline. An
estimated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock will be subject to our registration rights
agreement and Mr.&nbsp;Unger&#146;s letter agreement upon
completion of this offering. See &#147;Shares eligible for
future sale,&#148; &#147;Certain relationships and related party
transactions&#151; Registration rights,&#148;
&#147;Management&#151; Executive compensation&#151; Employment
agreements&#148; and &#147;Description of capital stock&#151;
Registration rights.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>We may require additional capital in the future and sales of
our equity securities to provide this capital may dilute your
ownership in us.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We may need to raise additional funds through public or private
equity financings to:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">expand and grow our business;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">develop new products and services;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">respond to competitive
    pressures;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">acquire complementary businesses
    or technologies.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Any additional capital raised through the sale of our equity
securities may dilute your percentage ownership interest in us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Carl C. Icahn will continue to exert significant influence
over us.</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been advised that in December 2005 an affiliate of Carl
C. Icahn, our principal beneficial stockholder and the chairman
of our board of directors, entered into a stock purchase
agreement with the Foundation for a Greater Opportunity, or the
Foundation, our other significant beneficial stockholder, to
acquire all of our common stock held by the Foundation. The
consummation of this acquisition requires the completion of this
offering and the approval of applicable authorities of the State
of New York. If the parties obtain this approval, we have been
advised that the parties expect that the purchase would be
completed in the first three months of 2006. Pending the closing
of this purchase, and for so long as the stock purchase
agreement has not been terminated, the Foundation has granted
the affiliate of Mr.&nbsp;Icahn purchasing the shares owned by
the Foundation an irrevocable proxy to vote all of the shares of
our common stock held by the Foundation. The stock purchase
agreement may be terminated by either party if the purchase does
not occur by May 2006. As a result of these contemplated
arrangements, we expect that Mr.&nbsp;Icahn will control
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the voting power of our capital stock following the offering.
If the common stock held by the Foundation is not acquired by
affiliates of Mr.&nbsp;Icahn, and the irrevocable proxy expires,
Mr.&nbsp;Icahn will control
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the voting power of our common stock. Whether or not
affiliates of Mr.&nbsp;Icahn acquire our common stock held by
the Foundation, Mr.&nbsp;Icahn will be able to exert
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 33</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
substantial influence over us, including the election of our
directors, and controlling most matters requiring board or
shareholder approval, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">any determination with respect to
    our business strategy and policies;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">mergers or other business
    combinations involving us;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our acquisition or disposition of
    assets;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">future issuances of common stock
    or other securities by us;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our incurrence of debt or
    obtaining other sources of financing;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the payment of dividends on our
    common stock.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, the existence of a controlling stockholder may have
the effect of making it difficult for, or may discourage or
delay, a third party from seeking to acquire, a majority of our
outstanding common stock, which may adversely affect the market
price of the stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Mr.&nbsp;Icahn&#146;s interests may conflict with the
interest of our stockholders.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Icahn owns and controls and has an interest in a wide
array of companies, some of which such as ARL and ACF as
described below, may compete directly or indirectly with us. As
a result, his interests may not always be consistent with our
interests or the interests of our other stockholders. For
example, ARL, a railcar leasing company owned by Mr.&nbsp;Icahn,
competes directly with our other customers that are in the
railcar leasing business and ACF, which supplies us with
critical components, also provides components to our
competitors. ACF has also previously manufactured railcars and
may do so in the future. Mr.&nbsp;Icahn and entities controlled
by him may also pursue acquisitions or business opportunities
that may be complementary to our business. Our certificate of
incorporation will allow Mr.&nbsp;Icahn, entities controlled by
him, and any director, officer, member, partner, stockholder or
employee of Mr.&nbsp;Icahn or entities controlled by him, to
take advantage of such corporate opportunities without first
presenting such opportunities to us, unless such opportunities
are expressly offered to any such party solely in, and as a
direct result of, his or her capacity as our director, officer
or employee. As a result, corporate opportunities that may
benefit us may not be available to us in a timely manner, or at
all. See &#147;Description of Capital Stock&#151; Corporate
Opportunities.&#148; To the extent that conflicts of interest
may arise between us and Mr.&nbsp;Icahn and his affiliates,
those conflicts may be resolved in a manner adverse to us or to
you or other holders of our securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Upon the closing of this offering we may be a
&#147;controlled company&#148; within the meaning of the Nasdaq
National Market rules and you will not have the same protections
afforded to shareholders of companies that are not
&#147;controlled companies&#148; and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements.</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been advised that an affiliate of Carl C. Icahn has
entered into an agreement to acquire all of our common stock
held by the Foundation. The consummation of this acquisition of
our common stock would require the completion of this offering
and the approval of applicable authorities of the State of New
York. If the parties obtain this approval, we have been advised
that the parties expect that the purchase would be completed in
the first three months of 2006. Pending the closing of this
purchase, and for so long as the stock purchase agreement has
not been terminated, the Foundation has granted the affiliate of
Mr.&nbsp;Icahn purchasing the shares owned by the Foundation an
irrevocable proxy to vote all of the shares of our common stock
held by the Foundation. As a result of these contemplated
arrangements, Mr.&nbsp;Icahn will control
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the voting power of our capital stock following the offering.
Consequently, after the offering, we will be a &#147;controlled
company&#148; within the meaning of the corporate governance
standards of the Nasdaq National Market. Under these rules, a
&#147;controlled company&#148; may elect not to comply with
certain Nasdaq National Market corporate governance
requirements, including requirements that a majority of the
board of directors consist of independent directors;
compensation of
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 34</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
officers be determined or recommended to the board of directors
by a majority of its independent directors or by a compensation
committee that is composed entirely of independent directors;
and director nominees be selected or recommended for selection
by a majority of the independent directors or by a nominating
committee composed solely of independent directors. If we are a
&#147;controlled company&#148; following this offering, we
intend to use these exemptions. As a result, we expect that we
would not have a majority of independent directors, we would not
have a compensation committee and we would not have a nominating
committee. Accordingly, if we are a &#147;controlled
company&#148; following this offering, you will not have the
same protections afforded to shareholders of other companies
that are not &#147;controlled companies&#148; and, therefore,
are subject to all of the Nasdaq National Market corporate
governance requirements.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Payments of cash dividends on our common stock may be made
only at the discretion of our board of directors and Delaware
law may restrict, and the agreements governing our revolving
credit facility contain provisions that limit, our ability to
pay dividends.</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors has never declared or paid any cash
dividends on our common stock. Our board of directors may, in
its discretion, refuse to pay dividends and any payment of
dividends will depend upon our operating results, strategic
plans, capital requirements, financial condition, provisions of
our borrowing arrangements and other factors our board of
directors considers relevant. In addition, the agreements
governing our existing revolving credit facility restrict our
ability to declare and pay dividends on our capital stock and
the amended and restated revolving credit facility that we
expect to enter into concurrently with this offering will also
restrict our ability to declare and pay dividends. Furthermore,
Delaware law imposes restrictions on our ability to pay
dividends. For example, our board of directors may declare
dividends only to the extent of our &#147;surplus&#148; (which
is defined as total assets at fair market value minus total
liabilities, minus statutory capital), or if there is no
surplus, out of our net profits for the then-current and/or
immediately preceding fiscal years. Accordingly, we may not be
able to pay dividends in any given amount in the future, or at
all.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>As a result of being a public company, we will incur
increased costs that may place a strain on our resources and our
management&#146;s attention may be diverted from other business
concerns.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
In addition, the Sarbanes-Oxley Act, as well as new rules
subsequently implemented by the Securities and Exchange
Commission, or SEC, and the Nasdaq National Market, have
required changes in corporate governance practices of public
companies. We expect these new rules and regulations to increase
our legal and financial compliance costs and to make some
activities more time-consuming and costly. These requirements
may place a strain on our systems and resources. The Exchange
Act requires that we file annual, quarterly and current reports
with respect to our business and financial condition. The
Sarbanes-Oxley Act requires that we maintain effective
disclosure controls and procedures and internal controls over
financial reporting. We currently do not have an internal audit
group. We will require significant resources and management
oversight to maintain and improve the effectiveness of our
disclosure controls and procedures and internal controls over
financial reporting. This may divert management&#146;s attention
from other business concerns, which could have a material
adverse effect on our business, financial condition, results of
operations and cash flows. In addition, we will need to hire or
outsource additional accounting and financial staff with
appropriate public company experience and technical accounting
knowledge.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We also expect these new rules and regulations to make it more
difficult and expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs
to obtain coverage. As a result, it may be more difficult for us
to attract and retain qualified persons to serve on our board of
directors or as executive officers. We
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 35</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Risk factors</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
are currently evaluating and monitoring developments with
respect to these new rules, and we cannot predict or estimate
the amount of costs we may incur with respect to them or the
timing of such costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>This offering may cause us to undergo an &#147;ownership
change&#148; for purposes of Section&nbsp;382 of the Internal
Revenue Code, which may limit our ability to use our net
operating loss carryforwards and certain other tax
attributes.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At December&nbsp;31, 2004, the Company had net operating loss
carryforwards of $26 million, which begin to expire in 2024. The
tax effect of this federal net operating loss carryforwards were
approximately $10.1&nbsp;million. Under Section&nbsp;382 of the
Internal Revenue Code, if a corporation undergoes an
&#147;ownership change,&#148; generally defined as a greater
than 50% change (by value) in its equity ownership over a
three-year period, the corporation&#146;s ability to use its
pre-change of control net operating loss carryforward and other
pre-change tax attributes against its post-change income may be
limited. Although no definite determination can be made at this
time, there is a possibility that this offering will cause us to
undergo an ownership change under the Internal Revenue Code.
These limitations may have the effect of reducing our after-tax
cash flow. Even if this offering does not cause an ownership
change to occur, we may undergo an ownership change after the
offering due to subsequent changes in ownership of our common
stock.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 36</B>
</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='103'></A>
</DIV>

<!-- link1 "Special note regarding forward-looking statements" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Special note regarding forward-looking statements
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This prospectus contains some forward-looking statements
including, in particular, statements about our industry, plans,
strategies and prospects. These statements involve known and
unknown risks, uncertainties and other factors that may cause
our actual results, financial position or performance to be
materially different from any future results, financial position
or performance expressed or implied by such forward-looking
statements. We have used the words &#147;may,&#148;
&#147;will,&#148; &#147;expect,&#148; &#147;anticipate,&#148;
&#147;believe,&#148; &#147;forecast,&#148; &#147;estimate,&#148;
&#147;plan,&#148; &#147;projected,&#148; &#147;intend&#148; and
similar expressions in this prospectus to identify
forward-looking statements. We have based these forward-looking
statements on our current views with respect to future events
and financial performance. Our actual results or those of our
industry could differ materially from those projected in the
forward-looking statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our forward-looking statements are subject to risks and
uncertainties, including:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the cyclical nature of our
    business;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">adverse economic and market
    conditions;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">fluctuating costs of raw
    materials, including steel and railcar components, and delays in
    the delivery of such raw materials and components;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our ability to maintain
    relationships with our suppliers of railcar components and raw
    materials;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">fluctuations in the supply of
    components and raw materials we use in railcar manufacturing;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the highly competitive nature of
    our industry;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the risk of damage to our primary
    railcar manufacturing facilities or equipment in Paragould or
    Marmaduke, Arkansas;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our reliance upon a small number
    of customers that represent a large percentage of our revenues;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the variable purchase patterns of
    our railcar customers and the timing of completion, delivery and
    acceptance of customer orders;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our dependence on our key
    personnel;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the risks of a labor shortage in
    light of our recent growth;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">risks associated with the
    conversion of our railcar backlog into revenues;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the risk of lack of acceptance of
    our new railcar offerings by our customers;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the cost of complying with
    environmental laws and regulations;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the costs associated with being a
    public company;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our relationship with Carl C.
    Icahn, our principal beneficial stockholder and the chairman of
    our board of directors, and his affiliates as a purchaser of our
    products, supplier of components and services to us and as a
    provider of significant capital, financial and managerial
    support;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">potential failure by ACF to honor
    its indemnification obligations to us;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">potential risk of increased
    unionization of our workforce;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our ability to manage our pension
    costs;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">potential significant warranty
    claims;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">covenants in our existing
    revolving credit facility and other agreements as they presently
    exist and similar covenants that we expect in our amended and
    restated revolving credit facility governing our indebtedness
    that limit our management&#146;s discretion in the operation of
    our businesses.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 37</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Special note regarding forward-looking statements</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our actual results could be different from the results described
in or anticipated by our forward-looking statements due to the
inherent uncertainty of estimates, forecasts and projections and
may be better or worse than anticipated. Given these
uncertainties, you should not rely on forward-looking
statements. Forward-looking statements represent our estimates
and assumptions only as of the date that they were made. We
expressly disclaim any duty to provide updates to
forward-looking statements, and the estimates and assumptions
associated with them, after the date of this prospectus, in
order to reflect changes in circumstances or expectations or the
occurrence of unanticipated events except to the extent required
by applicable securities laws. All of the forward-looking
statements are qualified in their entirety by reference to the
factors discussed above under &#147;Risk factors.&#148; We
caution you that these risks may not be exhaustive. We operate
in a continually changing business environment and new risks
emerge from time to time. You should carefully read this
prospectus in its entirety as it contains information you should
consider when making your investment decision.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 38</B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='104'></A>
</DIV>

<!-- link1 "Use of proceeds" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Use of proceeds
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We estimate that we will receive net proceeds from this offering
of approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
(or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, if the
underwriters exercise their over-allotment option in full),
after deducting underwriting discounts and other estimated fees
and expenses related to this offering payable by us, assuming an
initial offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which represents the midpoint of the range on the cover
of this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The table below shows the application of the net proceeds of
this offering to give effect to the Transactions, as if the
Transactions were completed as of September&nbsp;30, 2005.
Actual amounts will vary from the amounts shown below.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Amount</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B><I>Uses of Funds</I></B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of amounts outstanding under revolving credit
    facility(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of notes due to affiliates(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of all industrial revenue bonds(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Redemption of all outstanding shares of preferred stock(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fees and expenses relating to this offering(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Total uses</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><B>$</B></TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Borrowings under our existing revolving credit facility bear
    interest at various rates based on either the LIBOR or the
    U.S.&nbsp;prime rate. As of September&nbsp;30, 2005, the
    interest rate on the borrowings under the revolving credit
    facility was 6.5%, based on the U.S.&nbsp;prime rate at that
    time. Our existing revolving credit facility matures in
    March&nbsp;2006. In conjunction with this offering we intend to
    amend and restate the existing revolving credit facility
    pursuant to a commitment letter we have obtained from our
    lenders. See &#147;Management&#146;s discussion and analysis of
    financial condition and results of operations&#151;Liquidity and
    capital resources&#151;Revolving credit facility&#148; for a
    description of the material terms of our existing revolving
    credit facility and the expected terms of our amended and
    restated revolving credit facility.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Includes indebtedness owed to Arnos Corp. and ACF Industries
    Holding Corp., both of which are beneficially-owned and
    controlled by Carl C. Icahn, our principal beneficial
    stockholder and the chairman of our board of directors. On
    December&nbsp;17, 2004, we issued a note payable to Arnos Corp.
    in the amount of $7.0&nbsp;million that bears interest at the
    U.S.&nbsp;prime rate plus 1.75% and is payable on demand. We
    refer to this note as the Arnos note. We used the proceeds of
    the Arnos note to provide additional working capital. As of
    September&nbsp;30, 2005, the interest rate on the Arnos note was
    8.0%. As of September&nbsp;30, 2005, we had $7.0&nbsp;million in
    principal amount and $0.4&nbsp;million in accrued interest on
    the Arnos note outstanding. As of January&nbsp;1, 2005, in
    connection with our purchase of Castings LLC, the entity through
    which we own our interest in the Ohio Castings joint venture,
    from ACF Industries Holding Corp., we issued a note payable to
    ACF Industries Holding Corp. in the principal amount of
    $12.0&nbsp;million. We refer to this note as the Castings note.
    The Castings note bears interest at the U.S.&nbsp;prime rate
    plus 0.5% and is due on demand. As of September&nbsp;30, 2005,
    the interest rate on the Castings note was 7.25%. As of
    September&nbsp;30, 2005, we had $12.0&nbsp;million in principal
    amount and $0.6&nbsp;million in accrued interest on the Castings
    note outstanding. See &#147;Certain relationships and related
    party transactions&#151;Certain transactions with ACF Industries
    LLC and American Railcar Leasing LLC&#151;Amounts due to
    affiliates.&#148;</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    The industrial revenue bonds are due at varying dates through
    2011 and as of September&nbsp;30, 2005 bear interest at rates
    ranging from 7.75% to 8.5%, with a weighted average interest
    rate of 8.3%&nbsp;per year. See &#147;Management&#146;s
    discussion and analysis of financial condition and results of
    operations&#151;Liquidity and capital resources&#151;Industrial
    revenue bonds.&#148; The industrial revenue bonds are guaranteed
    by affiliates of Mr.&nbsp;Icahn, and these affiliates will be
    released from such guarantees upon repayment of the industrial
    revenue bonds. In addition, James J. Unger, our president and
    chief executive officer, and his wife own</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 39</B>
</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Use of proceeds</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT style="font-size: 9pt">$0.4&nbsp;million of the industrial
    revenue bonds issued by Paragould, Arkansas. See &#147;Certain
    relationships and related party transactions&#151;Guarantees of
    indebtedness by ACF and other related parties&#151;Industrial
    revenue bonds&#148; and &#147;Certain relationships and related
    party transactions&#151;Certain transactions involving James J.
    Unger&#151;Industrial revenue bonds&#148; for more details.
    Amounts include accrued and unpaid interest through the date of
    the repurchase of the industrial revenue bonds. At the closing
    of this offering, we will deliver the aggregate principal amount
    outstanding under the industrial revenue bonds and accrued and
    unpaid interest to the date of redemption to the trustee under
    the indenture governing the industrial revenue bonds and we will
    deliver to the trustee irrevocable instructions to notify the
    holders of the industrial revenue bonds of the redemption of all
    outstanding industrial revenue bonds. Pursuant to the terms of
    the indenture, the industrial revenue bonds will be redeemed
    upon the expiration of a 30-day to 60-day notice period from the
    date the trustee gives notice to the holders of the industrial
    revenue bonds. At the time we deposit the amounts due under the
    industrial revenue bonds with the trustee and give irrevocable
    instructions to the trustee the industrial revenue bonds will be
    deemed to be repaid.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 9pt">(4)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 9pt">We intend to redeem all of the
    outstanding shares of our preferred stock and pay all
    accumulated and unpaid dividends on that stock immediately
    following the completion of this offering. As of
    September&nbsp;30, 2005, there was one share of our mandatorily
    redeemable preferred stock outstanding and $770 of accumulated
    and unpaid dividends on that share. As of September&nbsp;30,
    2005, there were 82,055&nbsp;shares of our new preferred stock
    outstanding and $9.3&nbsp;million of accumulated and unpaid
    dividends on those shares. All of our outstanding preferred
    stock is held by Mr.&nbsp;Icahn and his affiliates. See
    &#147;Certain relationships and related party
    transactions&#151;Redemption of new preferred stock&#148; and
    &#147;Description of capital stock.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT style="font-size: 9pt">(5)</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 9pt">Represents the underwriting
    discounts and commissions and other fees and expenses related to
    the offering and the transactions. This excludes a one-time
    special cash bonus of $500,000 William P. Benac, our chief
    financial officer, is entitled to receive on April&nbsp;22, 2007
    in the event we complete this offering and provided
    Mr.&nbsp;Benac remains employed with us until that date, subject
    to certain exceptions. See &#147;Management&nbsp;&#151;
    Employment Agreements.&#148; We intend to pay
    Mr.&nbsp;Benac&#146;s bonus with cash from operations.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 40</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='105'></A>
</DIV>

<!-- link1 "Dividend policy and restrictions" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Dividend policy and restrictions
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors has never declared or paid any cash
dividends on our common stock. Following this offering, we
intend to pay cash dividends on our common stock.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of the date of this prospectus, our board of directors has
not determined the amount of any specific dividend. The
declaration and payment of dividends will be at the discretion
of our board of directors and will depend upon our operating
results, strategic plans, capital requirements, financial
condition, provisions of our borrowing arrangement and other
factors our board of directors considers relevant.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our existing revolving credit facility provides that the payment
of dividends triggers a right in favor of the administrative
agent and our lenders to accelerate all of our obligations under
the credit facility, a demand right, unless we satisfy certain
financial covenants and provide our lenders under that facility
with advance notice of the dividend. We expect to amend and
restate our existing revolving credit facility pursuant to a
commitment letter we have received from our lenders concurrently
with the completion of this offering. The amended and restated
revolving credit facility would continue to contain provisions
that trigger a demand right if we pay dividends on our common
stock unless the payment would not cause the adjusted fixed
charge coverage ratio to be less than 1.2 to 1.0 or the adjusted
ratio of indebtedness to earnings before interest, taxes,
depreciation and amortization to be greater than 4.0 to 1.0,
each on a quarterly and/or annual basis, as defined in the
amended and restated revolving credit facility. In addition,
Delaware law imposes restrictions on our ability to pay
dividends. For example, our board of directors may declare
dividends only to the extent of our &#147;surplus&#148; (which
is defined as total assets at fair market value minus total
liabilities, minus statutory capital), or if there is no
surplus, out of our net profits for the then-current and/or
immediately preceding fiscal years. Accordingly, we may not be
able to pay dividends in any given amount in the future, or at
all.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 41</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='106'></A>
</DIV>

<!-- link1 "Capitalization" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Capitalization
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth our cash and cash equivalents and
capitalization as of September&nbsp;30, 2005, on an actual basis
and on an adjusted basis to give effect to the Transactions,
assuming an initial offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which represents the midpoint of the range on the cover
of this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should read this table together with &#147;Prospectus
summary&#151; The transactions,&#148; &#147;Use of
proceeds,&#148; &#147;Management&#146;s discussion and analysis
of financial condition and results of operations&#148; and the
consolidated financial statements and the related notes thereto
included elsewhere in this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>As of September&nbsp;30, 2005</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Actual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>As Adjusted</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands, except share</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>information)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Short-term debt:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving credit facility(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total short-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Industrial revenue bonds (including current portion)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note payable for land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mandatorily redeemable preferred stock, $0.01&nbsp;par value,
    99,000&nbsp;shares authorized, 1&nbsp;share issued and
    outstanding, actual; no shares authorized, issued or
    outstanding, as adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New preferred stock, par value $0.01&nbsp;per share,
    500,000&nbsp;shares authorized, 82,055&nbsp;shares issued and
    outstanding, actual; no shares authorized, issued or
    outstanding, as adjusted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Preferred stock, $0.01&nbsp;par value, no shares authorized,
    issued or outstanding, actual; &nbsp;&nbsp;&nbsp;shares
    authorized and no shares issued or outstanding, as adjusted(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, par value $0.01&nbsp;per share, 12,000&nbsp;shares
    authorized, 1,195 issued and outstanding,
    actual; &nbsp;&nbsp;&nbsp;shares
    authorized, &nbsp;&nbsp;&nbsp;shares issued and outstanding, as
    adjusted(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,599</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,046</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total capitalization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>166,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    We anticipate that our amended and restated revolving credit
    facility that we intend to enter into concurrently with the
    closing of this offering, pursuant to a commitment letter we
    have received from our lenders, will permit us to borrow
    $75&nbsp;million and will mature three years after the closing
    of this offering.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    To be authorized immediately prior to the completion of the
    offering.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    As adjusted, reflects the write-off of deferred financing costs
    of $0.6&nbsp;million relating to the redemption of the
    industrial revenue bonds.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 42</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='107'></A>
</DIV>

<!-- link1 "Dilution" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Dilution
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Purchasers of the common stock in the offering will suffer an
immediate and substantial dilution in net tangible book value
per share. Dilution is the amount by which the initial public
offering price paid by purchasers of shares of our common stock
exceeds the net tangible book value per share of our common
stock immediately following the completion of the offering. Net
tangible book value represents the amount of our total tangible
assets reduced by our total liabilities. Tangible assets
represents our total assets less intangible assets. Net tangible
book value per share represents our net tangible book value
divided by the number of shares of common stock outstanding. As
of September&nbsp;30, 2005, prior to giving effect to the
Transactions, our net tangible book value was
$107.5&nbsp;million and our net tangible book value per share,
after giving effect to the merger, was
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After giving effect to the Transactions at the assumed initial
public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which represents the midpoint of the range on the cover
of this prospectus, our net tangible book value would have been
approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share. This represents an immediate increase in net tangible
book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to existing stockholders and an immediate dilution in net
tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share to new investors purchasing shares of our common stock in
this offering. Dilution per share represents the difference
between the price per share paid by new investors for shares
issued in this offering and the net tangible book value per
share immediately after the completion of this offering. The
following table illustrates this dilution:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assumed initial public offering price per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net tangible book value per share as of September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in net tangible book value per share attributable to
    new investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjusted net tangible book value per share after this offering</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dilution per share to new investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table presents, on an adjusted basis, after giving
effect to the Transactions, as of September&nbsp;30, 2005, the
total number of shares of common stock purchased from us, the
total consideration paid and the average price per share paid by
the existing stockholders and by new investors purchasing shares
of our common stock in this offering, assuming an initial public
offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which represents the midpoint of the range on the cover
of this prospectus.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares purchased</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Total consideration</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Average price</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Amount</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>per share</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Existing stockholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New investors</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The above table excludes
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
that will be available for future issuance under stock options
granted under our 2005 Equity Incentive Plan on or about the
closing date of this offering
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;remaining
shares that will be available for future issuance under our 2005
Equity Incentive Plan. See &#147;Management&nbsp;&#151;
Executive compensation&nbsp;&#151; Equity incentive plan&#148;.
To the extent that any of
our &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding
options issued under our 2005 Equity Incentive Plan are
exercised, there will be further dilution to new investors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If the underwriters exercise their over-allotment option in
full, the number of shares of common stock held by our existing
stockholders will further decrease to
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total number of shares of our common stock outstanding,
and the number of shares of our common stock held by new
investors will further increase
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares,
or
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of the total number of shares of our common stock outstanding.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 43</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='108'></A>
</DIV>

<!-- link1 "Selected consolidated financial data" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Selected consolidated financial data
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth our summary consolidated
financial data for the periods presented. The consolidated
statements of operations and cash flow data for the years ended
December&nbsp;31, 2002, 2003 and 2004 and the consolidated
balance sheet data as of December&nbsp;31, 2003 and 2004 are
derived from our audited consolidated financial statements and
related notes included elsewhere in this prospectus. The
consolidated statements of operations and cash flow data for the
years ended December&nbsp;31, 2000 and 2001 and the consolidated
balance sheet data as of December&nbsp;31, 2000, 2001 and 2002
are derived from our historical consolidated financial
statements not included in this prospectus. The consolidated
statements of operations and cash flow data for the nine months
ended September&nbsp;30, 2004 and 2005 and the consolidated
balance sheet data as of September&nbsp;30, 2005 have been
derived from unaudited consolidated financial statements and
related notes included elsewhere in this prospectus and reflect
all adjustments (consisting only of normal, recurring
adjustments) which are, in the opinion of management, necessary
for a fair presentation of our financial position, the results
of operations and cash flows for the periods presented.
Operating results for the nine months ended September&nbsp;30,
2005 are not necessarily indicative of the results that may be
expected for the year ended December&nbsp;31, 2005 or any other
future period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You should read this information together with
&#147;Capitalization,&#148; &#147;Management&#146;s discussion
and analysis of financial condition and results of
operations&#148; and our consolidated financial statements and
the related notes thereto included elsewhere in this prospectus.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 44</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Selected consolidated financial data</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Years ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2000</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2001</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(unaudited)</B></TD><TD></TD>
</TR>


<TR style="font-size: 7pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="26" align="center" nowrap><B>(in thousands, except share data)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated statement of operations data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Manufacturing operations(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>200,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>181,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>138,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>188,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>316,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>226,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>409,208</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar services(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,940</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>238,784</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>217,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>254,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442,148</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of manufacturing operations(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>169,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>216,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>377,181</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of railcar services(4)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,538</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>224,486</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>340,756</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404,719</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,429</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administrative and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,573</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income(5)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,265</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense(6)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,687</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,525</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,853</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,616</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,667</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,216</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,577</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(604</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(609</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(351</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before income tax (benefit) expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,305</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,040</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,807</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax (benefit) expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(713</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,074</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,611</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,966</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,913</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less preferred dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,070</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,139</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,690</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,241</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,296</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,171</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) available to common shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,036</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,052</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,423</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,361</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares outstanding basic and diluted(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) per common share basic and diluted(7)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,592</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,036</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,052</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,414</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated balance sheet data (at period end):</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net working capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,096</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>83,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,197</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,090</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>191,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>187,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>356,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>300,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>262,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>113,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>98,463</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>190,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,489</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>77,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>89,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>205,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>107,535</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Consolidated cash flow data:</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,639</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(17,082</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,831</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,782</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,189</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,251</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,037</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(12,111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,369</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,783</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 45</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Selected consolidated financial data</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Includes revenues from transactions with affiliates of
    $52.8&nbsp;million, $64.8&nbsp;million, $63.6&nbsp;million,
    $62.9&nbsp;million and $64.4&nbsp;million in 2000, 2001, 2002,
    2003 and 2004, respectively and $44.6&nbsp;million and
    $44.5&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(2)</TD>
    <TD align="left">
    Includes revenues from transactions with affiliates of
    $16.1&nbsp;million, $8.6&nbsp;million, $12.8&nbsp;million,
    $11.0&nbsp;million and $19.4&nbsp;million in 2000, 2001, 2002,
    2003 and 2004, respectively and $12.7&nbsp;million and
    $16.0&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(3)</TD>
    <TD align="left">
    Including costs from transactions with affiliates of
    $46.6&nbsp;million, $57.6&nbsp;million, $55.7&nbsp;million,
    $54.4&nbsp;million and $59.1&nbsp;million in 2000, 2001, 2002,
    2003 and 2004, respectively and $40.2&nbsp;million and
    $41.4&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(4)</TD>
    <TD align="left">
    Includes costs from transactions with affiliates of
    $12.8&nbsp;million, $7.2&nbsp;million, $12.2&nbsp;million,
    $10.1&nbsp;million and $15.5&nbsp;million in 2000, 2001, 2002,
    2003 and 2004, respectively and $9.6&nbsp;million and
    $12.7&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(5)</TD>
    <TD align="left">
    Includes interest income from affiliates of $5.6&nbsp;million,
    $4.3&nbsp;million, $3.4&nbsp;million, $3.0&nbsp;million and
    $3.9&nbsp;million in 2000, 2001, 2002, 2003 and 2004,
    respectively and $1.2&nbsp;million and $0.8&nbsp;million for the
    nine months ended September&nbsp;30, 2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>(6)</TD>
    <TD align="left">
    Includes interest expense to affiliates of $0.2&nbsp;million in
    2001, and $1.5&nbsp;million in 2004 and $0.2&nbsp;million and
    $1.7&nbsp;million for the nine months ended September&nbsp;30,
    2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(7)</TD>
    <TD align="left">
    Share and per share data have not been restated to give effect
    to the merger.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 46</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='109'></A>
</DIV>

<!-- link1 "Management&#146;s discussion and analysis of financial condition and results of operations" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Management&#146;s discussion and analysis of financial condition
and results of operations
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>You should read the following discussion in conjunction with
&#147;Selected consolidated financial data&#148; and our
consolidated financial statements and related notes included
elsewhere in this prospectus. This discussion contains
forward-looking statements that are based on management&#146;s
current expectations, estimates and projections about our
business and operations. Our actual results may differ
materially from those currently anticipated and expressed in
such forward-looking statements and as a result of the factors
we describe under &#147;Risk factors&#148; and elsewhere in this
prospectus. See &#147;Special note regarding forward-looking
statements&#148; and &#147;Risk factors.&#148;</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OVERVIEW</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a leading North American manufacturer of covered hopper
and tank railcars. We also repair and refurbish railcars,
provide fleet management services and design and manufacture
certain railcar and industrial components used in the production
of our railcars as well as railcars and non-railcar industrial
products produced by others. We provide our railcar customers
with integrated solutions through a comprehensive set of high
quality products and related services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We operate in two segments:&nbsp;manufacturing operations and
railcar services. Manufacturing operations consists of railcar
manufacturing and railcar and industrial component
manufacturing. Railcar services consists of railcar repair and
refurbishment services and fleet management services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have experienced significant growth in the last three years
with revenues growing to $355.1&nbsp;million in 2004, from
$218.0&nbsp;million in 2003 and $168.8&nbsp;million in 2002. Our
revenues in the first nine months of 2005 were
$442.1&nbsp;million, compared to $254.3&nbsp;million in the
first nine months of 2004. Our revenues in 2004 included
$316.5&nbsp;million from manufacturing operations and
$38.6&nbsp;million from the sale of railcar services. Our
revenues in the first nine months of 2005 included
$409.2&nbsp;million from manufacturing operations and
$32.9&nbsp;million from the sale of railcar services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Manufacturing operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We manufacture all of our railcars in modern facilities located
in Paragould and Marmaduke, Arkansas, which were built in 1995
and 1999, respectively. We strategically located these
facilities in close proximity to our main shipper and railroad
customers, as well as our main suppliers of railcar components.
As of the date of this prospectus, none of our over 1,100
employees at our Paragould and Marmaduke facilities are
represented by a union. However, employees of three of our
repair facilities and one of our component manufacturing
facilities, representing 16% of our total workforce as of
September&nbsp;30, 2005, are represented by a union. We
manufacture components in four other manufacturing facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our Paragould facility was designed primarily to produce covered
hopper railcars, but is also capable of producing other railcar
types. For example, in 2004 and the first nine months of 2005,
we produced centerbeam platform railcars at our Paragould
facility. This facility originally consisted of two production
tracks with an initial production capacity of approximately six
railcars per day. Changes in plant design and manufacturing
processes since 1995, along with the addition of painting and
lining capabilities in 1999, and a third production track in
December 2004, increased our production capacity. Based on our
current backlog, we plan to produce an average of approximately
24 covered hopper railcars per working day, dependent upon
product mix and the availability of raw materials and
components. The production lines at our Paragould facility are
designed to provide maximum flexibility for efficient and rapid
changeover in product mix between various types and sizes
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 47</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
of railcars. Currently, we are expanding our Paragould facility
through the construction of additional painting and lining
capabilities, which are scheduled to be completed by the end of
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We delivered the following quantities and types of railcars in
2002, 2003 and 2004, and the first nine months of 2004 and 2005,
manufactured at our Paragould facility:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="20" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Covered hoppers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,759</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Centerbeam platform</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>785</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Paragould railcar deliveries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,544</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our Marmaduke facility was built in 1999 to manufacture tank
railcars. Based on our current backlog, we plan to produce an
average of approximately 7.5 tank railcars per working day at
this facility, dependent upon product mix of tank railcar types
and the availability of raw materials and components. The
facility is designed to produce both pressure and non-pressure
tank railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We delivered the following quantities and types of tank railcars
in 2002, 2003 and 2004, and the first nine months of 2004 and
2005, manufactured at our Marmaduke facility:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year Ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="20" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pressure tanks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>223</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-pressure tanks</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,213</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total Marmaduke railcar deliveries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>713</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,637</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,436</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We provide components for our railcar manufacturing operations
as well as for other railcar manufacturers and other industries.
Components manufactured by us include aluminum and steel
fabricated and machined parts and carbon steel, aluminum, high
alloy and stainless steel castings, primarily for the trucking
and construction equipment and oil and gas exploration markets.
Our revenues from the sales of components exclude the components
we manufacture for use in our railcar manufacturing business. In
2004, our revenues from sales of components increased by 52% to
$50.7&nbsp;million from $33.4&nbsp;million in 2003. In the first
nine months of 2005, our revenues from sales of components
increased to $51.7&nbsp;million from $36.6&nbsp;million in the
first nine months of 2004. We attribute the increase in these
revenues primarily to an overall increase in demand for
commercial railcar components as well as the demand for steel
castings and machine components in the non-railcar industrial
sectors that we serve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Railcar services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our railcar services include railcar repair and refurbishment
and fleet management and engineering services. Our railcar
repair and refurbishment services are provided through our
network of six full service maintenance and repair facilities
and four mobile repair units. Our railcar service facilities are
located in strategic areas near major customers. We have
established long-term business relationships with a customer
base that includes railcar leasing companies, shippers and
railroads. In 2004, our railcar services revenues increased by
29% to $38.6&nbsp;million, from $29.9&nbsp;million in 2003. In
2002, our railcar services revenues were $30.4&nbsp;million. In
the first nine months of 2005, our railcar services revenues
increased to $32.9&nbsp;million from $27.6&nbsp;million in the
first nine months of 2004. We believe
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 48</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the growth in these revenues reflects the overall trend in the
United States toward increased railcar utilization, the increase
in our customer base, the increase in our service offerings and
the increase in the number of railcars under fleet management by
us. Our fleet management business complements both our railcar
repair and refurbishment and railcar manufacturing operations.
As of September&nbsp;30, 2005, we managed approximately 57,000
railcars for various customers, including approximately 22,000
railcars for ARL, an affiliate of Carl C. Icahn, the chairman of
our board of directors and our principal controlling stockholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AMERICAN RAILCAR LEASING LLC FORMATION AND EXCHANGE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We formed ARL, a company that buys and leases railcars, as our
wholly owned subsidiary in June 2004. As part of the formation
of ARL and its further capitalization, ACF and certain of its
subsidiaries transferred to us and ARL their railcars and
related leases, as well as equity in certain of ACF&#146;s
subsidiaries that supported its leasing business, in exchange
for shares of our new preferred stock and preferred interests of
ARL. We, in turn, contributed the assets we received to ARL in
return for common equity interests in ARL. ACF is a company
beneficially owned and controlled by Mr.&nbsp;Icahn. On
June&nbsp;30, 2005, we transferred all of our interest in ARL to
the holders of our new preferred stock, all of which are
beneficially owned and controlled by Mr.&nbsp;Icahn, in exchange
for the redemption of 116,116&nbsp;shares of our new preferred
stock held by them plus accrued dividends. The description of
our operations and the presentation of our financial information
and consolidated financial statements has been prepared on a
standalone basis, excluding ARL&#146;s operations for all
periods, and all transactions giving effect to ARL&#146;s
formation and subsequent transfer have been eliminated from the
financial statements, with the exception of deferred tax assets
retained by us. Any differences related to the amounts
originally capitalized and the amount paid for ARL or our
subsequent transfer of ARL have been recorded through
adjustments to shareholder&#146;s equity, including certain tax
benefits that we received as a result of using ARL&#146;s
previously incurred tax losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For further information relating to the formation of ARL, the
subsequent ARL transfer and our prior and continuing agreements
with ARL and with other affiliates of Mr.&nbsp;Icahn, see
&#147;Certain relationships and related party transactions&#151;
Certain transactions involving American Railcar Leasing
LLC.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FACTORS AFFECTING OPERATING RESULTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following is a discussion of some of the key factors that
have in the past and are likely in the future to affect our
operating results. These factors include, but are not limited
to, the cyclical nature of the North American railcar market,
our reliance on a few customers for most of our revenues, our
historical reliance on revenues from our affiliates for a
significant portion of our revenue, our reliance on large
orders, the variable purchasing patterns of our customers and
fluctuation in supplies and prices of raw materials and
components used in railcar manufacturing. See &#147;Risk
factors&#148; for a more comprehensive list of factors that
could affect our operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Cyclicality of the railcar industry.</I> Historically, the
North American railcar market has been highly cyclical and we
expect it to continue to be highly cyclical. During the most
recent industry cycle, industry-wide railcar deliveries declined
from a peak of 75,704 in 1998 to a low of 17,714 railcars in
2002. During this downturn, our revenues dropped from
$238.8&nbsp;million in 2000 to $168.8&nbsp;million in 2002 and
we incurred losses of $1.6&nbsp;million, $2.0&nbsp;million and
$3.9&nbsp;million in 2000, 2001 and 2002, respectively. We
believe that downturns in the railcar manufacturing industry
will occur in the future and will result in decreased demand for
our products and services. The cycles in our industry result
from many factors that are beyond our control, including
economic conditions in the United States. Although railcar
production has increased since 2002, industry professionals
believe demand for railcars may have reached a peak and may not
persist if favorable economic and other conditions are not
sustained. Even if a sustained economic recovery occurs in the
United States, demand for our
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 49</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
railcars may not match or exceed expected levels. An economic
downturn may result in increased cancellations of railcar orders
which could have a material adverse effect on our ability to
convert our railcar backlog into revenues. If industry backlog
for railcars declines below certain levels, CIT, one of our
customers which accounts for 71% of our September&nbsp;30, 2005
backlog, will be permitted to cancel some or, in certain
circumstances, all its orders after 180 days written notice,
which could have a material adverse effect on our business,
financial condition and results of operations. In addition, an
economic downturn in the United States could result in lower
sales volumes, lower prices for railcars and a loss of profits
for us. Furthermore, a substantial number of the end users of
our railcars acquire railcars through leasing arrangements with
our leasing company customers. Economic conditions that result
in higher interest rates would increase the cost of new leasing
arrangements, which could cause our leasing company customers to
purchase fewer railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Customer concentration.</I> Railcars are typically sold
pursuant to large, periodic orders, and a limited number of
customers typically represent a significant percentage of our
railcar sales in any given year. In 2004, sales to our top three
customers accounted for approximately 23%, 20% and 16%,
respectively, of our total revenues. In the nine months ended
September&nbsp;30, 2005, sales to our top three customers
accounted for approximately 17%, 16% and 15%, respectively, of
our total revenues. The loss of any significant portion of our
sales to any major customer, the loss of a single major customer
or a material adverse change in the financial condition of any
one of our major customers could have a material adverse effect
on our business and financial results. Most of our individual
railcar customers do not make railcar purchases every year
because they do not need to replace or replenish their railcar
fleets on a yearly basis. Many of our customers place orders for
railcars on an as-needed basis, sometimes only once every few
years. As a result, the order levels for railcars, the mix of
railcar types ordered and the railcars ordered by any particular
customer have varied significantly from quarterly period to
quarterly period in the past and may continue to vary
significantly in the future. As railcar sales comprised 75% of
our total revenue in 2004 and 81% of our total revenue in the
nine months ended September&nbsp;30, 2005, our results of
operations in any particular quarterly period may be
significantly affected by the number of railcars and the product
mix of railcars we deliver in any given quarterly period.
Additionally, because we record the sale of a railcar at the
time we complete production, the railcar is accepted by the
customer following inspection, the risk for any damage or loss
with respect to the railcar passes to the customer and title to
the railcar transfers to the customer, and not when the order is
taken, the timing of completion, delivery and acceptance of
significant customer orders will have a considerable effect on
fluctuations in our quarterly results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Revenues from affiliates.</I> In 2002, 2003, 2004 and the
first nine months of 2005, our revenues from affiliates
accounted for 45%, 34%, 24% and 14% of our total revenues,
respectively. These affiliates consisted of entities
beneficially owned and controlled by Carl&nbsp;C. Icahn, the
chairman of our board of directors and our principal controlling
stockholder. The decline in our percentage of revenues from
affiliates is primarily attributable to the growth in our
revenues from third parties. We anticipate that our percentage
of revenues from affiliates will continue to decline if we are
successful in growing our business. Nevertheless we believe that
revenues from affiliates will continue to constitute an
important portion of our business. A significant reduction in
sales to affiliates could have a material adverse effect on our
business and financial results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Raw material costs.</I> The price for steel, the primary raw
material used in the manufacture of our railcars, increased
sharply in 2004 as a result of strong worldwide demand, limited
availability of production inputs for steel, including scrap
metal, industry consolidation and import trade barriers. These
factors have caused a corresponding increase in the cost and
decrease in the availability of castings and other railcar
components constructed with steel. Costs for other railcar
manufacturers have been similarly affected by the availability
and pricing of steel and castings and other components. The
costs for raw steel, based on a Semi Finished Steel Mill Product
Index, have almost doubled during the period from October 2003
through December 2004. The availability of scrap metal has
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 50</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
been limited by exports of scrap metal to China and, as a
result, steel producers have charged steel and scrap metal
surcharges in excess of agreed-upon prices. Price levels for
steel have increased again in 2005 and we expect worldwide
demand for steel to increase, supplies to continue to be limited
and prices to continue to increase in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2004, we were unable to pass on an estimated
$7.9&nbsp;million in increased raw material and component costs
to our customers under existing customer contracts. In the first
nine months of 2005, we estimate that we were unable to pass
through to our customers an estimated $1.5&nbsp;million of such
increased costs. In response to the increasing cost of raw
materials and railcar components, we are working with suppliers
to reduce surcharges that they charge us, and we have entered
into variable pricing contracts with most of our railcar
customers that allow us to pass along changes in costs of
certain raw materials and components to our customers to protect
us against future changes in these costs. By September&nbsp;30,
2005, we completed most of the deliveries of railcars under
contracts that did not allow us to pass through these increased
costs. Most of our current deliveries and backlog for railcars
include variable pricing to protect us against further
volatility in the price of certain raw materials and railcar
components.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Component supply constraints.</I> Our business depends on the
adequate supply of numerous specialty components, such as
railcar wheels, brakes, sideframes, axles, bearings, yokes,
bolsters and other heavy castings, and specialized raw
materials, such as normalized steel plate used in the production
of railcars. Over the last few years many suppliers have been
acquired or have ceased operations, which has caused the number
of alternative suppliers of specialty components and raw
materials to decline. The combination of industry consolidation
and high demand has caused recent railcar industry-wide
shortages of many critical components as many reliable suppliers
are frequently at or near production capacity. In certain cases,
such as for railcar wheels, only two significant suppliers
continue to produce the type of component we use in our
railcars. With the recent increased demand for railcars, our
remaining suppliers are facing significant challenges in
providing components and materials on a timely basis to us and
other railcar manufacturers. If our suppliers of railcar
components and raw materials were to stop or reduce the
production of railcar components and raw materials that we use,
go out of business, refuse to continue their business
relationships with us, reduce the amounts they are willing to
sell to us or become subject to work stoppages, our business
would be disrupted. Our inability to obtain components and raw
materials in required quantities or of acceptable quality could
result in significant delays or reductions in railcar shipments.
This would materially and adversely affect our operating
results. Furthermore, our ability to increase our railcar
production to expand our business depends on our ability to
obtain an adequate supply of these railcar components and raw
materials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our participation in the Ohio Castings joint venture has
facilitated our ability to meet some of our requirements for
heavy castings such as bolsters and sideframes. In 2005, Ohio
Castings expanded its castings production and added couplers and
yokes to its products. We believe that this expanded production
capability should help to reduce our risk of encountering supply
shortages. In 2004, we purchased $24.8&nbsp;million of railcar
components produced by Ohio Castings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Completion of our centerbeam platform railcar contract.
</I>In 2004 we entered into an agreement with The Greenbrier
Companies to manufacture centerbeam platform railcars at our
Paragould manufacturing facility. This was the first time we
manufactured centerbeam platform railcars and, as a result of
start-up and increased production costs, we did not realize a
profit on this contract. We completed our deliveries of these
centerbeam platform railcars in July 2005 and we do not
anticipate significant sales to Greenbrier in the future. Our
revenues from our sales of centerbeam platform railcars were
$50.8&nbsp;million in the first nine months of 2005 and
$53.0&nbsp;million in 2004. Upon completion of production of the
centerbeam platform railcars for Greenbrier, we converted the
manufacturing line at our Paragould facility that we used to
manufacture those railcars to manufacture covered hopper
railcars. This manufacturing line, along with our two other
covered hopper railcar
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 51</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
manufacturing lines at our Paragould manufacturing facility have
been operating at capacity since the conversion and, as a result
of our significant backlog for covered hopper cars, we expect
those lines to continue, subject to cancellations or adjustments
in existing railcar orders in our backlog, to operate at or
close to capacity through at least 2007. We have generally been
able to achieve higher profit margins on our sale of covered
hopper railcars than we were able to achieve on our sales of the
centerbeam platform railcars to Greenbrier. Therefore, we do not
believe that the completion of our centerbeam platform railcar
contracts and the corresponding reduction of sales to Greenbrier
will have a material adverse affect on our business or results
of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUTLOOK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that demand for railcars has reached a peak and
should continue at or near current levels due to generally
positive economic conditions, the current United States economic
recovery, strong industry-wide backlog for railcars, increased
rail traffic, the projected replacement of aging railcar fleets
and an increasing demand for products that are hauled and stored
in railcars. We believe that we are strategically positioned to
capitalize on the current strong demand for railcars, and that
we have growth opportunities across our broad array of product
and service offerings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BACKLOG</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our backlog consists of orders for railcars. We define backlog
as the number and sales value of railcars that our customers
have committed in writing to purchase from us that have not been
recognized as revenues. Customer orders, however, may be subject
to cancellation, customer requests for delays in railcar
deliveries, inspection rights and other customary industry terms
and conditions. Although we generally have one to three year
contracts with most of our fleet management customers, neither
orders for our railcar repair and refurbishment services
business nor our fleet management business are included in our
backlog because we generally deliver our services in the same
period in which orders are received. Similarly, orders for our
component manufacturing business are not included in our backlog
because we generally deliver components to our customers in the
same period in which orders for the components are received. Due
to the large size of railcar orders and variations in the number
and mix of railcars ordered in any given period, the size of our
reported backlog at the end of any such period may fluctuate
significantly. See &#147;Risk factors&#151; Risks related to our
business&#151; The variable purchase patterns of our customers
and the timing of completion, delivery and acceptance of
customer orders may cause our revenues and income from
operations to vary substantially each quarter, which could
result in significant fluctuations in our quarterly
results.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our backlog has increased from 412 railcars at the end of 2002
to 15,567 railcars at September&nbsp;30, 2005. We believe this
increase is due to the current strength of the economy, the
replacement of aging railcar fleets, increasing demand for
consumer and industrial products, and an increasing demand for
covered hopper and tank railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On July&nbsp;29, 2005, we entered into a multi-year purchase and
sale agreement with CIT to manufacture and sell to CIT covered
hopper and tank railcars. Under this agreement, CIT has agreed
to buy a minimum of 3,000 railcars from us in each of 2006, 2007
and 2008 and we have agreed to offer to sell to CIT up to 1,000
additional railcars in each of those years. CIT may choose to
satisfy its purchase obligations from among a variety of covered
hopper and tank railcars described in the agreement. CIT may
reduce its future purchase obligations or cancel pending
purchase orders, upon prior written notice to us, under certain
conditions, including a reduction of the then current American
Railway Car Institute&#146;s most recently reported quarterly
backlog below specified levels. As of September 30, 2005, the
American Railway Car Institute reported a quarterly backlog in
excess of 60,900&nbsp;railcars. If during the term of the
agreement, the levels of quarterly backlog reported by American
Railway Car Institute falls below 45,000 railcars but remains
above 35,000 railcars, CIT has
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 52</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the right, on 240&nbsp;days prior written notice, to cancel
pending purchase orders or reduce subsequent purchase
obligations for the then current agreement year, in either case
such that actual purchases by CIT would not fall below 50% of
that agreement year&#146;s original minimum purchase
requirements. If the American Railway Car Institute&#146;s
reported quarterly backlog falls below 35,000 railcars, CIT has
the right to cancel or suspend all, or any, pending purchase
orders or remaining purchase obligations under the Agreement
upon 180&nbsp;days prior written notice. If CIT elects to cancel
any pending purchase order under these provisions within
120&nbsp;days of the delivery date of the order, we may require
that CIT purchase from us, at our cost, all material which we
had purchased and identified to such cancelled purchase order.
CIT also has the right to reduce its railcar orders from us if
market prices for the railcars subject to our agreement are
reduced significantly below our quoted prices and we fail to
meet such price reductions. Under the agreement, purchase prices
for railcars are subject to steel surcharges and certain other
material cost increases applicable at the time of production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table shows our reported railcar backlog, in
number of railcars and estimated future value attributable to
such backlog, for the periods shown. This reported backlog
includes 9,000 railcars relating to CIT&#146;s minimum purchase
obligations under its agreement with us based upon an assumed
product mix consistent with CIT&#146;s orders for railcars.
Changes in product mix from that assumed would affect the dollar
amount of our backlog from CIT.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="20" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar backlog at start of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,547</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New railcars delivered</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,766</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,557</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,384</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,980</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New railcar orders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar backlog at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,567</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Estimated backlog value at end of period (in thousands of
    dollars)(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>129,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>494,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>365,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,132,788</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Estimated backlog value reflects the total revenues expected to
    be attributable to the backlog reported at the end of the
    particular period as if such backlog were converted to actual
    revenues. Estimated backlog does not reflect potential price
    increases and decreases under certain customer contracts that
    provide for variable pricing based on changes in the cost of
    certain raw materials and railcar components, or the
    cancellation or delay of railcar orders that may occur.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We anticipate that approximately 12% of our reported backlog as
of September&nbsp;30, 2005 will be converted to revenues by the
end of 2005. Historically, we have experienced little variation
between the number of railcars ordered and the number of
railcars actually delivered. However, our backlog is not
necessarily indicative of our future results of operations as
orders may be canceled or delivery dates extended. We cannot
assure that our reported backlog will convert to revenues in any
particular period, if at all, that the actual revenues from
these orders will equal our reported backlog estimates or that
our future revenue collection efforts will be successful. See
&#147;Risk factors&#151; Risks related to our business&#151; The
level of our reported railcar backlog may not necessarily
indicate what our future revenues will be and our actual
revenues may fall short of the estimated revenue value
attributed to our railcar backlog.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We rely on supplies from third-party providers and our Ohio
Castings joint venture for steel, heavy castings, wheels and
other components for our railcars. In the event that our
suppliers were to stop or reduce their supply of steel, heavy
castings, wheels or the other railcar components that we depend
upon, our business would be disrupted and the actual sales from
our customer contracts may fall significantly short of our
reported backlog. See &#147;Risk factors&#151; Risks related to
our business&#151; Fluctuations in the supply of components and
raw materials we use in manufacturing railcars could
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 53</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
cause production delays or reductions in the number of railcars
we manufacture, which could adversely affect our business and
operating results.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CHARGES AND COSTS ASSOCIATED WITH OUR PUBLIC OFFERING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect to incur significant additional selling,
administrative and other fees and expenses in connection with
the preparation for this offering and becoming a public company.
In addition we expect to incur a number of charges in connection
with transactions contemplated in connection with this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>ACF employee benefit plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In anticipation of our no longer being a part of ACF&#146;s
controlled group upon completion of this offering, we have been
discussing with ACF an appropriate arrangement for allocating
the assets and liabilities of the pension benefit plans retained
by ACF in the 1994 ACF asset transfer in which some of our
employees continue to participate, and for relieving us of our
further employee benefit reimbursement obligations to ACF under
the 1994 ACF asset transfer agreement. The principal employee
benefit plans affected by this arrangement are two ACF sponsored
pension plans, known as the ACF Employee Retirement Plan and the
ACF Shippers Car Line Pension Plan, and certain ACF sponsored
retiree medical and retiree life insurance plans. See
&#147;Certain relationships and related party
transactions&#151;Certain transactions with ACF Industries
LLC&#151;1994 ACF asset transfer.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the proposed arrangement, in exchange for our agreement to
pay ACF approximately $9.2&nbsp;million and to become the
sponsoring employer under the ACF Shippers Car Line Pension
Plan, including the assumption of all obligations for our and
ACF&#146;s employees under that plan, we will cease to be a
participating employer under the ACF Employee Retirement Plan
and will be relieved of all further reimbursement obligations,
including for our employees, under that plan. We estimate that
as of December&nbsp;1, 2005, the ACF Shippers Car Line Pension
Plan had $4.0&nbsp;million of unfunded liabilities on an
accounting basis, that will be assumed by us in connection with
this arrangement. The payment of approximately $9.2&nbsp;million
to be made by us to ACF represents our and ACF&#146;s estimate
of the payment required to be made by us to achieve an
appropriate allocation of the assets and liabilities of the
benefit plans accrued after the 1994 ACF asset transfer, with
respect to each of our and ACF&#146;s employees in connection
with the two plans. This allocation will be determined in
accordance with actuarial calculations consistent with those
that would be required to be used by us and ACF in allocating
plan assets and liabilities at such time as we cease to be a
member of ACF&#146;s controlled group.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As part of this arrangement, we will also assume sponsorship of
a retiree medical and retiree life insurance plan for active and
identified former ARI employees that are covered by the ACF
sponsored medical and retiree life insurance plans, and ACF will
be relieved of all further liability under those plans with
respect to those employees. We estimate that as of
December&nbsp;1, 2005, the post-retirement liability related to
this obligation was approximately $3.9&nbsp;million. ACF will
pay ARI approximately $2.9&nbsp;million to assume the pre 1994
portion of this liability.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the foregoing, we anticipate that we will
record an expense of approximately $10.4&nbsp;million during the
period in which these transactions are completed, including
$6.3&nbsp;million for the net cash payment to ACF,
$4.0&nbsp;million for the unfunded liability assumed under the
Shippers Car Line pension plan and $3.9&nbsp;million for the
assumption and sponsorship of an unfunded post retirement
medical and retiree life insurance plan for our employees. We
have previously accrued an estimated liability related to this
settlement of $3.8 million.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 54</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equity incentive awards</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We also expect to incur a non-cash operating expense in
connection with the issuance at the close of this offering to
James Unger, our chief executive officer, of the number of
shares of our common stock obtained by dividing
$6.0&nbsp;million by the initial public offering price set forth
on the cover page of this prospectus for no consideration.
Assuming an initial offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which represents the midpoint of the range on the cover
of this prospectus, Mr.&nbsp;Unger will
receive &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. The expense we will recognize in connection
with this grant will equal the value of the shares granted to
Mr.&nbsp;Unger as of the date of issuance, which we expect will
be approximately $6.0 million. We expect to recognize
$2.4&nbsp;million of this expense in the quarter that we
complete this offering, when 40% of these shares will vest. We
expect to recognize the remaining $3.6&nbsp;million of this
expense in the quarter that is one year after we complete the
offering, when the balance of these shares will vest. See
&#147;Management&#151;Execution compensation&#151;Employment
agreements&#148; and &#147;Certain relationships and related
party transactions&#151;Certain transactions involving James J.
Unger&#151;Grant of common stock.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We also intend to issue options to purchase up to an
estimated &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock under our 2005 equity incentive plan upon the
closing of this offering. These options will be granted at an
exercise price equal to the fair market value of the shares on
the date of the grant, have a term of five years and vest in
equal annual installments over a three-year period. Under the
terms of his employment agreement, James A. Cowan, our chief
operating officer, is entitled to receive an option to purchase
1.25% of our outstanding shares of common stock immediately
following the offering (excluding the shares that may be issued
upon the exercise, if any, of the over-allotment option). As a
result, the actual number of shares subject to the option
granted to Mr.&nbsp;Cowan will be proportionately adjusted if
the number of shares to be issued by us in this offering is
increased or decreased. Based on the anticipated number of
shares we will issue in this offering, Mr.&nbsp;Cowan would have
an option to
purchase &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. We have also agreed to issue options to
other of our employees to purchase up to approximately
$5.0&nbsp;million of our shares, representing the balance of the
options we intend to issue upon the closing of this offering,
under our 2005 equity incentive plan. The number of shares
subject to those options will be determined by dividing the
dollar value of the shares allocated to each recipient by the
exercise price as so determined. Actual valuation of the options
and shares to be granted at the closing will be based upon a
number of factors that are not in our control, such as the fair
market value of our common stock on the closing of this offering
and the market performance of our common stock. We estimate that
our stock option expense for all these options will total
approximately $3.5 million over the next three years assuming a
Black-Scholes calculation based on the following assumptions:
stock volatility of 33.78%; 5-year term; interest rate of 4.46%;
and dividend yield of 0%.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The 2005 Equity Incentive Plan will be administered by the Board
of Directors who will be authorized to grant incentive stock
options, nonqualified stock options, stock appreciation rights
(SARs), performance shares, restricted stock, other forms of
equity-based or equity-related awards, or other cash awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Other additional expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have agreed to pay William Benac, our chief financial
officer, a one-time special cash bonus of $500,000 on
April&nbsp;22, 2007 if, prior to that date, we issue common
stock to the public in an offering registered with the SEC or
Mr.&nbsp;Icahn sells his controlling interest in us to a third
party in a private transaction. If at any time on or before
April&nbsp;22, 2007, we terminate Mr.&nbsp;Benac&#146;s
employment without cause, he resigns for good reason, or a
change in control occurs, he will be entitled to receive the
special cash bonus of $500,000 upon the occurrence of such
event. Mr.&nbsp;Benac&#146;s right to the special cash bonus of
$500,000 and any severance immediately terminates if his
employment is terminated for cause or he resigns without good
reason. As a result of this arrangement, we expect that we will
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 55</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
accrue a $500,000 expense in the quarter that we complete this
offering. See &#147;Management&#151; Executive
compensation&#151; Employment agreements.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Other additional expenses that we expect to incur in connection
with this offering includes the write-off of the remaining
$0.6&nbsp;million of deferred financing costs that we incurred
in connection with our industrial revenue bond financings, which
we plan to repay in full with a portion of the net proceeds of
this offering. We had previously been amortizing these expenses
over the remaining terms of the industrial revenue bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RESULTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table summarizes our historical operations as a
percentage of revenues for the periods shown. Our historical
results are not necessarily indicative of operating results that
may be expected in the future.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="22" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Manufacturing Operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar Services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>80.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>84.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>85.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of railcar services</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total cost of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>97.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>93.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>96.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>94.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>91.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administrative and other expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.4</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.9</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.9</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.7</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.0</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.9</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.8</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income (loss) from joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.3</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.2</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.1</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3.4</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.8</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1.1</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.6</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2.2</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2.3</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.5</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1.1</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 14pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Comparison of the nine months ended September&nbsp;30, 2005
to the nine months ended September&nbsp;30, 2004</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our net earnings for the nine months ended September&nbsp;30,
2005 were $14.5&nbsp;million, compared to $2.9&nbsp;million for
the nine months ended September&nbsp;30, 2004, representing an
increase of $11.6&nbsp;million. In the first nine months of
2005, we sold 4,980 railcars, which is 1,720 more than the 3,260
railcars we sold in the first nine months of 2004. Most of our
revenues for the first nine months of 2005 included sales under
contracts that allowed us to adjust our sale prices to pass on
to our customers the impact of increases in the costs of certain
raw materials, particularly steel, and components. This
improvement was partially offset by increased costs associated
with outsourcing our railcar painting and lining for our new
production line at our Paragould facility and the start-up costs
for that new production line.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 56</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our revenues for the nine months ended September&nbsp;30, 2005
increased 74% to $442.1&nbsp;million from $254.3&nbsp;million in
the nine months ended September&nbsp;30, 2004. This increase was
primarily attributable to an increase in our revenues from sales
of railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our manufacturing operations revenues increased 81% to
$409.2&nbsp;million in the first nine months of 2005 from
$226.8&nbsp;million in the first nine months of 2004. This
increase was primarily attributable to the delivery of an
additional 1,720 railcars in the first nine months of 2005,
increased prices resulting from our ability to pass through a
portion of our increased raw material and component costs and
increases in the base unit price for some of our railcars. Our
revenues from sales of railcars increased $166.8&nbsp;million to
$356.5&nbsp;million in the first nine months of 2005 from
$189.7&nbsp;million in the first nine months of 2004. The
additional deliveries of railcars in the first nine months of
2005 reflected increased sales of covered hopper and tank
railcars and a continuation of deliveries of centerbeam platform
railcars ordered in 2004. These increased sales reflected our
increased capacity at our Paragould facility supported by the
continued strong backlog of orders for our railcars. Our
manufacturing operations revenues attributable to sales of
railcar and industrial components increased by
$15.1&nbsp;million in the first nine months of 2005 to
$51.7&nbsp;million from $36.6&nbsp;million in the first nine
months of 2004. This increase was primarily attributable to
increased unit sales reflecting increased railcar manufacturing
and industrial activity. For the first nine months of 2005, our
manufacturing operations revenues included $44.5&nbsp;million,
or 10.1% of our total revenues, from transactions with
affiliates, compared to $44.6&nbsp;million, or 17.5% of our
total revenues, in the first nine months of 2004. These revenues
were attributable to sales of railcars to companies controlled
by Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our railcar services revenues increased by $5.3&nbsp;million to
$32.9&nbsp;million in the first nine months of 2005, from
$27.6&nbsp;million in the first nine months of 2004. This
increase was primarily attributable to strong railcar repair
demand and a $2.0&nbsp;million increase in leasing and other
fleet management service revenue from subsidiaries of our
affiliate, ARL, a company controlled by Mr.&nbsp;Icahn. The
increase in railcar services revenues from ARL was fully offset
by $2.0&nbsp;million of pass through costs paid to ACF, also a
company controlled by Mr.&nbsp;Icahn, that was included in our
cost of railcar services. Our management agreements with the ARL
subsidiaries were terminated on June&nbsp;30, 2005. However, we
continue to provide repair, maintenance and fleet management
services for those fleets. For the first nine months of 2005,
our railcar services revenues included $16.0&nbsp;million, or
3.6% of our total revenues, from transactions with affiliates,
compared to $12.7&nbsp;million, or 5.0% of our total revenues,
in the first nine months of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Gross profit</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our gross profit increased to $37.4&nbsp;million in the first
nine months of 2005 from $13.7&nbsp;million in the first nine
months of 2004. Our gross profit margin increased to 8.5% in the
first nine months of 2005 from 5.4% in the first nine months of
2004, primarily reflecting improved margins in our manufacturing
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our gross profit margin for our manufacturing operations
increased to 7.8% in the first nine months of 2005 from 4.7% in
the first nine months of 2004. This increase was primarily
attributable to the contribution from increased overhead
absorption on plant work volume and our ability to pass through
a greater portion of increased raw material and component costs
through variable pricing contracts. In the first nine months of
2005, we were unable to pass through only approximately
$1.5&nbsp;million of $32.5&nbsp;million of increased raw
material and component costs. In the first nine months of 2004,
we were unable to pass through approximately $5.0&nbsp;million
of $7.0&nbsp;million of increased raw material and component
costs. Most of our railcar manufacturing contracts providing for
deliveries after the first nine months of 2005 have variable
cost provisions that adjust the delivery price for changes in
certain raw material and component costs. As a result, changes
in steel prices and other raw material and component prices
should have little impact on our gross profits for the remainder
of the year. However, increases in
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 57</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
raw material and component costs would have an adverse effect on
our gross profit margin as a percentage of revenues, because we
do not earn any additional net profit margin on our price
adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our improvement in gross profit margin in 2005 was partially
offset by a contract to manufacture centerbeam platform
railcars, a new product line for us in 2004. This was the first
time we manufactured centerbeam platform railcars and, as a
result of start-up and increased production costs, we did not
realize a profit on this contract. Our centerbeam platform
railcar contracts were completed at our Paragould facility in
July 2005 and we have since converted the manufacturing line at
that facility to manufacturing covered hopper railcars. In the
first six months of 2005, we also incurred additional costs in
connection with the completion of our new third production line
at our Paragould facility, including costs associated with
outsourcing our railcar painting and lining for the increased
railcar production from that new production line and costs of
the initial training and supplies for that production line. We
are currently constructing additional painting and lining
capabilities at our Paragould facility, which we expect to be
completed by the end of 2005. This new painting and lining
capacity should allow us to improve margins as we reduce or
eliminate outsourcing of this function.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our gross profit margin for our railcar services increased to
16.4% in the first nine months of 2005 from 10.8% in the first
nine months of 2004. This increase was primarily attributable to
our service facilities operating at a higher volume level, which
resulted in efficiencies in labor and overhead.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selling, administrative and other expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our selling, administrative and other expenses increased by
$2.9&nbsp;million in the first nine months of 2005, to
$11.4&nbsp;million from $8.5&nbsp;million in the first nine
months of 2004. Selling, administrative and other expenses were
2.6% of total revenues in the first nine months of 2005 as
compared to 3.4% of total revenues in the first nine months of
2004. Our increase in the amount of our selling, administrative
and other expenses was primarily attributable to an increase in
information technology costs, audit and outside professional
service fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interest expense and interest income</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our interest expense in the nine months ended September&nbsp;30,
2005 was $3.6&nbsp;million as compared to $2.2&nbsp;million for
the nine months ended September&nbsp;30, 2004, representing an
increase of $1.4&nbsp;million. The increase in interest expense
was primarily attributable to higher debt balances. Our interest
income in the nine months ended September&nbsp;30, 2005 was
$1.3&nbsp;million as compared to $2.1&nbsp;million for the nine
months ended September&nbsp;30, 2004, representing a decrease of
$0.8&nbsp;million. The decrease in interest income was primarily
attributable to a $57.2&nbsp;million loan to an affiliate that
was repaid in 2004 that was partially offset by interest income
we earned on a $165.0&nbsp;million secured loan we made to
Mr.&nbsp;Icahn in October 2004. In January 2005, we transferred
our entire interest in this loan to ARL in exchange for
additional common interests in ARL and in satisfaction of our
$130.0&nbsp;million loan from ARL. See &#147;Certain
relationships and related party transactions&#151; Certain
transactions with Mr.&nbsp;Icahn and other related
entities.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income tax expense</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our income tax expense for the nine months ended
September&nbsp;30, 2005 was $9.6&nbsp;million, or 39.8% of our
earnings before income taxes, as compared to $1.9&nbsp;million
for the nine months ended September&nbsp;30, 2004, or 39.3% of
our earnings before income taxes. Our effective tax rate is
impacted by expenses included in pre-tax earnings for which we
do not receive a deduction for tax purposes. These expenses
result from the liabilities and obligations retained by ACF as
part of its transfer of assets to us in 1994. See &#147;Certain
relationships and related party transactions&#151; Certain
transactions with ACF Industries LLC.&#148; Although ACF is
responsible for any costs associated with these liabilities, we
are required to recognize these costs as expenses in order to
reflect the full cost of doing business. The entire amount of
such permanently nondeductible expenses is treated as
contribution of capital resulting in an increase to our
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 58</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
effective tax rate. The expenses included in pre-tax income were
$0.8&nbsp;million and $0.8&nbsp;million for the nine months
ended September&nbsp;30, 2004 and September&nbsp;30, 2005,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Comparison of the year ended December&nbsp;31, 2004 to the
year ended December&nbsp;31, 2003</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our net earnings for the year ended December&nbsp;31, 2004 was
$1.9&nbsp;million as compared to $1.1&nbsp;million for the year
ended December&nbsp;31, 2003, representing an increase of
$0.8&nbsp;million. In 2004, we sold 4,384 railcars, 1,827 more
than the 2,557 railcars we sold in 2003. Despite the increase in
railcar deliveries in 2004, our net earnings for 2004 was
negatively affected by dramatic increases in raw materials,
especially steel, and railcar component prices, particularly for
components manufactured from steel. Our railcar manufacturing
contracts precluded us from passing most of these increased
costs on to our customers. Our gross margins in 2004 were also
adversely affected by the losses we incurred from our
introduction and sale of centerbeam platform railcars
manufactured at our Paragould facility. Net earnings for 2003
reflected a $0.8&nbsp;million write-down of the carrying value
of buildings and improvements, and equipment at our Milton,
Pennsylvania railcar repair facility, and a $0.4&nbsp;million
charge to adjust inventory to the lower of cost or market. We
incurred no such write-downs in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our revenues in 2004 increased 63% to $355.1&nbsp;million from
$218.0&nbsp;million in 2003. This increase was attributable to
an increase in revenues from both manufacturing operations and
railcar services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our manufacturing operations revenues increased 68% to
$316.4&nbsp;million in 2004 from $188.1&nbsp;million in 2003.
This increase was primarily attributable to our delivery of an
additional 1,827 railcars in 2004 and, to a lesser extent, an
increase in pricing based upon our ability to pass through some
of our increased costs as well as an increase in the base price
of our railcars. Our revenues from railcar sales increased
$111.1&nbsp;million to $265.8&nbsp;million in 2004 from
$154.7&nbsp;million in 2003. The additional deliveries of
railcars in 2004 reflected increased sales of covered hopper and
tank railcars and sales of centerbeam platform railcars. We
believe that the increases were primarily attributable to the
continuing recovery of the railcar industry which resulted in a
strong backlog of orders for delivery in 2004. In 2004,
deliveries increased by 428 tank railcars and 164 covered hopper
railcars from 2003, and our centerbeam platform railcar
deliveries totaled 1,240. We delivered five centerbeam platform
railcars in 2003. Our increase in manufacturing operations
revenues also reflected a $17.3&nbsp;million increase in our
sales of railcar and industrial components. This increase was
primarily attributable to an increase in demand for castings and
components in the oil refinery and transportation markets. In
2004, our manufacturing operations revenues included
$64.4&nbsp;million, or 18.1% of our total revenues, from
transactions with affiliates, compared to $62.9&nbsp;million, or
28.8% of our total revenues, in 2003. These revenues were
primarily attributable to sales of railcars to companies
controlled by Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our railcar services revenues increased 29% to
$38.6&nbsp;million in 2004 from $29.9&nbsp;million in 2003. This
increase was attributable to increased sales, primarily related
to repair and maintenance services provided to affiliates,
including ACF and ARL and their subsidiaries. In 2004, our
railcar services revenues included $19.4&nbsp;million, or 5.5%
of our total revenues, from transactions with affiliates, as
compared to $11.0&nbsp;million, or 5.1%, in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Gross profit</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our gross profit increased to $14.3&nbsp;million in 2004 from
$13.6&nbsp;million in 2003. Our gross profit margin decreased to
4.0% in 2004 from 6.2% in 2003. The decrease in our gross profit
margin was primarily attributable to a decrease in our gross
profit margin for our manufacturing operations that was
partially offset by an increase in our gross profit margin for
our railcar services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our gross profit margin for our manufacturing operations
decreased to 3.2% in 2004 from 7.2% in 2003. This decrease was
primarily attributable to an increase in the cost of raw
materials and
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 59</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
components, consisting primarily of steel and steel-based
components, that we were not able to pass through to our
customers due to fixed price contracts. Our cost of sales
increased by approximately $11.3&nbsp;million in 2004 based upon
these increased raw material and component costs. We estimate
that we were able to pass through $3.4&nbsp;million of these
costs to our customers. Our margins were also adversely affected
by the losses we incurred resulting from our introduction and
sale of centerbeam platform railcars in 2004. We completed
deliveries under our centerbeam platform railcar contract by in
July 2005 and have converted the manufacturing line we used to
manufacture these railcars to manufacture covered hopper
railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our gross profit margin for railcar services increased to 10.7%
in 2004 from 0.4% in 2003. This increase was primarily
attributable to increased sales that resulted in increased
efficiencies of labor and overhead. Our gross profit margin for
railcar services in 2003 was adversely affected by a
$0.8&nbsp;million write-down of the carrying value of buildings
and improvements, and equipment at our Milton, Pennsylvania
railcar maintenance facility, which we idled during 2003, and a
$0.4&nbsp;million charge to adjust inventory to the lower of
cost or market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selling, administrative and other expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our selling, administrative and other expenses did not increase
in 2004 from the $10.3&nbsp;million expense in 2003. Selling,
administrative and other expenses were 2.9% of sales in 2004 as
compared to 4.7% of sales in 2003. In 2004, we were able to use
the infrastructure we put in place in 2003 to grow our revenues
without increasing our selling, administrative and other
expenses. Our expenses in 2004 reflected an increase in
engineering and purchasing personnel, but these expenses were
offset by reduced spending in insurance, retirement, legal fees
and engineering consulting services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interest expense and interest income</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Interest expense was $3.7&nbsp;million and $3.6&nbsp;million for
years ended December&nbsp;31, 2004 and 2003, respectively. Our
interest income increased to $4.4&nbsp;million in 2004 from
$3.2&nbsp;million in 2003. The increase in interest income and
interest expense was primarily attributable to our
$165.0&nbsp;million secured loan to Mr.&nbsp;Icahn and our
$130.0&nbsp;million loan from ARL, respectively, both of which
are no longer outstanding.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income tax expense</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Income tax expense for 2004 was $2.2&nbsp;million, or 53.3% of
our earnings before income taxes, as compared to
$1.1&nbsp;million for 2003, or 51.7% of our earnings before
income taxes. Our income tax rates were higher than the
statutory rates in both periods because of the effect of
expenses included in pre-tax income for which we do not receive
a deduction for tax purposes. These expenses primarily relate to
the liabilities and obligations retained by ACF as part of its
transfer of assets to us in 1994.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Comparison of the year ended December&nbsp;31, 2003 to the
year ended December&nbsp;31, 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our net earnings for the year ended December&nbsp;31, 2003 was
$1.1&nbsp;million as compared to a $3.9&nbsp;million net loss
for the year ended December&nbsp;31, 2002, representing an
increase of $5.0&nbsp;million. In 2003, we sold 2,557 railcars,
791 more than the 1,766 railcars we sold in 2002. The increase
in our earnings was primarily attributable to increased gross
profit from the delivery of these additional railcars, which was
partially offset by an increase in selling, administrative and
other expenses of $0.8&nbsp;million, as increased engineering
and purchasing support were added to support railcar
manufacturing. Net earnings was reduced in 2003 because we wrote
down the carrying value of buildings and improvements and
equipment for one of our railcar maintenance facilities by
$0.8&nbsp;million, and an inventory value reduction of
$0.4&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 60</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenues</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our revenues increased by 29.1% to $218.0&nbsp;million in 2003
from $168.8&nbsp;million in 2002. This increase was attributable
to an increase in our manufacturing operations revenues that was
partially offset by a decrease in railcar services revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our manufacturing operations revenues increased 36% to
$188.1&nbsp;million in 2003 from $138.4&nbsp;million in 2002.
This increase was primarily attributable to our delivery of an
additional 791 railcars in 2003 and, to a lesser extent, an
increase in the base unit price of our railcars. In 2003, we
delivered 496 additional tank railcars and 290 additional
covered hopper railcars as compared to 2002. We attribute these
increased sales to the recovery of the railcar manufacturing
industry. Our revenues from railcar and industrial components
manufacturing increased $3.1&nbsp;million to $33.4&nbsp;million
in 2003 from $30.3&nbsp;million in 2002. This increase reflected
increased demand for our railcar component products and an
increase in demand for our steel castings products in the oil,
gas and transportation markets. In 2003, our manufacturing
operations revenues included $62.9&nbsp;million, or 28.8% of our
total revenues, from transactions with affiliates, compared to
$63.6&nbsp;million, or 37.6% of our total revenues, in 2002.
These revenues were primarily attributable to sales of railcars
to companies controlled by Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our revenues from railcar services decreased by
$0.5&nbsp;million to $29.9&nbsp;million in 2003 from
$30.4&nbsp;million in 2002. This decrease is primarily
attributable to the idling of our Milton, Pennsylvania repair
facility and a corresponding loss of repair and maintenance
revenues that had historically been performed at that facility.
In 2003, our railcar services revenues included
$11.0&nbsp;million, or 5.1% of our total revenues, from
transactions with affiliates, as compared to $12.8&nbsp;million,
or 7.6% of our total revenues, in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Gross profit</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our gross profit increased by $8.7&nbsp;million to
$13.6&nbsp;million in 2003 from $4.9&nbsp;million in 2002. Our
gross profit margin increased to 6.2% in 2003 from 2.9% in 2002.
The improvement in our gross profit margin was attributable to
an improved gross profit margin for our manufacturing operations
that was partially offset by a decrease in our gross profit
margin for our railcar services. Our gross profit margin for our
manufacturing operations increased to 7.2% in 2003 from 2.9% in
2002. This increase was primarily attributable to the
contribution from increased overhead absorption as plant work
volume increased. Our gross profit margin for our railcar
services was 0.4% in 2003 compared to 2.8% in 2002. This
decrease in gross profit margin was primarily attributable to
decreased revenues and the $1.2&nbsp;million asset write-down in
2003 in connection with the idling of our Milton, Pennsylvania
repair and maintenance facility. We incurred a $0.2&nbsp;million
write-down in connection with this facility in 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Selling, administrative and other expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our selling, administrative and other expenses increased 8.8% to
$10.3&nbsp;million in 2003 from $9.5&nbsp;million in 2002. The
increase in our selling, administrative and other expenses in
2003 was primarily attributable to increased information
technology, infrastructure, engineering and purchasing services
to support our growing operations. Selling, administrative and
other expenses decreased to 4.7% of revenues in the year ended
December&nbsp;31, 2003 from 5.6% in the year ended
December&nbsp;31, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interest expense and interest income</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our interest expense was $3.6&nbsp;million and $4.9&nbsp;million
for the years ended December&nbsp;31, 2003 and 2002,
respectively. Our interest income was $3.2&nbsp;million and
$3.6&nbsp;million for the years ended December&nbsp;31, 2003 and
2002, respectively. The interest income was primarily from a
$57.2&nbsp;million loan to an affiliate that was repaid in 2004.
The interest expense reduction was primarily due to reduction of
the average outstanding borrowings under our existing revolving
credit facility.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 61</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income tax expense/benefit</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our income tax expense in the year ended December&nbsp;31, 2003
was $1.1&nbsp;million, or 51.7% of income before income taxes,
as compared to a $1.9&nbsp;million tax benefit in the year ended
December&nbsp;31, 2002, or 32.6% of loss before income taxes.
Our income tax rate was higher than the statutory rates in 2003,
because of the effect of expenses included in pre-tax income for
which we do not receive a deduction for tax purposes. These
expenses primarily relate to the liabilities and obligations
retained by ACF as part of its transfer of assets to us in 1994.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our primary sources of liquidity have historically been the cash
generated from our operations, the sale of securities and funds
generated from borrowings. Until recently, most of our capital
needs have been satisfied by entities affiliated with
Mr.&nbsp;Icahn. Upon completion of this offering, we intend to
use substantially all of the net proceeds of this offering to
repay amounts outstanding under our revolving credit facility,
to pay the notes due to affiliates of Mr.&nbsp;Icahn, to redeem
all our industrial revenue bonds and to redeem all of the
outstanding shares of our preferred stock, all of which is held
by Mr.&nbsp;Icahn and his affiliates. Following this offering we
cannot guarantee that we will receive any further financial
support from Mr.&nbsp;Icahn or his affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Outstanding debt</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Revolving credit facility. </I></B>On March&nbsp;10, 2005,
we entered into a revolving credit facility with North Fork
Business Capital Corporation, as administrative agent for
various lenders. As of September&nbsp;30, 2005, we had
$31.3&nbsp;million in principal and interest outstanding under
this facility. We intend to repay all or a substantial portion
of this credit facility with the proceeds of this offering. We
have entered into a commitment letter with our lenders to amend
and restate our revolving credit facility in conjunction with
the closing of this offering to, among other things, extend the
term of the facility to three years from the completion of the
offering, increase our maximum borrowing amount to
$75&nbsp;million with a $15&nbsp;million subfacility and modify
certain covenants, including to eliminate the covenant that
requires Mr.&nbsp;Icahn to retain a majority interest in us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Terms of our existing revolving credit facility are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Maximum
    borrowing.</FONT></I><FONT style="font-size: 10pt"> The
    revolving credit facility provides for a maximum borrowing of
    the lesser of (a)&nbsp;$50.0&nbsp;million or (b)&nbsp;85% of the
    eligible receivables plus 65% of the eligible inventory, which
    inventory may include at the most $40.0&nbsp;million, less any
    reserves established by the agent in accordance with the
    agreement. As of September&nbsp;30, 2005, the maximum borrowing
    amount eligible under this facility was $48.4&nbsp;million;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Term.</FONT></I><FONT style="font-size: 10pt">
    The revolving credit facility expires March&nbsp;10, 2006;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Interest rate and
    fees.</FONT></I><FONT style="font-size: 10pt"> Borrowings bear
    an interest rate of a base rate less 0.25%, where the base rate
    is the highest prime, base or equivalent rate of interest
    published by the administrative agent, or the published
    annualized rate for 90-day dealer commercial paper published in
    the Wall Street Journal, or a LIBOR rate plus 2.5%. We are
    required to pay an unused line fee of 0.375%&nbsp;per year on
    the difference, if positive, of $50.0&nbsp;million minus the
    average daily aggregate outstanding amount of the loans. As of
    September&nbsp;30, 2005, the interest rate under the revolving
    credit facility was 6.5%;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Collateral.</FONT></I><FONT style="font-size: 10pt">
    Our receivables, inventory and a pledged deposit account serve
    as collateral under the existing revolving credit facility. In
    addition, we are required to maintain one or more blocked
    accounts to which all our collections are remitted, upon notice
    from the administrative agent, if the difference between the
    lesser of $50.0&nbsp;million or the borrowing base and the
    outstanding amount of our loans is less than $5.0&nbsp;million,
    or if an event of default is ongoing;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Financial
    covenants.</FONT></I><FONT style="font-size: 10pt"> Our existing
    revolving credit facility requires us to meet a fixed charge
    coverage ratio of not less that 1.2 to 1.0 for each of the
    following periods: January&nbsp;1, 2005
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 62</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    through June&nbsp;30, 2005; January&nbsp;1, 2005 through
    September&nbsp;30, 2005; January&nbsp;1, 2005 through
    December&nbsp;31, 2005; and each 12&nbsp;month period ending on
    the last day of each calendar quarter thereafter; and a leverage
    ratio calculated based on the outstanding amount of indebtedness
    to EBITDA of not greater than 4.0 to 1.0 for each of the above
    mentioned periods. As of September&nbsp;30, 2005, we were in
    compliance with these financial covenants; and</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Negative
    covenants.</FONT></I><FONT style="font-size: 10pt"> Our existing
    revolving credit facility includes certain limitations on, among
    other things, our ability to incur additional indebtedness,
    modify our current governing documents, sell or dispose of
    collateral, grant credit and declare or pay dividends or make
    distributions on common stock or other equity securities. In
    addition, our existing revolving credit facility provides that
    Mr.&nbsp;Icahn shall maintain a direct or indirect ownership of
    at least 50.1% of our voting equity interest.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Terms of the proposed amended and restated revolving credit
facility are:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Maximum
    borrowing.</FONT></I><FONT style="font-size: 10pt"> Our amended
    and restated revolving credit facility would provide for a
    maximum borrowing of the lesser of (a)&nbsp;$75&nbsp;million or
    (b)&nbsp;85% of the eligible accounts receivables plus 65% of
    the eligible raw materials and finished goods inventory.
    Eligible receivables would include only accounts receivable to
    our customers in the United States or Canada arising from sales
    in the ordinary course of business with non-affiliates. In
    addition, the amended and restated revolving credit facility
    would include a $15.0&nbsp;million capital expenditure
    sub-facility that would be based on 80% of the costs related to
    capital projects we may undertake;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Term.</FONT></I><FONT style="font-size: 10pt">
    The amended and restated revolving credit facility would expire
    three years after the closing of this offering;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Interest rate and
    fees.</FONT></I><FONT style="font-size: 10pt"> Borrowings would
    bear an interest rate of a base rate less 0.5%, where the base
    rate is the higher of the highest prime, base or equivalent rate
    of interest published by the administrative agent, or the
    published annualized rate for 90-day dealer commercial paper
    published in the Wall Street Journal. In addition we would be
    granted a 1&nbsp;month, 2&nbsp;month or 3&nbsp;month LIBOR rate
    plus 1.5%. We would be required to pay a closing fee of
    $0.2&nbsp;million and an unused line fee of 0.375% per year on
    the unused portion of our amended and restated revolving credit
    facility;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Collateral.</FONT></I><FONT style="font-size: 10pt">
    Our receivables, inventory and a pledged deposit account
    together with assets we purchase with the proceeds from the
    capital expenditure sub-facility would serve as collateral under
    the amended and restated revolving credit facility and the
    capital expenditure sub-facility. In addition, we would be
    required to maintain one or more blocked accounts to which all
    our collections would be remitted. Under the amended and
    restated revolving credit facility, the types of collections
    that would be subject to the blocked account consist of all
    collections including all cash, funds, checks, notes,
    instruments, any other form of remittance tendered by account
    debtors in respect of payment of our receivables and any other
    payments received by us with respect to any collateral. If the
    funds which we can draw under the amended and restated revolving
    credit facility would fall under $5&nbsp;million, the proceeds
    in the blocked accounts would be transferred to the
    administrative agent and the administrative agent would be
    required to apply all such proceeds to our loan account with the
    administrative agent, conditional upon final collection,
    effecting a payment of any obligations that are outstanding at
    such time. The interest that the administrative agent would hold
    in such proceeds (until such time as they are applied to the
    obligations) would be in the nature of a collateral security
    interest. Upon termination of the administrative agent&#146;s
    security interests in such proceeds in accordance with
    applicable laws generally governing the termination of security
    interests and bank deposits, the administrative agent would
    return to us any proceeds it holds after satisfaction of
    existing or contingent obligations owed to the administrative
    agent and the other lenders. We may borrow, repay, and reborrow
    revolving credit loans in accordance with the proposed terms of
    the revolving credit facility;
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Financial
    covenants.</FONT></I><FONT style="font-size: 10pt"> Our amended
    and restated revolving credit facility would require us to meet
    an adjusted fixed charge coverage ratio of not less than 1.2 to
    1.0 on a quarterly and/or annual
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 63</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    basis and a leverage ratio calculated based on the outstanding
    amount of indebtedness to EBITDA of not greater than 4.0 to 1.0
    on a quarterly and/or annual basis; and</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Negative
    covenants.</FONT></I><FONT style="font-size: 10pt"> Our amended
    and restated revolving credit facility would include certain
    limitations on, among other things, our ability to incur
    additional indebtedness, modify our current governing documents,
    sell or dispose of collateral, grant credit and declare or pay
    dividends or make distributions on common stock or other equity
    securities. The limitation on certain of the actions addressed
    by the amended and restated revolving credit facility would be
    in the nature of a right in favor of the administrative agent
    and our lenders to accelerate all of our obligations under the
    credit facility, a demand right, that is triggered by certain
    actions, rather than in the nature of a negative covenant by
    which we contractually agree not to take such actions. Included
    among the actions that would trigger a demand right would be
    certain actions to modify governing documents, sell or dispose
    of collateral, grant credit, incur indebtedness, and make
    dividends and distributions. An incurrence of indebtedness would
    trigger a demand right if it would cause the adjusted ratio of
    our indebtedness to EBITDA, as defined in the amended and
    restated revolving credit facility, to be greater than 4.0 to
    1.0. The direct or indirect payment of dividends or
    distributions, or purchase, redemption, or retirement of capital
    stock, equity interests, options or rights to purchase capital
    stock or equity interests, or payments to sinking or analogous
    funds, will trigger a demand right if it would cause the
    adjusted fixed charge coverage ratio to be less than 1.2 to 1.0
    or the ratio of adjusted indebtedness to EBITDA to be greater
    than 4.0 to 1.0, each on a quarterly and/or annual basis, as
    defined in the amended and restated revolving credit facility.
    Our amended and restated revolving credit facility would
    eliminate the requirement that Mr.&nbsp;Icahn maintain a direct
    or indirect ownership of at least 50.1% of our voting equity
    interest.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Industrial revenue bonds.</I></B> As of September&nbsp;30,
2005, we had $8.3&nbsp;million in principal amount and
$0.3&nbsp;million in accrued interest on the industrial revenue
bonds outstanding. As of that date, these bonds had effective
interest rates ranging from 7.75% to 8.5%, with principal
amounts due through 2011. We intend to use a portion of the net
proceeds of this offering to repay all amounts due under these
bonds. The industrial revenue bonds are guaranteed by affiliates
of Mr.&nbsp;Icahn, and these affiliates will be released from
such guarantees upon repayment of the industrial revenue bonds.
In addition, James J. Unger, our president and chief executive
officer, and his wife own $0.4&nbsp;million of the industrial
revenue bonds issued by Paragould, Arkansas. Mr.&nbsp;Unger and
his wife will receive approximately $0.4&nbsp;million upon our
repayment of the amounts due under the industrial revenue bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Outstanding notes to affiliates.</I></B> In December 2004,
we borrowed $7.0&nbsp;million from Arnos Corp., a company
controlled by Mr.&nbsp;Icahn, to provide us with additional
working capital. The loan bears interest at the prime rate plus
1.75% (8.0% at September&nbsp;30, 2005) and is payable on
demand. Additionally, in connection with our purchase of
Castings LLC, effective January&nbsp;1, 2005, from an affiliate
of Mr.&nbsp;Icahn, we issued that affiliate a note payable in
the principal amount of $12.0&nbsp;million. The note bears
interest at the prime rate plus 0.5% (6.75% at
September&nbsp;30, 2005) and is payable on demand. We intend to
use a portion of the net proceeds of this offering to repay all
amounts due under these obligations. As of September&nbsp;30,
2005, $20.0&nbsp;million was outstanding under these obligations.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 64</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cash flows</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table summarizes our net cash provided by or used
in operating activities, investing activities and financing
activities and our capital expenditures for the periods
presented:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Nine Months</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Cash flows</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,&nbsp;2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September 30, 2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in):</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(17,082</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,831</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,037</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,783</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,441</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Operating activities.</I> Our net cash provided by or used in
operating activities reflects net earnings or loss, adjusted for
non-cash charges and changes in net working capital, including
non-current assets and liabilities. Cash flows from operating
activities are affected by several factors, including
fluctuations in business volume, contract terms for billings and
collections, the timing of collections on our accounts
receivables, processing of payroll and associated taxes and
payments to our suppliers. We do not typically experience
business credit losses, although a payment may be delayed
pending completion of closing documentation, and a typical order
of railcars may not yield cash proceeds until after the end of a
reporting period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our net cash provided by operating activities was
$27.8&nbsp;million for the nine months ended September&nbsp;30,
2005, which included net earnings of $14.5&nbsp;million,
increased by depreciation and amortization of $5.0&nbsp;million,
a provision for deferred income taxes of $8.7&nbsp;million, and
$0.8&nbsp;million of expenses that we incurred relating to
pre-capitalization liabilities retained and payable by ACF.
Payment of these expenses by ACF is reflected as additional paid
in capital. These increases were partially offset by
$0.4&nbsp;million of earnings allocated to us as a result of our
joint venture interest in Ohio Castings. Cash provided by
operating activities attributable to changes in our current
assets and liabilities included an increase in accounts payable
of $33.4&nbsp;million and an increase in accrued expenses and
taxes of $5.8&nbsp;million. These sources of cash were partially
offset by an increase in inventories of $7.9&nbsp;million, an
increase in accounts receivable of $23.8&nbsp;million and an
increase in prepaid expenses of $8.3&nbsp;million. The increase
in inventories was primarily attributable to the build-up of
inventory for our new third production line at our Paragould
facility. The increase in accounts payable and accrued expenses
was primarily due to this inventory buildup and a change in the
processing and accounting of accounts payable that had
previously been processed through affiliates. The increase in
accounts receivable was primarily attributable to the increased
volume of sales attributed to railcars manufactured at our
Paragould facility. The increase in prepaid expenses was
primarily attributable to payments for workers&#146;
compensation and general insurance coverages that benefit future
periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the year ended December&nbsp;31, 2004, cash used by
operating activities was $17.1&nbsp;million. Our sources of cash
included net earnings of $1.9&nbsp;million, increased by
depreciation and amortization of $6.2&nbsp;million, expenses
relating to pre-capitalization liabilities retained by ACF of
$1.4&nbsp;million, a provision for deferred income taxes of
$1.7&nbsp;million and $0.6&nbsp;million of non-cash loss
allocated to us as a result of our joint venture interest in
Ohio Castings. Cash used in operating activities attributable to
changes in our current assets and liabilities included an
increase in inventories of $28.7&nbsp;million and an increase in
accounts receivable of $12.0 million. These uses of cash were
partially offset by an increase in accounts payable of
$12.0&nbsp;million. The increase in our inventories and accounts
receivable were primarily attributable to our increased sales
and the increased cost or raw materials and
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 65</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
components. The increase in accounts payable was primarily
attributable to our build-up of inventory to support our
increased sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Investing activities.</I> Net cash used in investing
activities for the nine months ended September&nbsp;30, 2005 was
$16.4&nbsp;million, including $8.3&nbsp;million for construction
of additional painting and lining capabilities at our Paragould
facility and $2.8&nbsp;million for the purchase of manufacturing
equipment and leasehold improvements that we had previously been
leasing from ACF at our St. Charles, Missouri manufacturing
facility. See &#147;Certain relationships and related party
transactions&#151;Certain transactions with ACF Industries
LLC&#151;Corbitt Equipment Lease and Purchase.&#148; Net cash
used in investing activities for the year ended
December&nbsp;31, 2004 was $11.0&nbsp;million, including
$9.4&nbsp;million to construct an additional production line at
our Paragould facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Financing activities.</I> Cash provided by financing
activities was $7.8&nbsp;million for the nine months ended
September&nbsp;30, 2005, and included $31.3&nbsp;million
borrowed under our existing revolving credit facility that we
obtained in March 2005, offset by payments to affiliates of
$22.2&nbsp;million and debt repayments of $1.3&nbsp;million. The
decrease in amounts due affiliates was primarily attributable to
the change in our financing arrangement with ACF, which was
terminated on April&nbsp;1, 2005. The accumulated amounts due to
ACF under this intercompany arrangement were repaid by us from
the proceeds of our revolving credit facility that we obtained
in March 2005.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Net cash provided by financing activities was $35.0&nbsp;million
for the year ended December&nbsp;31, 2004. During the year ended
December&nbsp;31, 2004, we received $110.0&nbsp;million in
additional capital contributions, of which $25.0&nbsp;million
was used for our contribution in the initial capitalization of
ARL, $137.0&nbsp;million from the proceeds of notes due to
affiliates. The $137.0&nbsp;million of proceeds from notes due
to affiliates primarily related to our $130.0&nbsp;million loan
from ARL. The increase in amounts due to affiliates consisted of
cash advances and affiliate transactions. These sources of cash
were partially offset by a $165.0&nbsp;million secured loan we
made to Mr. Icahn in October 2004 and a $40.2&nbsp;million
repayment of our term loan in July 2004.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Capital expenditures.</I> We continuously evaluate facility
requirements based on our strategic plans, production
requirements and market demand and may elect to make capital
investments at higher or lower levels in the future. These
investments are all based on an analysis of the potential for
these additions to improve profitability and future rates of
return. In response to the current demand for our railcars, we
are pursuing opportunities to increase our production capacity
and reduce our costs through continued vertical integration of
our production capacity. From time to time, we may expand our
business by acquiring other businesses or pursuing other
strategic growth opportunities. We presently have not entered
into any agreements related to any material acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, we began construction of additional painting
and lining capabilities at our Paragould, Arkansas covered
hopper manufacturing facility. This will complement our
additional production line that was completed in November 2004.
We expect our capital expenditures in connection with the new
painting and lining capabilities, including the
$8.3&nbsp;million paid in the first nine months of 2005, to be
approximately $13.2&nbsp;million, with completion by November
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We recently initiated a project that we estimate will cost
approximately $7.0&nbsp;million to construct a new fabrication
shop at our Paragould facility to produce covered hopper railcar
components that are currently supplied by an outside vendor. We
have also recently initiated a project that we estimate will
cost approximately $2.0&nbsp;million for additional steel
storage at our Marmaduke facility, which should result in
production efficiencies and contribute to a higher tank railcar
output at our Marmaduke facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of January&nbsp;1, 2005 we acquired from ACF Industries
Holding Corp., a company beneficially-owned and controlled by
Mr.&nbsp;Icahn, its interest in Castings LLC for total
consideration of $12.0&nbsp;million, represented by a promissory
note bearing an interest rate equal to the prime rate plus 0.5%,
payable
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 66</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
on demand. Castings LLC owns a one-third interest in Ohio
Castings, which operates two foundries that produce heavy
castings. In connection with this transfer, we agreed to assume
certain, and indemnify all liabilities related to and arising
from ACF Industries Holding Corp.&#146;s investment in Castings
LLC, including the guarantee of Castings LLC&#146;s obligations
to Ohio Castings, the guarantee of bonds in the amount of
$10.0&nbsp;million issued by the State of Ohio to one of Ohio
Castings&#146; subsidiaries, of which $8.0&nbsp;million was
outstanding as of September&nbsp;30, 2005, and the guarantee of
a $2.0&nbsp;million state loan that provides for purchases of
capital equipment, of which $0.8&nbsp;million was outstanding as
of September&nbsp;30, 2005. The two other partners of Ohio
Castings have made similar guarantees of these obligations. See
&#147;Certain relationships and related party
transactions&#151;Certain transactions involving Ohio
Castings.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have an equipment lease expiring on January 30, 2006, the
terms of which include an option to either renew the lease or
purchase the equipment at a specified amount. Our intent is to
purchase the equipment upon expiration of the lease. The buyout
amount is estimated at $6.7&nbsp;million. We expect to fund
these capital expenditures through cash provided by operating
activities and our revolving credit facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We anticipate that any future expansion of the business will be
financed through cash flow from operations, our amended and
restated revolving credit facility or term debt associated
directly with that expansion. Moreover, we believe that
following the completion of this offering, these sources of
funds will provide sufficient liquidity to meet our expected
operating requirements over the next twelve months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our long-term liquidity is contingent upon future operating
performance and our ability to continue to meet financial
covenants under our proposed amended and restated revolving
credit facility and any other indebtedness. We may also require
additional capital in the future to fund capital expenditures,
acquisitions or incur from time to time other investments and
these capital requirements could be substantial. Our operating
performance may also be affected by matters discussed under
&#147;Risk factors,&#148; and trends and uncertainties discussed
in this discussion and analysis, including those factors
discussed under &#147;Factors affecting operating results,&#148;
as well as elsewhere in this prospectus. These risks, trends and
uncertainties may also adversely affect our long-term liquidity.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Dividends.</I></B> Our board of directors has never
declared or paid any cash dividends on our common stock.
Following this offering, we intend to pay cash dividends on our
common stock. However, as of the date of this prospectus our
board of directors has not determined the amount of any specific
dividend. Our existing revolving credit facility provides that
the payment of dividends triggers a right in favor of the
administrative agent and our leaders to accelerate all of our
obligations under the credit facility, a demand right, unless we
satisfy certain financial covenants and provide our lenders
under that facility with advance notice of the dividend. Our
revolving credit facility requires us to meet a fixed charge
coverage ratio, after giving effect to the payment of the
dividend, of not less that 1.2 to 1.0 for each 12&nbsp;month
period ending on the last day of each calendar quarter. We
expect to amend and restate our revolving credit facility
concurrently with the completion of this offering pursuant to a
commitment letter we have obtained from our lenders. The amended
and restated revolving credit facility would continue to contain
provisions that trigger a demand right if we pay dividends on
our common stock unless the payment would not cause the adjusted
fixed charge coverage ratio to be less than 1.2 to 1.0 or the
adjusted ratio of our indebtedness to EBITDA to be greater than
4.0 to 1.0, each on a quarterly and/or annual basis, as defined
in the amended and restated revolving credit facility. In
addition, under Delaware law, our board of directors may declare
dividends only to the extent of our &#147;surplus&#148; (which
is defined as total assets at fair market value minus total
liabilities, minus statutory capital), or if there is no
surplus, out of our net profits for the then-current and/or
immediately preceding fiscal years. Moreover, our declaration
and payment of dividends will be at the discretion of our board
of directors and will depend upon our operating results,
strategic plans, capital
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 67</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
requirements, financial condition, covenants under our borrowing
arrangement and other factors our board of directors considers
relevant. Accordingly, we may not pay dividends in any given
amount in the future, or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Contractual obligations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table summarizes our contractual obligations as of
December&nbsp;31, 2004, and the effect that these obligations
and commitments would be expected to have on our liquidity and
cash flow in future periods, assuming that our existing debt
remains outstanding during such periods:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="41%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Payments Due By Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2-3</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>4-5</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>After</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Contractual Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1&nbsp;Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5 Years</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>149,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension funding(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>237,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>155,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>49,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,345</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Includes obligations under the pension plan relating to our
    employees at our Bude, Mississippi repair plant and our
    supplemental executive retirement plan.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The operating lease commitment above includes the future minimum
rental payments required under non-cancelable operating leases
for property and equipment leased by us.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In anticipation of the offering, after which we anticipate that
we will no longer be a part of ACF&#146;s control group, we have
been discussing with ACF an appropriate arrangement for
allocating the assets and liabilities of the pension benefit
plans and retiree group health and life insurance plans retained
by ACF in the 1994 ACF asset transfer, in which some of our
employees continue to participate, and for relieving us of
further employee benefit reimbursement obligations to ACF under
the 1994 ACF asset transfer agreement. In connection with the
proposed allocation of assets and liabilities of the affected
plans, which we expect to complete in the fourth quarter of
2005, we estimate the net amount that we will pay ACF is
approximately $6.3&nbsp;million. In addition, in connection with
that arrangement, we estimate that we will assume unfunded post
retirement benefit liabilities totaling $7.9&nbsp;million. We
have previously accrued an estimated liability related to this
settlement of $3.8 million. For a further description of the
proposed arrangement, see &#147;&#151;Charges and costs
associated with our public offering&#151;ACF employee benefit
plans&#148; and Note 13 to our Condensed Consolidated Financial
Statements.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Contractual obligations for the Bude pension plan are the
estimated minimum required contributions to be made to the Bude
pension plan at the due date of those payments. The first of
these payments is due on January&nbsp;15, 2008. The amount
included for the supplemental executive retirement plan reflects
accrued benefits to be paid to James&nbsp;J. Unger, our chief
executive officer. These payments are included in the amounts
due after five years. See &#147;Management&nbsp;&#151;
Retirement plans&#148; for more information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of November&nbsp;1, 2005, we had $135.6&nbsp;million of
purchase orders outstanding, all of which is scheduled to be
delivered within one year. These purchase orders include
purchase orders relating to the commitments described below.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 68</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We entered into two vendor supply contracts with minimum volume
commitments in October 2005 with suppliers of materials used at
our railcar production facilities. The agreements have terms of
two and three years respectively. We have agreed to purchase a
combined total of $67.6 from these two suppliers over the next
three years. In 2006, 2007 and 2008 we expect to purchase $16.0
million, $27.1&nbsp;million and $24.5&nbsp;million respectively
under these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We entered into two supply agreements, in January 2005 and June
2005, with a steel supplier for the purchase of regular and
normalized steel plate. The agreements each have terms of five
years and may be terminated by either party at any time after
two years, upon twelve months prior notice. Each agreement
requires us to purchase the lesser of a fixed volume or 75% of
our requirements for the steel covered by that agreement at
prices that fluctuate with the market. We have no commitment
under these arrangements to buy a minimum amount of steel, other
than the minimum percentages, if our overall steel purchases
decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have entered into supply agreements with an affiliate of
Amsted Industries, Inc., an affiliate of one of our Ohio
Castings joint venture partners, to purchase up to 25% and 33%
of the car sets, consisting of sideframes and bolsters, produced
at each of two foundries, respectively, being operated by
subsidiaries of Ohio Castings. Our purchase commitments under
these supply agreements are dependent upon the number of car
sets manufactured by these foundries, which are jointly
controlled by us and the other two members of Ohio Castings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table summarizes our contractual obligations as of
December&nbsp;31, 2004, and the effect that these obligations
and commitments are expected to have on our liquidity and cash
flow in future periods, after giving effect to this offering and
the application of the net proceeds of this offering as
described in &#147;Use of proceeds&#148;:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>Payments Due By Period</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2-3</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>4-5</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>After</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Contractual Obligations</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>1&nbsp;Year</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Years</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>5&nbsp;Years</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt obligations(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,352</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchase obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>43,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pension funding</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,129</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>78,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,355</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>46,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    We anticipate that our amended and restated revolving credit
    facility that we intend to enter into concurrently with this
    offering, will permit us to borrow $75.0&nbsp;million and that
    our amended and restated revolving credit facility will mature
    three years following the closing of the offering.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon completion of this offering, we intend to repay and replace
our existing revolving credit facility, under which there is
presently $31.3&nbsp;million outstanding, with an amended and
restated revolving credit facility. We will be exposed to
interest rate risk on the borrowings under our revolving credit
facility. However, we do not plan to enter into swaps or other
hedging arrangements to manage this risk because we do not
believe the risk is significant. On an annual basis, a 1% change
in the interest rate in our revolving credit facility will
increase or decrease our interest expense by $10,000 for every
$1.0&nbsp;million of outstanding borrowings.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 69</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are exposed to price risks associated with the purchase of
raw materials, especially steel and heavy castings. The cost of
steel, heavy castings and all other materials used in the
production of our railcars represent approximately 80-85% of our
direct manufacturing costs. Given the significant increases in
the price of raw materials since November 2003, this exposure
can affect our costs of production. We believe that the risk to
our margins and profitability has been greatly reduced by the
variable pricing contracts we now have in place. We have
negotiated most of our railcar manufacturing contracts with our
customers to adjust the purchase prices of our railcars to
reflect increases or decreases in the cost of certain raw
materials and components and, as a result, we are able to pass
on to our customers substantially all of the increased raw
material and component costs with respect to the railcars that
we will produce and deliver after the first nine months of 2005.
We believe that we currently have excellent supplier
relationships and do not anticipate that material constraints
will limit our production capacity. Such constraints may exist
if railcar production were to increase beyond current levels, or
other economic changes occur that affect the availability of our
raw materials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are not exposed to any significant foreign currency exchange
risks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CRITICAL ACCOUNTING POLICIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We prepare our consolidated financial statements in accordance
with U.S.&nbsp;GAAP. The preparation of our financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during
the reporting period. Our significant accounting policies are
described in the notes to our consolidated financial statements
included elsewhere in this prospectus. Some of these policies
involve a high degree of judgment in their application. The
critical accounting policies, in management&#146;s judgment, are
those described below. If different assumptions or conditions
prevail, or if our estimates and assumptions prove to be
incorrect, actual results could be materially different from
those reported.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenue recognition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenues from railcar sales are recognized following completion
of manufacturing, inspection, customer acceptance and shipment,
which is when title and risk for any damage or loss with respect
to the railcars passes to the customer. In some cases, painting
and lining work may be outsourced to an independent contractor
and, as a result, the sale will not be recorded until the
railcars are shipped from the independent contractor&#146;s
facilities to our customer. Revenues from railcar and industrial
components are recorded at the time of product shipment, in
accordance with our contractual terms. Revenue for railcar
maintenance services are recognized upon completion and shipment
of railcars from our plants. Revenue for fleet management
services are recognized as performed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We record amounts billed to customers for shipping and handling
as part of sales in accordance with Emerging Issues Task Force
(EITF)&nbsp;00-10, <I>Accounting for Shipping and Handling Fees
and Costs</I>, and we record related costs in our cost of sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounts receivable</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We carry our accounts receivable at cost, less an allowance for
doubtful accounts. On a quarterly basis, we evaluate our
accounts receivable and establish an allowance for doubtful
accounts, based on a history of past write-offs and collections
and current credit conditions. Accounts are placed for
collection on a limited basis once all other methods of
collection have been exhausted. Once it has been determined that
the customer is no longer in business and/or refuses to pay, the
accounts are written off. Our bad debt experience has been
minimal. Write-offs could be materially different than reserves
if economic conditions change or actual results deviate from
historical trends.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 70</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Product warranties</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We record a liability for an estimate of costs that we expect to
incur under our basic limited warranty when manufacturing
revenue is recognized. Warranty terms are based on the
negotiated railcar sales contracts and typically are for periods
of up to five years. Factors affecting our warranty liability
include the number of units sold and historical and anticipated
rates of claims and costs per claim. We assess quarterly the
adequacy of our warranty liability based on changes in these
factors. We have generally experienced low warranty claims. Our
warranty claims were $0.5&nbsp;million in 2003 and
$0.1&nbsp;million in 2004. Actual results differing from
estimates could have a material effect on results from
operations in the event that unforeseen warranty issues were to
occur.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inventory</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventories are stated at the lower of average cost or market,
and include the cost of materials, direct labor and
manufacturing overhead. We evaluate our ability to realize the
value of our inventory based on a combination of factors
including historical usage rates, forecasted sales or usage,
product end of life dates, estimated current and future market
values and new product introductions. Assumptions used in
determining our estimates of future product demand may prove to
be incorrect, in which case the provision required for excess
and obsolete inventory would have to be adjusted in the future.
If inventory is determined to be overvalued, we would be
required to recognize such costs as cost of goods sold at the
time of such determination. Any significant unanticipated
changes in demand could have a significant negative impact on
the value of our inventory and our reported operating results.
Additionally, purchasing requirements and alternative usage
avenues are explored within these processes to mitigate
inventory exposure. When recorded, our reserves are intended to
reduce the carrying value of our inventory to its net realizable
value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Long-lived assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We evaluate long-lived assets, including property, plant and
equipment, under the provisions of Statement of Financial
Accounting Standards (SFAS)&nbsp;No.&nbsp;144, <I>Accounting for
the Impairment or Disposal of Long-Lived Assets</I>, which
addresses financial accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed
of. Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of assets may not be recoverable. The criteria for
determining impairment or such long-lived assets to be held and
used is determined by comparing the carrying value of these
long-lived assets to be held and used to management&#146;s best
estimate of future undiscounted cash flows expected to result
from the use of the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the
fair value of the assets. The estimated fair value of the assets
is measured by estimating the present value of the future
discounted cash flows to be generated. We incurred impairment
losses in the years ended December&nbsp;31, 2002 and 2003, and
reduced the carrying value of buildings and improvements and
equipment by $0.2&nbsp;million and $0.8 million, respectively,
at one of our railcar maintenance facilities. Any future
determination requiring write-off of a significant portion of
long-lived assets recorded on our balance sheet could have an
adverse effect on our financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For financial reporting purposes, income tax expense is
estimated based on planned tax return filings. The amounts
anticipated to be reported in those filings may change between
the time the financial statements are prepared and the time the
tax returns are filed. Further, because tax filings are subject
to review by taxing authorities, there is also the risk that a
position on a tax return may be challenged by a taxing
authority. If the taxing authority is successful in asserting a
position different than that
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 71</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
taken by us, differences in a tax expense or between current and
deferred tax items may arise in future periods. Any such
differences which could have a material impact on our financial
statements would be reflected in the financial statements when
management considers them probable of occurring and the amount
reasonably estimable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Valuation allowances reduce deferred tax assets to an amount
that will more likely than not be realized. Management&#146;s
estimates of the realization of deferred tax assets is based on
the information available at the time the financial statements
are prepared and may include estimates of future income and
other assumptions that are inherently uncertain. No valuation
allowance is currently recorded, as we expect to realize our
deferred tax assets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounting for expenses paid by affiliate</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In October 1994, we acquired railcar components manufacturing,
railcar maintenance and certain other assets from ACF, a company
beneficially owned and controlled by Carl C. Icahn, our
principal beneficial stockholder and the chairman of our board
of directors. In connection with that transaction, ACF retained,
and agreed to indemnify and hold us harmless for, certain
liabilities and obligations relating to the conduct of business
and ownership of the assets prior to the transfer, including
liabilities relating to employee benefit plans subject to
certain exceptions for transferred employees, workers&#146;
compensation, environmental contamination and third-party
litigation. See &#147;Certain relationships and related party
transactions&#151;Transactions with ACF Industries LLC.&#148; At
December&nbsp;31, 2004, the total liability retained by ACF was
$11.1&nbsp;million, which is related primarily to pension
benefit obligations. Although ACF is responsible for any costs
associated with the retained liabilities, we have continued to
reflect the costs associated with those retained liabilities in
our financial statements as an expense in order to reflect the
full cost of doing business, and the payment by ACF of these
expenses is reflected as additional paid-in capital, as required
by Staff Accounting Bulletin&nbsp;Topic 5T.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fair value of financial instruments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The carrying amounts of cash and cash equivalents, accounts
receivable, amounts due to/from affiliates and accounts payable
approximate fair values because of the short-term maturity of
these instruments. The fair value of long-term debt is
calculated by discounting cash flows through maturity using our
current rate of borrowing for similar liabilities. The fair
value of the note receivable from ACF, which was carried at face
amount plus accrued interest, could not reasonably be estimated
due to the lack of market for similar instruments. Fair value
estimates are made at a specific point in time, based on
relevant market information about the financial instrument.
These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Contingencies and litigation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We periodically record the estimated impacts of various
uncertain outcomes. These events are called contingencies and
our accounting for these events is prescribed by
SFAS&nbsp;No.&nbsp;5, <I>Accounting for Contingencies</I>.
SFAS&nbsp;No.&nbsp;5 defines a contingency as &#147;an existing
condition, situation, or set of circumstances involving
uncertainty as to possible gain or loss to an enterprise that
will ultimately be resolved when one or more future events occur
or fail to occur.&#148; Contingent losses must be accrued if:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">available information indicates it
    is probable that the loss has been or will be incurred, given
    the likelihood of the uncertain future events;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the amount of the loss can be
    reasonably estimated.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 72</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accrual of a contingency involves considerable judgment on
the part of management. Legal proceedings have elements of
uncertainty, and in order to determine the amount of any
reserves required, we assess the likelihood of any adverse
judgments or outcomes to pending and threatened legal matters,
as well as potential ranges of probable losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are subject to comprehensive federal, state, local and
international environmental laws and regulations relating to the
release or discharge of materials into the environment, the
management, use, processing, handling, storage, transport or
disposal of hazardous materials and wastes, or otherwise
relating to the protection of human health and the environment.
These laws and regulations not only expose us to liability for
the environmental condition of our current or formerly owned or
operated facilities, and our own negligent acts, but also may
expose us to liability for the conduct of others or for our
actions that were in compliance with all applicable laws at the
time these actions were taken. In addition, these laws may
require significant expenditures to achieve compliance, and are
frequently modified or revised to impose new obligations. Civil
and criminal fines and penalties and other sanctions may be
imposed for non-compliance with these environmental laws and
regulations. Our operations that involve hazardous materials
also raise potential risks of liability under common law. We are
involved in investigation and remediation activities at
properties that we now own or lease to address historical
contamination and potential contamination by third parties. We
are also involved with state agencies in the cleanup of two
sites under these laws. These investigations are at a
preliminary stage, and it is impossible to estimate, with any
certainty, the timing and extent of remedial actions that may be
required, and the costs that would be involved in such
remediation. Substantially all of the issues identified relate
to the use of the properties prior to their transfer to us in
1994 by ACF and for which ACF has retained liability for
environmental contamination that may have existed at the time of
transfer to us. ACF has also agreed to indemnify us for any cost
that might be incurred with those existing issues. However, if
ACF fails to honor its obligations to us, we would be
responsible for the cost of such remediation. We have been
advised that, for the remainder of 2005, ACF estimates that it
will spend approximately $0.1&nbsp;million on environmental
investigation and, in each of 2006 and 2007, it will spend
approximately $0.2&nbsp;million on environmental investigation,
relating to contamination that existed at properties prior to
their transfer to us and for which ACF has retained liability
and agreed to indemnify us. We believe that our operations and
facilities are in substantial compliance with applicable laws
and regulations and that any noncompliance is not likely to have
a material adverse effect on our operations or financial
condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Future events, such as new environmental regulations or changes
in or modified interpretations of existing laws and regulations
or enforcement policies, or further investigation or evaluation
of the potential health hazards of products or business
activities, may give rise to additional compliance and other
costs that could have a material adverse effect on our financial
conditions and operations. In addition, ACF has in the past
conducted investigation and remediation activities at properties
that we now own to address historic contamination. Although we
believe that ACF has satisfactorily addressed all known material
contamination, there can be no assurance that ACF has addressed
all historical contamination. The discovery of historical
contamination or the release of hazardous substances into the
environment at our current or formerly owned or operated
facilities could require ACF or us in the future to incur
investigative or remedial costs or other liabilities that could
be material or that could interfere with the operation of our
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are currently a member of a controlled group that includes
ACF, an entity in which Mr.&nbsp;Icahn has an indirect ownership
of at least 80%. ACF is the sponsor of several pension plans
that are underfunded, as of December&nbsp;31, 2004, by a total
of approximately $24.1&nbsp;million on an ongoing actuarial
basis and $172.4&nbsp;million if those plans were terminated, as
most recently reported by the plans&#146; actuaries. The
liabilities could increase or decrease, depending on a number of
factors, including future changes in promised benefits,
investment returns and the assumptions used to calculate the
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 73</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
liability. As members of the controlled group, we would be
jointly and severally liable for any failure of ACF to pay the
unfunded liabilities upon a termination of the ACF pension
plans. Upon completion of this offering, we believe that we
should no longer be a member of the ACF controlled group. As a
result, we should no longer be subject to ACF&#146;s pension
liabilities, unless it were determined that we were otherwise a
member of the ACF controlled group or that a principal purpose
of the offering or other transactions that resulted in our
ceasing to be a member of the ACF controlled group was to evade
pension liabilities and the termination date of the underfunded
plan was within five years after the offering or other
transactions. If such a determination were made and upheld by a
court, we could remain jointly and severally liable for pension
plan obligations of ACF, which could have a material adverse
effect on our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with Trans World Airlines, Inc.&#146;s (or TWA)
1992 bankruptcy proceedings under Chapter 11 of the Bankruptcy
Code, the Pension Benefit Guarantee Corporation (or the PBGC)
asserted that ACF as well as the other entities in which Mr.
Icahn had a controlling interest were obligated along with TWA
to satisfy any underfunding of obligations under TWA&#146;s
defined benefit plan. Subsequently, and in response to a
petition of another member of the Icahn control group, the PBGC
terminated the TWA pension plan and obligated an affiliate of
ARI, Highcrest Investors Corp (or Highcrest) to make eight
annual termination payments of $30 million, totaling $240
million. We have been advised that as of December 31, 2004,
Highcrest had made termination payments totaling $130 million
and still owed $110 million on this obligation. The obligation
to make termination payments is non-recourse except to the
common stock of ACF Industries Holding Corp., which is also a
member of the Icahn control group. The authority of the PBGC to
enter into the settlement agreement is currently being
contested. Although ARI is a controlled entity of Mr. Icahn,
management believes this obligation will have no adverse effect
on the future liquidity, results of operations, or financial
position of ARI. See &#147;Risk Factors&nbsp;&#151; Risks
related to our business&nbsp;&#151; We could be liable for
liabilities associated with pension plans sponsored by companies
controlled by Carl&nbsp;C. Icahn.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been named a party to a suit in which the plaintiff
alleges we were responsible for the malfunction of a valve which
we manufactured, and that was negligently remanufactured in 2004
by a third party. We believe we have no responsibility for this
malfunction and have meritorious defenses against any liability.
It is not possible to estimate the expected settlement, if any,
at this time as the case is in its early stages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been named the defendant in a law suit in which the
plaintiff, OCI&nbsp;Chemical Company, claims we were responsible
for the damage caused by allegedly defective railcars that were
manufactured by us. The lawsuit was filed on September&nbsp;19,
2005 in the United States District Court, Eastern District of
Missouri. The plaintiff seeks unspecified damages in excess of
$75,000. The plaintiffs allege that the failures in certain
components caused the contents transported by these railcars to
spill out of the railcars causing property damage, clean-up
costs, monitoring costs, testing costs and other costs and
damages. We believe that we are not responsible for the damage
and have meritorious defenses against liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT ON INTERNAL CONTROLS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our management and auditors have identified three significant
deficiencies in our internal controls as of December&nbsp;31,
2004, which, if not properly remediated could result in
misstatements in our financial statements in future periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our independent auditors, Grant Thornton LLP, issued a letter to
our board of directors in which they identified three
significant deficiencies in the design and operation of our
internal controls as of December&nbsp;31, 2004. A significant
deficiency is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that
a misstatement of the financial
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 74</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
statements that is more than inconsequential will not be
prevented or detected. A control deficiency exists when the
design or operation of a control does not allow management or
employees, in the normal course of performing their assigned
functions, to prevent or detect misstatements on a timely basis.
Specifically, the significant deficiencies noted were:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Inventory
    cut-off.</FONT></I></B><FONT style="font-size: 10pt"> Our
    manufacturing locations recorded inventory shipped by our
    vendors to us on the date we received the inventory in our
    facility, rather than on the date of shipment.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Construction in
    process.</FONT></I></B><FONT style="font-size: 10pt"> We
    transferred assets from construction in process to fixed assets
    on a quarterly basis rather than at the time assets are actually
    placed into service. There was insufficient documentation
    authorizing the movement of assets from construction in process
    to fixed assets. Certain assets were still being classified as
    construction in process even though the asset was in service.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Fixed asset recording and
    reconciliation.</FONT></I></B><FONT style="font-size: 10pt"> Our
    fixed asset subsidiary ledgers were not updated in a timely
    manner. Supporting ledgers for depreciation schedules were
    tracked using Microsoft Excel. The schedules were not reconciled
    on a timely basis. The procedures surrounding the compilation of
    the data was manual and subject to error.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In light of the noted significant deficiencies, we have
instituted control improvements that we believe will reduce the
likelihood of similar errors to less than remote or to an
inconsequential amount in the specific areas that are judged to
be most vulnerable. See &#147;Risk factors&#151; Our management
and auditors have identified three significant deficiencies in
our internal controls as of December&nbsp;31, 2004, which, if
not properly remediated could result in misstatements in our
financial statements in future periods.&#148; These control
improvements include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Inventory
    cut-off.</FONT></I></B><FONT style="font-size: 10pt"> Effective
    March&nbsp;31, 2005, we implemented procedures to track the
    inventory in transit and record the receipt of such inventory
    properly in our general ledger. We now follow this procedure
    monthly.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Construction in
    process.</FONT></I></B><FONT style="font-size: 10pt"> We are
    developing a process for plant and corporate management approval
    to authorize assets to be placed in service. This procedure will
    entail a threshold dollar amount requiring corporate controller
    approval that will include a review of the asset clarification
    and depreciation rate. Under this plan, assets will be moved
    from construction in process in the month the asset is placed in
    service.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <B><I><FONT style="font-size: 10pt">Fixed asset recording and
    reconciliation.</FONT></I></B><FONT style="font-size: 10pt"> We
    expect to implement a new fixed asset tracking system before the
    end of 2005.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We do not expect to incur material incremental staffing costs
associated with these corrective actions. However, in connection
with becoming a public company, we expect to incur significant
additional staffing and infrastructure costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RECENT ACCOUNTING PRONOUNCEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In January 2003, the Financial Accounting Standards Board
(FASB)&nbsp;issued Interpretation No. (FIN)&nbsp;46,
<I>Consolidation of Variable Interest Entities</I>, which was
later amended on December&nbsp;24, 2003 (FIN&nbsp;46R).
FIN&nbsp;46R explains how to identify variable interest entities
and how an enterprise assesses its interest in a variable
interest entity to decide whether to consolidate that entity.
FIN&nbsp;46R requires unconsolidated variable interest entities
to be consolidated by their primary beneficiaries if their
entities do not effectively disperse the risks and rewards of
ownership among their owners and other parties involved. The
provisions of FIN&nbsp;46R are generally effective for periods
after December&nbsp;31, 2003. The adoption of this pronouncement
has not had a material effect on us.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 75</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management&#146;s discussion and analysis of financial
condition and results of operations</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In May 2003, the FASB issued Statement of Financial Accounting
Standards No.&nbsp;150, <I>Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity
</I>(SFAS&nbsp;150), which establishes standards for how
companies classify and measure certain financial instruments
with characteristics of both liabilities and equity. It requires
companies to classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). We
classified our mandatorily redeemable payment-in-kind preferred
stock as a liability in accordance with SFAS&nbsp;150 in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In November 2004, the FASB issued SFAS&nbsp;No.&nbsp;151,
<I>Inventory Costs-An Amendment of ARB No.&nbsp;43</I>,
<I>Chapter&nbsp;4</I>, which requires the recognition of costs
of idle facilities, excessive spoilage, double freight, and
rehandling costs as a component of current-period expenses. The
provisions of SFAS&nbsp;No.&nbsp;151 are effective for inventory
costs incurred during fiscal years beginning after June&nbsp;15,
2005. Since we produce railcars based upon specific customer
orders, management does not expect the provisions of
SFAS&nbsp;No.&nbsp;151 to have a material impact on our
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, the FASB issued SFAS&nbsp;123R, <I>Share-Based
Payments.</I> SFAS&nbsp;123R is a revision of SFAS&nbsp;123,
<I>Accounting for Stock Based Compensation</I>, and supersedes
APB&nbsp;25. Among other items, SFAS&nbsp;123R eliminates the
use of APB&nbsp;25 and the intrinsic value method of accounting,
and requires companies to recognize the cost of employee
services received in exchange for awards of equity instruments,
based on the grant date fair value of those awards, in the
financial statements. The effective date of SFAS&nbsp;123R is
currently the beginning of the next fiscal year that begins
after June&nbsp;15, 2005, which is the first quarter of our year
ending December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In March 2005, the FASB issued FIN&nbsp;47 as an interpretation
of FASB Statement&nbsp;143, <I>Accounting for Asset Retirement
Obligations </I>(FASB 143). This interpretation clarifies that
the term conditional asset retirement obligation as used in FASB
143 and refers to a legal obligation to perform an asset
retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not
be within the control of the entity. The obligation to perform
the asset retirement activity is unconditional even though
uncertainty exists about the timing and/or method of settlement.
Accordingly, an entity is required to recognize a liability for
the fair value of a conditional asset retirement obligation if
the fair value of the liability can be reasonably estimated.
This interpretation also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of
an asset retirement obligation. FIN&nbsp;47 is effective no
later than the end of fiscal years ending after
December&nbsp;15, 2005. We believe that the adoption of
FIN&nbsp;47 will not result in a material change in our
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On June&nbsp;1, 2005, the FASB issued Statement No.&nbsp;154,
<I>Accounting Changes and Error Corrections, a replacement of
APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3
(SFAS&nbsp;154)</I>. The Statement applies to all voluntary
changes in accounting principle, and changes the requirements
for accounting for and reporting of a change in accounting
principle. We will adopt SFAS&nbsp;154 at December&nbsp;31, 2005
and do not anticipate any material change to our operating
results as a result of this adoption.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 76</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='110'></A>
</DIV>

<!-- link1 "Industry" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Industry
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OVERVIEW OF NORTH AMERICAN RAILCAR MANUFACTURING INDUSTRY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Many diverse industries depend on the railroad system to
transport items such as plastic pellets, chemicals and related
products, non-metallic minerals, grains and other farm products,
food products, metals and ores, coal, lumber and other building
products, petroleum products, oils, ethanol related products,
paper products, vehicles, equipment and associated parts. Demand
for railcars reflects their importance for the North American
economy in moving goods and raw materials. In periods of rising
economic activity, fleet utilization typically increases,
driving an increase in demand for new railcars, which also
increases backlog for new railcars. Conversely, during economic
slowdowns, fleet utilization typically declines, resulting in
reduced demand, deliveries and backlog for new railcars.
According to Global Insight&#146;s Freight Car Outlook Third
Quarter 2005, orders for new railcars are expected to be strong
with deliveries projected to average 59,400&nbsp;railcars per
year from 2005 through 2010. This compares to deliveries of
17,714&nbsp;railcars in 2002, 32,184&nbsp;railcars in 2003 and
46,871&nbsp;railcars in 2004, as reported by the Railway Supply
Institute, or RSI. RSI reported that at the end of 2004, the
total backlog for the railcar manufacturing industry reached
58,677&nbsp;railcars. This growth trend has continued through
the first nine months of 2005, with 54,134&nbsp;new railcars
ordered and 50,682&nbsp;railcars delivered, with total backlog
increasing to 60,986&nbsp;railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The primary purchasers of railcars in North America are leasing
companies, shippers and railroads. Leasing companies are
financial institutions that buy railcars from manufacturers like
us and lease these railcars to end users that include railroads
and shippers. Shippers include a variety of industrial companies
that purchase railcars for freight transport. Railroads purchase
railcars to transport goods for industrial companies and others
on their lines. The primary source of railcar orders has shifted
over time as leasing companies and shippers replace railroads as
the largest purchasers of new railcars. From 1990 to 2003,
leasing companies and shippers have increased their collective
share of the total North American railcar fleet from 37% to 53%,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The major railcar types and primary uses of these railcars in
North America are summarized below.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Railcar Type</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Primary Use</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Covered Hopper Railcar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Transport of cargo in the plastics, chemical, oil and food
    industries</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tank Railcar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Transport of liquids and gaseous materials, including chemicals,
    petroleum products and fertilizers</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intermodal Flat Railcar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Transport of cargo in containers and trailers that may also be
    used by trucks or ships</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gondola Railcar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Transport of coal and other commodities including steel products
    and scrap metals</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Open-Top Hopper Railcar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Transport of coal</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Box&nbsp;Railcar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Transport of auto parts, food products, wood products and paper
    products</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Flat Railcar</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">
    Transport of bulky items including machinery, automobiles and
    forest products</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Although a railcar can be used for up to 50&nbsp;years under
existing regulations in North America, we believe that the
average life of a railcar is approximately 30 to 35&nbsp;years.
After that point, most railcars must either be refurbished or
replaced. Railcar designs change over time, incorporating
technical and quality improvements while adapting to the
functions required by customers. As the industry advances,
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 77</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
we generally expect that railcars will become more efficient and
capable of carrying larger loads with better ride quality and
lower repair and operating costs. We believe that as customers
replace aging fleets and expand the number of railcars in use to
meet higher shipping demand, they make new railcar purchasing
decisions based not only on price and delivery time, but also on
key performance characteristics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following chart identifies the composition, by percentage,
of the U.S.&nbsp;railcar fleet in 2003, and indicates that among
all the different railcar types, covered hopper railcars and
tank railcars represented the two largest categories of the
U.S.&nbsp;railcar fleet.
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Composition of 2003 U.S.&nbsp;Railcar Fleet</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10848s1y1084800.gif" alt="(PIE CHART)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><I>Source:</I>&nbsp;</TD>
    <TD align="left">
    Association of American Railroads</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NORTH AMERICAN RAILCAR COMPONENTS AND SERVICES INDUSTRIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Manufacturers of railcar components are primarily comprised of
railcar manufacturers, some of which produce components solely
for internal use, while others produce railcar components for
sale to outside customers, as well as non-railcar manufacturers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Railcar support services are an important part of the railcar
industry. Railcar services include maintenance and repair,
cleaning, painting and lining, engineering services and the
management of customers&#146; railcar fleets. Maintenance and
repair facilities may be fixed locations near railroad lines or
operate as mobile units designed to service railcars at customer
locations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NORTH AMERICAN RAILCAR INDUSTRY DYNAMICS AND TRENDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The 1980 Staggers Rail Act ended more than 100&nbsp;years of
government rail industry regulation and dramatically transformed
the railcar industry in North America. The deregulation enabled
railroads to regain market share lost to the trucking industry
over the years and resulted in a wave of industry consolidation.
The number of Class&nbsp;I railroads, the grouping of the
largest railroads based on operating revenue, dropped from 22 in
1980 to seven today while the volume of goods transported on the
U.S.&nbsp;rail system increased from 1.5&nbsp;billion tons in
1980 to 1.8&nbsp;billion tons in 2003, according to the
Association of American Railroads.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 78</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Railroad industry deregulation also prompted a series of
consolidations among railcar manufacturers and more efficient
fleet management, which resulted in a reduction of the total
U.S.&nbsp;railcar fleet size from 1.7&nbsp;million railcars in
1980 to 1.2&nbsp;million railcars in 1995.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following chart reflects the size of the railcar fleet in
the United States, which represents the majority of the North
American railcar fleet, from 1994 to 2003.
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Historical U.S.&nbsp;Railcar Fleet</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10848s1y1084801.gif" alt="(GRAPH CHART)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><I>Source:&nbsp;</I></TD>
    <TD align="left">
    Association of American Railroads&#151; Railroad Facts 2004</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cyclical nature of the North American railcar market and
outlook for North American railcar demand</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The North American railcar market is highly cyclical and trends
in the railcar manufacturing industry are directly affected by
the level of activity in the North American economy. When the
economy is in a period of sustained growth, railcar users
generally tend to increase the size of their fleets and replace
older railcars with newer railcars or railcars with greater
capacity and durability. Conversely, when the economy slows
down, these companies generally delay investment in new railcars
and increase the utilization rates of railcars already in use,
keeping them in service for longer periods. The North American
railcar market is also affected by the level of international
trade activity, as railroads are also used to transport imported
and exported goods to and from ports. In addition, supplies of
materials, such as steel, as well as key railcar components,
such as heavy castings and wheels, are constrained from time to
time, which limits the production capacity of companies in the
railcar manufacturing industry and results in further cyclical
fluctuations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As illustrated by the chart below, railcar demand was at a high
in the late 1970s due, in particular, to the preferential tax
treatment attributed to railcars under then-existing tax laws.
The Tax Reform Act of 1981, which eliminated the preferential
tax treatment of railcars beginning in 1983, as well as the
economic recession in the early 1980s, led to low levels of
railcar production through most of the 1980s. However, during
most of the 1990s, increased general economic activity and
higher import levels led to an increase in railcar deliveries.
In addition, after a period of consolidation in the railroad
industry, railroads suffered from integration difficulties, poor
railcar utilization and aging fleets. We believe that railroads
responded by ordering additional railcars, which led to a
significant increase in railcar deliveries in 1998 and 1999.
This period of peaking orders ended in 2000 and 2001 as slowing
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 79</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
economic growth, a recovery in railroad operating efficiency and
transportation disruption related to the
September&nbsp;11<SUP style="font-size: 85%; vertical-align: text-top">th</SUP>
terrorist attacks pushed 2002 deliveries of new railcars down to
17,714&nbsp;railcars, according to the Railway Supply Institute.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2003, the industry began to recover from the downturn and
demand for new railcars started to increase. A total of 46,871
railcars were delivered in 2004 and industry backlog stood at
58,677 railcars at December&nbsp;31, 2004. A total of
50,682&nbsp;railcars have been delivered during the first nine
months of 2005 and industry backlog stands at 60,986 railcars as
of September&nbsp;30, 2005. The following chart illustrates
annual North American deliveries of railcars since 1978 and
projected annual North American railcar deliveries through 2010,
according to the Railway Supply Institute and Global
Insight&#146;s Freight Car Outlook Third-Quarter, 2005,
respectively.
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Railcar Annual Deliveries</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10848s1y1084802.gif" alt="(GRAPH CHART)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><I>Source:&nbsp;</I></TD>
    <TD align="left">
    Railway Supply Institute and Global Insight&#146;s Freight Car
    Outlook Third-Quarter 2005</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Strong near term demand for railcars</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Following a period of economic weakness from 2001 to 2003, we
believe leasing companies, shippers and railroads that have
deferred new railcar purchases and equipment maintenance are
poised to expand and service their fleets in response to growing
demand for railroad shipping. Global Insight&#146;s Freight Car
Outlook Third-Quarter, 2005 anticipates delivery of 66,043 new
railcars in 2005 and average annual deliveries of 59,400
railcars per year from 2005 through 2010.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 80</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following chart sets forth the historical backlog for the
North American railcar industry:
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Historical North American Railcar Backlog by Quarter</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10848s1y1084803.gif" alt="(GRAPH CHART)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><I>Source:&nbsp;</I></TD>
    <TD align="left">
    Railway Supply Institute</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Positive long term demand fundamentals</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Over the long term, we expect increased U.S.&nbsp;economic
activity to drive growth in railroad shipment and new railcar
purchases. Global Insight&#146;s Freight Car Outlook
Third-Quarter 2005 forecasts continued gains in rail freight
usage, with 1.6% growth in railcar loads during 2005, 1.7%
growth in railcar loads in 2006 and 1.7% to 0.8% annual growth
in railcar loads from 2007 to 2010. Under normal circumstances,
railcars generally need to be refurbished or replaced after 30
to 35&nbsp;years of use. We believe that, historically, the
useful life of tank railcars has been shorter, ranging from 25
to 30&nbsp;years of use. Railcars used at a higher than average
rate may require replacement in a shorter period of time. In
some cases, advances in technology and efficiency or new
regulations may require railcars with remaining useful life to
be replaced. We believe demand for replacement railcars will be
strong over the long term as approximately 50% of all railcars
in use are over 20&nbsp;years old.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Trends impacting covered hopper railcars</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Covered hopper railcars constitute the largest of all railcar
segments in terms of numbers of railcars in use. Covered hopper
railcars are used primarily to transport cargo such as cement,
plastic pellets, grain and dry fertilizer. Demand for covered
hopper railcars has shown renewed strength due to increased
shipments of a variety of products including plastics, chemicals
and foods. According to the Railway Supply Institute, 5,602
covered hopper railcars were delivered in 2004. We believe
manufacturing activity across a variety of sectors will continue
to drive demand for covered hopper railcars through 2005 and
2006. In addition, we believe increasing ethanol production will
continue to drive the volume of corn shipments transported in
covered hopper railcars. The U.S.&nbsp;Department of
Agriculture&#146;s Baseline Projections to 2014 dated February
2005 forecasts a 9% increase in corn production from 2005 to
2010, largely attributable to demand for corn in ethanol
production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Over the long term, Global Insight&#146;s Freight Car Outlook
Third-Quarter 2005 forecasts strong demand for covered hopper
railcars driven by continued growth of the U.S.&nbsp;economy,
higher production for a number of consumer and business durable
goods, increasing domestic and international demand for
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 81</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
U.S.&nbsp;agricultural products, increasing ethanol production
and replacement of aging railcars. As shown by the chart below,
Global Insight&#146;s Freight Car Outlook Third-Quarter 2005
forecasts deliveries of covered hopper railcars will reach
14,927 in 2005 and 16,926 in 2006, and will average more than
15,800 deliveries per year from 2007 through 2010. These
forecasts illustrate a significant projected increase from the
5,602 covered hopper railcars delivered in 2004 and the 3,801
covered hopper railcars delivered in 2003.
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Historical and Projected Covered Hopper Railcar Deliveries</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10848s1y1084804.gif" alt="(GRAPH CHART)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><I>Source:&nbsp;</I></TD>
    <TD align="left">
    Railway Supply Institute and Global Insight Freight Car Outlook
    Third-Quarter 2005</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Trends impacting tank railcars</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Orders of tank railcars are being driven in part by the advanced
age of the current North American tank railcar fleet. In 2004,
8,939&nbsp;tank railcars were delivered, according to Global
Insight&#146;s Freight Car Outlook Third-Quarter 2005. Tank
railcars primarily are used to transport liquid and gaseous
products, such as chemicals, liquid fertilizers and petroleum
products. Tank railcars, like covered hopper railcars, are also
in higher demand in North America as manufacturing activity, and
the need for liquids and gases used in manufacturing, increases.
We believe expansion of the ethanol sector as well as strong
consumer demand for petrochemicals, edible oils, lubricating
oils, liquid propane and liquid food products also positively
impact tank railcar shipments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Based on Global Insight&#146;s Freight Car Outlook Third-Quarter
2005 projections, tank railcar deliveries are expected to
increase to 11,069&nbsp;railcars in 2005 and
11,075&nbsp;railcars in 2006 and will average approximately
9,900&nbsp;deliveries per year from 2007 through 2010. In
comparison, the number of tank railcars delivered in North
America was 8,939 in 2004 and 8,176 in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The tank railcar market is a more difficult market to enter
compared to other railcar types. The manufacturing of tank
railcars is highly regulated and their production requires a
specially trained workforce and dedicated manufacturing
facilities. As a result, competition in the tank railcar market
is concentrated. Production of tank railcars is also very labor
intensive compared to production of other railcars. Due to
domestic supply constraints, tank railcar manufacturers have
experienced difficulties in obtaining normalized steel plate,
which is an essential specialty material used in the production
of many types of tank railcars.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 82</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Industry</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following chart shows historical tank railcar deliveries in
2003 and 2004 and projected tank railcar deliveries through 2010.
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Historical and Projected Tank Railcar Deliveries</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10848s1y1084805.gif" alt="(GRAPH CHART)">
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><I>Source:&nbsp;</I></TD>
    <TD align="left">
    Railway Supply Institute and Global Insight Freight Car Outlook
    Third-Quarter 2005</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 83</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='111'></A>
</DIV>

<!-- link1 "Business" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Business
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OVERVIEW</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are a leading North American manufacturer of covered hopper
and tank railcars. We also repair and refurbish railcars,
provide fleet management services and design and manufacture
certain railcar and industrial components used in the production
of our railcars as well as railcars and non-railcar industrial
products produced by others. We provide our railcar customers
with integrated solutions through a comprehensive set of high
quality products and related services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our primary customers include companies that purchase railcars
for lease by third parties, or leasing companies, industrial
companies that use railcars for freight transport, or shippers,
and Class&nbsp;I railroads. Over the past five years, our
largest leasing company customers included ACF&nbsp;Industries
LLC, ARL, CIT, GATX Rail Corporation, GE&nbsp;Capital
Corporation, The Greenbrier Companies and Union Tank Car Company
and our largest shipper customers included Dow Chemical Company,
Engelhard Corporation, Exxon Mobil Corporation, Lyondell
Chemical Company and Solvay America, Inc. Our major railroad
customers over the past five years included TTX and Union
Pacific. In servicing this customer base, we believe our
integrated railcar repair and refurbishment and fleet management
services and our railcar components manufacturing business help
us further penetrate the general railcar manufacturing market.
These products and services provide us with significant
cross-selling opportunities and insights into our
customers&#146; railcar needs that we use to improve our
products and services and enhance our reputation for high
quality. Although we build, service and manage railcars through
an integrated, complementary set of products and services, we
have chosen not to offer railcar leasing services so that we do
not compete with our leasing company customers, which represent
a significant portion of our revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the years ended December&nbsp;31, 2003 and 2004, we
generated total revenues of $218.0&nbsp;million and
$355.1&nbsp;million and net earnings of $1.1&nbsp;million and
$1.9&nbsp;million, respectively. For the nine months ended
September&nbsp;30, 2004 and 2005, we generated revenues of
$254.3&nbsp;million and $442.1&nbsp;million and net earnings of
$2.9&nbsp;million and $14.5&nbsp;million, respectively. As of
September&nbsp;30, 2005, our total railcar backlog was
15,567&nbsp;railcars, compared to a total railcar backlog of
5,653&nbsp;railcars as of September&nbsp;30, 2004. On
July&nbsp;29, 2005, we entered into an agreement with CIT, under
which CIT has agreed to purchase from us, during the 2006 to
2008 period, 9,000 to 12,000&nbsp;railcars, subject to
negotiated terms and conditions. See &#147;&#151;Backlog.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OUR HISTORY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Since our formation in 1988, we have grown our business from
being a small provider of railcar components and maintenance
services to one of North America&#146;s leading integrated
providers of railcars, railcar components, railcar maintenance
services and fleet management services. In October 1994, we
acquired railcar components manufacturing and railcar
maintenance assets from ACF&nbsp;Industries, Incorporated (now
known as ACF&nbsp;Industries, LLC), or ACF, a company controlled
by Carl C. Icahn, our principal beneficial stockholder and the
chairman of our board of directors. Through this acquisition, we
also hired members of ACF&#146;s management, many of whom,
including our president, remain a significant part of our
current management team. These executives brought with them
established relationships with important customers and suppliers
and extensive industry knowledge, as ACF and its predecessor
companies have roots in the railcar manufacturing industry that
trace back to 1873. Led by this management team, we entered the
railcar manufacturing business through the construction of new
manufacturing facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In October 1995, we produced our first railcar at our Paragould,
Arkansas manufacturing facility. We primarily manufacture
covered hopper railcars at our Paragould facility, but we have
the ability to
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 84</B>
</DIV>

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<B>Business</B>
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manufacture many other types of railcars at this facility. The
Paragould facility initially had two railcar manufacturing
lines. We added painting and lining capabilities to this
facility in 1999 and a third manufacturing line in December
2004. We are currently constructing additional painting and
lining capabilities at our Paragould facility to increase
efficiency, which we expect to open at the end of 2005. Our
Paragould facility also features component manufacturing
capabilities. We manufactured 20,455&nbsp;railcars at our
Paragould facility, mostly covered hopper railcars, through
September&nbsp;30, 2005. We can manufacture up to 30 railcars a
working day at this facility.
</DIV>

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In January 2000, we produced our first railcar at our Marmaduke,
Arkansas manufacturing facility. We manufacture tank railcars at
this facility. The design of this facility enables us to
manufacture many different types of tank railcars at the same
time. We manufactured 6,373&nbsp;tank railcars at our Marmaduke
facility through September&nbsp;30, 2005. We can manufacture up
to 10 railcars a working day at this facility.
</DIV>

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Since 1994, we have significantly expanded our components
manufacturing and railcar services operations. Our operations
now include three railcar assembly, sub-assembly and fabrication
facilities, three railcar and industrial component manufacturing
facilities, six railcar repair plants and four mobile repair
units. Our services business has grown to include online access
by customers, remote fleet management, expanded painting, lining
and cleaning offerings, regulatory consulting and engineering
support. Additionally, members of our management team helped
found and develop, and continue to operate, a joint venture,
Ohio Castings Company, LLC, which we refer to as Ohio Castings,
in which we own a one-third interest and that manufactures and
sells sideframes, bolsters, couplers and yokes for distribution
to third parties and to us. We believe that our involvement in
this joint venture helps us maintain our levels of production at
competitive prices, despite industry-wide shortages of these
potentially capacity constraining components. See
&#147;&#151;Certain relationships and related party
transactions.&#148;
</DIV>

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<B>OUR BUSINESS STRENGTHS AND COMPETITIVE ADVANTAGES</B>
</DIV>

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We believe that the following key business strengths and
competitive advantages will contribute to our growth:
</DIV>

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<B>Leading railcar manufacturer with focus on the covered hopper
and tank railcar markets</B>
</DIV>

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We are a leading North American manufacturer of covered hopper
and tank railcars. Over the last three years, we believe we have
produced an estimated 33% of the covered hopper railcars and an
estimated 16% of the tank railcars delivered in North America.
Based on the Association of American Railroads Railroad Facts
2004 Report, these represent the two largest segments of the
North American railcar industry, with covered hopper railcars
representing approximately 30% and tank railcars representing
approximately 19% of the total North American railcar fleet,
based on the number of railcars in service. We believe our
railcars are differentiated by their superior quality,
innovation and reliability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Modern non-union, low cost railcar manufacturing facilities
in strategic locations</B>
</DIV>

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Unlike many of our competitors, we manufacture all of our
railcars in modern facilities built in the last ten years. We
believe our Paragould and Marmaduke, Arkansas railcar production
facilities to be the newest covered hopper and tank railcar
production plants in North America. We designed these facilities
to provide manufacturing flexibility and allow for the
production of a variety of railcar sizes and types. We
strategically located these facilities in close proximity to our
main customers and suppliers. This reduces freight time and
costs for the components we purchase and the time for delivery
of completed railcars. Over the past several years, we have
increased our production capacity
</DIV>

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<B> 85</B>
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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

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and efficiency and reduced our costs per railcar through a
number of targeted operational improvements, which has also
reduced the amount of raw materials necessary for production of
railcars. We emphasize flexibility in our employees&#146;
training and, consequently, our employees frequently move both
between locations on manufacturing lines and among our different
manufacturing facilities. Currently, none of our over 1,100
employees at our Paragould and Marmaduke facilities are
represented by a union. However, employees of three of our
repair facilities and one of our component manufacturing
facilities, representing 16% of our total workforce as of
September&nbsp;30, 2005, are represented by a union.
</DIV>

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<B>Preferred access to components through in-house production, a
joint venture and strategic sourcing arrangements</B>
</DIV>

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We produce many of the components necessary to our railcar
manufacturing business ourselves and we own a one-third interest
in, and our management team operates, our Ohio Castings joint
venture from which we obtain certain other components. We
believe our in-house production capabilities and our involvement
in this joint venture help us maintain access to components at
competitive prices, despite industry-wide shortages of these
potentially capacity constraining components. We also have
developed and actively maintain strategic sourcing arrangements
and strong relationships with our suppliers. These arrangements
and relationships help ensure our continued access to critical
components and raw materials we use to produce railcars,
including steel, wheels and heavy castings. We also have
recently entered into an agreement to diversify our supply of
steel. We believe our attention to strengthening our supply
chain helps us maintain operational continuity and high
production levels.
</DIV>

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<B>Integrated railcar repair and refurbishment and fleet
management services complement railcar manufacturing</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We provide a wide array of complementary products and services
to the railcar industry. Unlike some other railcar
manufacturers, we also repair, maintain and provide fleet
management services for existing railcars, including railcars
built by others, and manufacture railcar components for third
parties and us. We believe this diverse product and service
offering provides us with a competitive advantage relative to
other railcar manufacturers, primarily in the form of
cross-selling opportunities with respect to our repair and fleet
management services. For example, customers of our repair
business that have experienced problems with our
competitors&#146; railcars have transferred railcar orders to us
after our repair workers were able to identify the benefits of
our railcars compared to our competitors&#146;. We also believe
that our ability to address the needs of our customers
throughout the lifecycle of a railcar enhances our customer
relationships and provides us with additional growth
opportunities and unique insights into industry trends. As of
September&nbsp;30, 2005, we have approximately
57,000&nbsp;railcars under management.
</DIV>

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<B>Strong relationships with a long-term customer base</B>
</DIV>

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We believe that our customers value our products and services.
Many of our major customers have been doing business with us for
a number of years, including CIT, Dow Chemical Company,
GE&nbsp;Capital Corporation and Solvay America, Inc. Many of our
customers have demonstrated a willingness to purchase several
different types of our products and services over time. For
example, GE&nbsp;Capital Corporation purchases pressure and
non-pressure tank railcars, covered hopper railcars and fleet
management services from us and The CIT&nbsp;Group, Inc.
purchases our tank railcars as well as cement, grain, sugar and
plastic pellet covered hopper railcars. We believe we deliver
high quality products and services to our customers with low
operating and maintenance costs, while maintaining what we
believe are low levels of warranty claims.
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<B> 86</B>
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<B>Business</B>
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<B>Strong management team with long-standing industry
experience</B>
</DIV>

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We have an experienced senior operations management team that
has an average of over 25&nbsp;years of experience in the
railcar and related manufacturing industries. Our senior
operations management team, including our president, James J.
Unger, has been with us since we began manufacturing railcars.
This team conceived and built our Paragould and Marmaduke
railcar manufacturing facilities and has been responsible for
growing our revenues from $80.9&nbsp;million in 1994 to
$355.1&nbsp;million in 2004. We believe our management
successfully managed our business during the most recent
cyclical downturn in the railcar manufacturing industry while
positioning us to capitalize on the current upturn in our
industry. Members of our management, in particular our
president, Mr.&nbsp;Unger, have risen to leadership roles on a
number of prominent industry committees and associations, which
provide us with insight into the railcar industry, trends and
customer needs. We believe our active participation in industry
committees and associations strengthens our relationships with
our customers and suppliers and increases our profile and
reputation in the North American railcar market.
</DIV>

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<B>OUR STRATEGY</B>
</DIV>

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The key elements of our business strategy are as follows:
</DIV>

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<B>Maintain and expand presence in covered hopper and tank
railcar markets</B>
</DIV>

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We intend to maintain and expand our presence in the covered
hopper and tank railcar markets by continuing to deliver high
quality and innovative products. We believe our excellent
customer relationships have enabled us to identify market
demands that we then target through our product development and
marketing efforts. We intend to continue the close collaboration
between our customers and our engineering, marketing, operations
and management personnel to meet demand and, where appropriate,
to selectively expand production capacity.
</DIV>

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<B>Continue to improve operating efficiencies</B>
</DIV>

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We intend to build on the success of our production initiatives
at our Paragould and Marmaduke railcar manufacturing facilities
and plan to continue to identify opportunities to enhance
operating efficiencies across these and our other manufacturing
facilities. These opportunities include our continued
streamlining of our manufacturing processes and our quality
control initiatives. For example, we believe the additional
painting and lining capabilities we are currently constructing
at our Paragould facility will reduce costs and further increase
our manufacturing efficiency and will speed delivery of our
products to our customers. We also intend to continue the
efforts of our design cost reduction team, formed in 2003, which
has already significantly reduced our railcar production costs
through standardization of components used in our railcars,
implemented design changes to reduce the amount of raw material
required for our railcars, and improved manufacturing techniques
that reduce our labor requirements. These efforts should allow
us to reduce our costs and maintain competitive prices.
</DIV>

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<B>Continue to grow railcar service and fleet management
businesses and increase sales of railcar and industrial
components</B>
</DIV>

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As the existing North American railcar fleet continues to age,
we anticipate increased demand for maintenance and repair
services and railcar components used in the maintenance and
repair of railcars. Additionally, we expect growing demand for
our fleet management services as ownership of railcars continues
to shift away from the railroads and toward the shippers and
leasing companies, which often outsource their fleet management
activities to third-party service providers such as us. We
intend to
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<B> 87</B>
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<B>Business</B>
</DIV>

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capitalize on these trends and we believe we are well positioned
to provide increased services through our strategically located
network of railcar repair and service facilities.
</DIV>

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<B>Leverage manufacturing expertise to selectively expand
product portfolio</B>
</DIV>

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We may seek to expand our product portfolio to other selected
types of railcars. Our management designed and constructed our
Paragould manufacturing facility to be able to produce most
railcar types, and we believe our adaptive production lines and
flexible employees are able to shift production among various
railcar types with minimal interruption to our operations. For
example, we have in the past produced centerbeam platform
railcars and may in the future produce other types of railcars,
including various intermodal railcars, such as the innovative
platform railcar. In addition, as the existing fleet of North
American railcars is aging, expansion of our product portfolio
into new railcar types will allow us to grow our business by
capturing a portion of the natural replacement demand for
existing railcar types. Our ability to produce other types of
railcars positions us to respond to customer requests for
production outside of our traditional markets and provides us
additional manufacturing flexibility in the event the covered
hopper or tank railcar markets weaken.
</DIV>

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<B>Selectively pursue strategic external growth opportunities</B>
</DIV>

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By significantly reducing our debt through this offering and
with the establishment of a public market for our common stock,
we believe we will have increased financial flexibility to
supplement internal growth with select acquisitions, alliances
or joint ventures. We also believe our in-house fabrication of
railcar components and our Ohio Castings joint venture provide
us with competitive advantages and we intend to enhance these
advantages by selectively acquiring or establishing strategic
relationships with railcar components manufacturers and
suppliers of critical raw materials. Successful acquisitions of
or collaborations with these manufacturers and suppliers should
help mitigate the risk of supply shortages of key components and
raw materials we need for our business. While we have in the
past engaged in preliminary discussions with certain parties
regarding potential strategic acquisitions, alliances or joint
ventures, as of the date of this prospectus, we are not
currently engaged in any such discussions and do not have any
commitments to enter into any acquisition, alliance or joint
venture. We may also seek to expand our railcar components
business into international markets on an opportunistic basis.
</DIV>

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<B>OUR PRODUCTS AND SERVICES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We design and manufacture special, customized and general
purpose railcars and a wide range of components primarily for
the North American railcar and industrial markets. We also
support the railcar industry through a variety of integrated
railcar services, including repair, maintenance, consulting,
engineering and fleet management services.
</DIV>

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<B>Manufacturing</B>
</DIV>

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We manufacture two primary types of railcars, covered hopper
railcars and tank railcars. Our revenues attributable to our
railcar manufacturing operations were approximately
$108.2&nbsp;million, $154.7&nbsp;million and $265.8&nbsp;million
in 2002, 2003 and 2004, respectively, and were approximately
$357.2&nbsp;million for the nine months ended September&nbsp;30,
2005. These revenues represented 64%, 71% and 75% of our total
revenues in 2002, 2003 and 2004, respectively, and represented
81% of our total revenues for the nine months ended
September&nbsp;30, 2005.
</DIV>

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<B><I>Covered hopper railcars.</I></B> We believe we are a
leading manufacturer of covered hopper railcars in North
America. We manufacture both general service and specialty
covered hopper railcars. Our general service covered hopper
railcars have capacities ranging from 3,200 to 6,500&nbsp;cubic
feet and
</DIV>

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<B> 88</B>
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<B>Business</B>
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primarily carry plastic pellets, cement, grain and other food
products, soda ash and other dry granular products. Our
specialty covered hopper railcars, which include our
Pressureaide covered hopper railcar, have capacities ranging
from 3,300 to 5,750&nbsp;cubic feet and use air pressure to
assist unloading. Our specialty covered hopper railcars
primarily carry flour, clays, food and industrial grade corn
starches. Revenues attributable to sales of our covered hopper
railcars were approximately $61.9&nbsp;million,
$82.2&nbsp;million and $84.8&nbsp;million in 2002, 2003 and
2004, respectively, and were approximately $190.8&nbsp;million
for the nine months ended September&nbsp;30, 2005. These
revenues represented 37%, 38% and 24% of our total revenues in
2002, 2003 and 2004, respectively, and represented 43% of our
total revenues for the nine months ended September&nbsp;30,
2005. We sold 1,053, 1,343 and 1,507&nbsp;covered hopper
railcars in 2002, 2003 and 2004, respectively, and
2,759&nbsp;covered hopper railcars in the nine months ended
September&nbsp;30, 2005.
</DIV>

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All of our covered hopper railcars may be equipped with varying
combinations of hatches, discharge outlets and protective
coatings to provide our customers with a railcar designed to
perform in precise operating environments. The flexible nature
of our covered hopper railcar design allows it to be quickly
modified to suit changing customer needs. This flexibility can
continue to provide value after the initial purchase because our
railcars may be converted for reassignment to other services or
customers. We provide a range of coatings to protect the railcar
and the shipper&#146;s product against corrosion and product
contamination. We build carbon steel and stainless steel covered
hopper railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our covered hopper railcars are specifically designed for
shipping a variety of dry bulk products, from light density
products, such as plastic pellets, to high density products,
such as cement. Some of our covered hopper railcars have a three
curve cross section. Depending upon the equipment on the
railcars, they can operate in either a gravity or vacuum
pneumatic unloading environment. Since its introduction, we have
improved our Center Flow line of covered hopper railcars to
provide protection for a wide range of dry bulk products and to
enhance the associated loading, unloading and cleaning
processes. Examples of these improvements include new and better
design of the shape of the railcars, joint designs, outlet
mounting frames and loading hatches and discharge outlets, which
enhance the cargo loading and unloading processes.
</DIV>

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We have several versions of our covered hopper railcar that
target specific customers and specific loads, including:
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    <TD><FONT face="webdings">4</FONT></TD>
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    <I><FONT style="font-size: 10pt">Plastic Pellet
    Railcars.</FONT></I><FONT style="font-size: 10pt"> These
    railcars are designed to transport, load and unload plastic
    pellets under precise specifications to preserve the purity of
    the load. Slight imperfections in the railcars transporting such
    goods or in the components that load and unload them can ruin an
    entire load. If plastic pellets within a load become tainted,
    the imperfection will likely persist during the conversion of
    the plastic pellets into end-products. An example of such cargo
    would be food grade plastic pellets used in the production of
    milk bottles and other food containers.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
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<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Cement
    Railcars.</FONT></I><FONT style="font-size: 10pt"> Cement loads
    are heavier than many other loads of comparable volume, and
    therefore cement railcars are smaller in size to compensate for
    the weight. As a consequence, we can build more cement covered
    hopper railcars per day than we can any other railcar we
    manufacture. Our cement railcars typically have capacities of
    3,250&nbsp;cubic feet and are built with two lading
    compartments, compared to, for example, our plastic pellet
    railcars, which typically have capacities of up to
    6,224&nbsp;cubic feet and are built with four compartments.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Pressureaide
    Railcars.</FONT></I><FONT style="font-size: 10pt"> Our
    Pressureaide railcar is targeted towards the bulk powder
    markets. Pressureaide railcars typically handle products such as
    clays, industrial and food grade starches and flours. We build
    our Pressureaide railcars in capacities ranging from
    3,300&nbsp;cubic feet to as large as 5,750&nbsp;cubic feet. They
    operate with internal pressures up to 14.5&nbsp;pounds per
    square inch, which expedites unloading, and are equipped with
    several safety devices, such as pressure relief valves, a
    rupture disc and a vacuum relief valve.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 89</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Tank railcars.</I></B> We manufacture non-pressure and
high pressure tank railcars. Our non-pressure tank railcars have
capacities ranging from 14,000 to 30,000&nbsp;gallons and are
flexibly designed to enable the handling of a variety of
commodities including petroleum products, ethanol, asphalt,
vegetable oil, corn syrup and other food products. Our high
pressure tank railcars have capacities ranging from 13,500 to
33,600&nbsp;gallons and transport products that require a
pressurized state due to their liquid, semi-gaseous or gaseous
nature, including chlorine, anhydrous ammonia, liquid propane
and butane. Most of our pressure tank railcars feature a thicker
pressure retaining inner shell that is separated from a jacketed
outer shell by layers of insulation, thermal protection or both.
Our pressure tank railcars are made from specific grades of
normalized steel that are selected for toughness and ease of
welding. Most of our tank railcars feature a sloped bottom tank
that improves the flow rate of the shipped product and provides
improved drainage. Many of our tank railcars feature coils that
are steam-heated to decrease cargo viscosity, which improves the
transported product&#146;s flow rate and speeds unloading. We
can alter the design of our tank railcars to address specific
customer requirements. Revenues attributable to sales of our
tank railcars were approximately $46.2&nbsp;million,
$72.2&nbsp;million and $111.3&nbsp;million in 2002, 2003 and
2004, respectively, and were $113.8&nbsp;million for the nine
months ended September&nbsp;30, 2005. These revenues represented
27%, 33% and 31% of our total revenues in 2002, 2003 and 2004,
respectively, and represented 26% of our total revenues for the
nine months ended September&nbsp;30, 2005. We sold 713, 1,209
and 1,637&nbsp;tank railcars in 2002, 2003 and 2004,
respectively, and 1,436 tank railcars in the nine months ended
September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Component
manufacturing.</I></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe
we are an industry leader in the design and manufacture of
custom and standard railcar components. We manufacture over
300&nbsp;different components for the North American railcar
industry. Our products include hitches for the intermodal
market, tank railcar components and valves, discharge outlets
for covered hopper railcars, manway covers and valve body
castings, and outlet components and running boards for
industrial and railroad customers. We manufacture a variety of
outlet types for our covered hopper railcars that we also sell
to other railcar manufacturers. We use these components in our
own railcar manufacturing and also sell them to third parties,
including our competitors. Sales of our railcar components to
third parties were approximately $9.2&nbsp;million,
$9.8&nbsp;million and $15.0&nbsp;million in 2002, 2003 and 2004,
respectively, and were approximately $21.3&nbsp;million for the
nine months ended September&nbsp;30, 2005. Revenues attributable
to these sales represented 5%, 4% and 4% of our total revenues
in 2002, 2003 and 2004, respectively, and represented 5% of our
total revenues for the nine months ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We also manufacture aluminum and special alloy steel castings
that we sell primarily to industrial customers. These products
include castings for the trucking, construction, mining and oil
and gas exploration markets, as well as finished, machined
aluminum castings, other custom machined products and commercial
mixing bowls. Sales of our industrial components were
approximately $21.1&nbsp;million, $23.7&nbsp;million and
$35.6&nbsp;million in 2002, 2003 and 2004, respectively and were
approximately $30.4&nbsp;million for the nine months ended
September&nbsp;30, 2005. Revenues attributable to these sales
represented 13%, 11% and 10% of our total revenues in 2002, 2003
and 2004, respectively, and represented 7% of our total revenues
for the nine months ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Railcar services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our primary railcar services are railcar repair and
refurbishment and railcar fleet management services. Our primary
customers for these services are leasing companies and shippers.
We can service the entire railcar fleets of our customers,
including railcars manufactured by other companies. Some of our
customers use both our railcar repair and refurbishment business
and our fleet management services. We often provide these
preferred customers with expedited repair services to strengthen
our overall customer relationships. Our railcar services provide
us insights into our customers&#146; railcar needs that we can
use to improve our products. These services create new customer
relationships and enhance
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 90</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
relationships with our existing customers. Our revenues from our
railcar services operations were approximately
$30.4&nbsp;million, $29.9&nbsp;million and $38.6&nbsp;million in
2002, 2003 and 2004, respectively, and were approximately
$32.9&nbsp;million for the nine months ended September&nbsp;30,
2005. These revenues represented 18%, 14% and 11% of our total
revenues in 2002, 2003 and 2004, respectively, and represented
7% of our total revenues for the nine months ended
September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Railcar repair and refurbishment.</I></B> Our railcar
repair and refurbishment services include light and heavy
railcar repairs, exterior painting, interior lining application
and cleaning, tank and safety valve testing, railcar
inspections, wheel replacement and conversion or reassignment of
railcars from one purpose to another. We support our railcar
repair and refurbishment services customers through a
combination of full service repair shops, mobile repair units
and mini-shop locations. Our repair shops, like our
manufacturing facilities, are strategically located near major
rail lines used by our customers and suppliers and close to some
of the major industries we serve. Revenues attributable to our
railcar repair and refurbishment service operations were
approximately $28.0&nbsp;million, $26.6&nbsp;million and
$33.6&nbsp;million in 2002, 2003 and 2004, respectively, and
were approximately $27.6&nbsp;million for the nine months ended
September&nbsp;30, 2005. These revenues represented 17%, 12% and
10% of our total revenues in 2002, 2003 and 2004, respectively,
and represented 6% of our total revenues for the nine months
ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Railcar fleet management.</I></B> As of September&nbsp;30,
2005, we manage approximately 57,000&nbsp;railcars for various
customers, including approximately 22,000 for ARL, a leasing
company controlled by affiliates of Carl C. Icahn. Revenues
attributable to our fleet management services were approximately
$2.4&nbsp;million, $3.3&nbsp;million and $5.0&nbsp;million in
2002, 2003 and 2004, respectively, and were approximately
$5.3&nbsp;million for the nine months ended September&nbsp;30,
2005. These revenues represented 1%, 2% and 1% of our total
revenues in each of 2002, 2003 and 2004, respectively, and
represented 1% of our total revenues for the nine months ended
September&nbsp;30, 2005. Some of the principal features of our
railcar fleet management services business include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Mileage
    accounting.</FONT></I><FONT style="font-size: 10pt"> Some
    customers elect to receive mileage payments to offset freight
    charges. Mileage is paid for loaded miles moved and calculated
    based on published rates. We collect and audit the
    railroads&#146; mileage calculations to ensure our customers
    receive the funds they are due.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Rolling stock
    taxes.</FONT></I><FONT style="font-size: 10pt"> States and
    localities impose taxes on railcars calculated based upon
    mileage reporting. We file the required tax forms with the state
    and local taxing authorities. We audit the tax invoices received
    to determine whether the assessments are accurate.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Regulatory
    compliance.</FONT></I><FONT style="font-size: 10pt"> Our
    regulatory compliance support services help customers maintain
    their railcar fleets in compliance with applicable regulations.
    As regulations change, we help our customers manage the
    associated requirements and costs. We analyze new fleets for
    which we provide fleet management services to identify areas of
    noncompliance with applicable U.S.&nbsp;rail regulations and
    determine corrective actions.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Engineering
    services.</FONT></I><FONT style="font-size: 10pt"> Our
    engineering support services help customers manage their
    regulatory compliance and documentation. We provide procedures
    and consultation for railcar repairs to address integrity and
    compliance.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Field engineering
    services.</FONT></I><FONT style="font-size: 10pt"> We provide
    on-site evaluation and implementation of significant engineering
    design changes for our customers.
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Online service
    access.</FONT></I><FONT style="font-size: 10pt"> Our web-based
    systems allow our customers to view information on their railcar
    fleet online. The data we maintain includes mechanical and
    regulatory information, historical costs and repair detail and
    the status of repairs.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 91</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <I><FONT style="font-size: 10pt">Maintenance
    planning.</FONT></I><FONT style="font-size: 10pt"> We forecast
    our customers&#146; railcar maintenance needs and suggest
    schedules for repair service and refurbishment. This helps to
    ensure better fleet utilization and more effective maintenance
    cycles.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>MANUFACTURING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our principal railcar manufacturing facilities are located in
Paragould and Marmaduke, Arkansas. We built these facilities in
1995 and 1999, respectively, on previously undeveloped sites.
These facilities employ non-unionized work forces and are
strategically located in close proximity to our major customers
and suppliers, which decreases our freight costs and railcar
delivery times. These facilities provide us the flexibility to
produce a variety of railcars and enable us to quickly shift
production from one railcar type to another railcar type.
Through September&nbsp;30, 2005, we have manufactured
20,455&nbsp;railcars at our Paragould facility and
6,373&nbsp;railcars at our Marmaduke facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We manufacture all of our covered hopper railcars at our
Paragould facility. We successfully launched a third
manufacturing line at Paragould in December 2004. Based on our
current backlog, we plan to produce an average of approximately
24&nbsp;railcars a working day at this facility. We manufacture
all of our tank railcars at our Marmaduke, Arkansas facility.
Based on our current backlog, we plan to produce an average of
approximately 7.5&nbsp;railcars a working day at this facility.
Our actual daily production at both of these facilities will
depend on the mix of railcar types being manufactured and the
availability of raw materials and components. In 2004, we
manufactured 2,747&nbsp;railcars at our Paragould facility and
1,637&nbsp;railcars at our Marmaduke facility. We also have the
manufacturing ability to produce other types of railcars. For
example, in the past we have manufactured centerbeam platform
railcars used to transport building products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that we sustain product quality throughout each
railcar manufacturing facility by employing uniform, quality
tools and equipment. Our production lines are able to produce a
variety of railcars to satisfy changing customer preferences and
our tooling and plant layouts were constructed to enable quick
changeover. We currently can manufacture up to three different
types of railcars simultaneously at our Paragould facilities and
many different types of tank railcars simultaneously at our
Marmaduke facility. We believe our quality products and modern
manufacturing processes contribute to our low incidence of
warranty claims. Our warranty claims for railcars produced at
our Paragould and Marmaduke facilities were approximately
$0.3&nbsp;million, $0.4&nbsp;million and $0.1&nbsp;million in
2002, 2003 and 2004, respectively, and were approximately
$0.5&nbsp;million for the nine months ended September&nbsp;30,
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We designed our Paragould and Marmaduke facilities to provide
manufacturing flexibility and allow for the production of a
variety of railcar sizes and types. Examples of our production
flexibility include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our ability to manufacture several
    types of railcars at our Paragould facility; for example, the
    Paragould facility recently finished an order of centerbeam
    platform railcars, and quickly converted to covered hopper
    railcar production upon completion of that order;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our two parallel,
    vertically-tiered manufacturing tracks at Paragould allow
    workers on these two tracks to share tools and equipment and
    allow multiple components of the same railcar to be produced
    simultaneously;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our welding machines, which are
    purposefully smaller than many other industrial welding
    machines, allow our welders greater freedom of movement, which,
    in turn, we believe increases production speed;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our automated painting lance helps
    ensure proper interior coating in a single application and we
    believe is faster and produces greater consistency than manual
    coating;
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 92</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our grit-blasting is conducted by
    automated, oscillating machinery, which we believe is superior
    to and more efficient than alternative techniques, including
    static manual blasting;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our ability to rotate railcars
    360&nbsp;degrees eases and speeds specific steps in the
    production line, such as complicated welding steps that would
    otherwise need to be performed from difficult and possibly
    dangerous angles;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our horizontal manufacturing lines
    at our Marmaduke facility allow individual tank railcars to be
    taken in and out of the production line for additional
    attention, without the need to stop the plant&#146;s entire
    production process;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our proprietary outer-jacket
    coiling process allows us to insulate our tank railcars at our
    facility;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our force curing technique helps
    eliminate impurities, smell and residue remaining in railcars
    following the painting and lining steps, which we use primarily
    for railcars designed to transport food products;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our tracked loading and unloading
    points decrease the indirect labor required to move raw
    materials and components into our facilities and finished
    products out of our facilities;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our integrated painting, railcar
    truck assembly and fabrication shops eliminate downtime in our
    production process.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, we believe our management and operation of these
facilities help reduce our operating costs, some examples of
which include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our decentralized management,
    including a salaried-to-hourly employee ratio of one to 14;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our proactive safety program,
    which features weekly meetings of safety sub-committees on which
    our hourly and salaried employees participate and voluntarily
    establish safety rules that frequently exceed regulatory and
    industry minimum requirements; our safety program has helped
    contribute to low incidences of accidents requiring lost
    production time at our facilities; and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our flexible workforce allows our
    employees to frequently move both between locations on
    production lines, such as welding and small components
    fabricating positions, and among our different manufacturing
    facilities.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CUSTOMERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have strong long-term relationships with many large
purchasers of railcars. Long-term customers are particularly
important in the railcar industry, given the limited number of
buyers and sellers of railcars, and railcar manufacturers&#146;
desire constantly to maintain adequate backlog and manufacture
at full capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our railcar customer base consists mostly of U.S.&nbsp;shippers,
leasing companies and railroads. Over the past five years, our
largest leasing company customers included
ACF&nbsp;Industries&nbsp;LLC, The CIT&nbsp;Group, Inc., GATX
Rail Corporation, GE&nbsp;Capital Corporation, The Greenbrier
Companies and Union Tank Car Company and our largest shipper
customers included Solvay America, Inc., Dow Chemical Company,
Engelhard Corporation, Exxon Mobil Corporation and Lyondell
Chemical Company. Our major railroad customers over the past
five years included TTX and Union Pacific. Over the last five
years, our largest customers of railcar repair and refurbishment
services included ACF and ARL, affiliates of Carl C. Icahn, The
CIT&nbsp;Group, Inc., Lyondell Chemical Company and
PPG&nbsp;Industries, Inc. Over the last five years, our largest
fleet management services customers included ACF, ARL and
PLM&nbsp;Transportation. Over the last five years, our largest
customers for railcar components included ACF, GE&nbsp;Capital
Railcar, Olin Corporation, Trinity Industries, Inc. and
TTX&nbsp;Company. Over the last
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 93</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
five years, our largest customers for industrial parts included
ABB&nbsp;Vetco Gray, Dresser Industries, Inc.,
KF&nbsp;Industries, Inc., McKissick Products and Stream&nbsp;Flo
Industries, Ltd.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2004, The CIT&nbsp;Group, Inc. accounted for approximately
16% of our revenues, The Greenbrier Companies accounted for
approximately 20% of our revenues, and ACF and ARL collectively
accounted for approximately 23% of our revenues. In 2004, sales
to our top ten customers accounted for approximately 79% of our
revenues. Sales to The Greenbrier Companies, another railcar
manufacturer, were under a contract for centerbeam platform
railcars that is now complete. We do not anticipate significant
sales to The Greenbrier Companies in the future. ARL and ACF are
affiliates of Carl C. Icahn, our principal beneficial
stockholder and the chairman of our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
While we maintain strong relationships with our customers, many
customers do not purchase railcars from us every year because
railcar fleets are not necessarily replenished or augmented
every year. The size and frequency of railcar orders often
results in a small number of customers representing a
significant portion of our sales in a given year. See &#147;Risk
factors&#151; Risks related to our business&#151; We depend upon
a small number of customers that represent a large percentage of
our revenues&#151; The loss of any single customer, or a
reduction in sales to any such customer, could have a material
adverse effect on our business, financial condition and results
of operations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SALES AND MARKETING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We sell and market our products in North America through our
sales and marketing staff, including sales representatives who
sell directly to customers, catalogs through which our customers
have access to our railcar components, and our web site, through
which customers can order specialty components. We have seven
employees devoted to sales and marketing efforts for our railcar
manufacturing, components manufacturing and fleet management
services who operate from our corporate headquarters in
St.&nbsp;Charles, Missouri and, for our railcar repair business,
from a service office located in Houston, Texas. In addition,
ARL and ACF, affiliates of Carl C. Icahn, in connection with
their own leasing sales activities have, from time to time,
referred their customers and contacts to us that prefer to
purchase, rather than lease, railcars. At this time, there is no
formal arrangement with, or compensation of, ARL and ACF for any
referrals that result in sales of railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The sales process for our products and services is often
multi-level, involving a team comprised of individuals from
sales, marketing, engineering, operations and senior management.
Each significant customer is assigned a team that engages the
customer at different organizational levels to provide planning
and product customization and to assure open communications and
support. Our marketing activities also include participation in
trade shows, publication of articles in trade journals,
participation in industry forums and distribution of sales
literature.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
There is significant overlap between our railcar manufacturing,
railcar components and fleet services customers. Our presence in
each market increases our opportunities to gain market share in
each of the other markets. Our access to competitors&#146;
railcars through our components and railcar repair and
maintenance businesses further increases our opportunities to
identify and address customer needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRODUCT DEVELOPMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our engineering, marketing, operations and management personnel
have developed collaborative relationships with many of their
customer counterparts and have used these relationships to
identify market demands and target our product development to
meet those demands. Our product development costs are reflected
in our general, selling and administrative expenses. From time
to time, we hire additional engineers or contract projects to
outside firms to work on specific product development projects.
Our current product development efforts focus on the development
of railcars equipped with outlets specifically designed to
target certain industries, including a through sill general
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 94</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
service covered hopper railcar designed for the sugar industry
and the grain and cement markets. We also have developed a
bulkheadless covered hopper railcar to address the needs of
customers that are more focused on loading, rather than
unloading, efficiency. We have built prototypes of some of these
railcars, which are currently being field tested by target
customers. With input from our customers, we continually monitor
product performance following delivery. Observation of our
products and our competitors&#146; products at various stages of
a railcar&#146;s lifecycle and feedback from our repair shops,
has led to product innovations, including proprietary bulkhead
reinforcements and changes to our basic design platform. We
cannot guarantee that we will be able to develop new products
effectively, to enhance our existing products, or to respond
effectively to technological changes or new industry standards
or developments on a timely basis if at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BACKLOG</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our total backlog as of September&nbsp;30, 2004 was
$365.1&nbsp;million and as of September&nbsp;30, 2005 was
$1,133&nbsp;million. We estimate that approximately 12% of our
September&nbsp;30, 2005 backlog will be converted to revenues in
the year ended December&nbsp;31, 2005. Although we believe these
orders to be firm, customer orders may be subject to
cancellation, customer requests for delays in railcar delivery,
inspection rights and other customary industry terms and
conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On July&nbsp;29, 2005, we entered into a multi-year purchase and
sale agreement with CIT to manufacture and sell to CIT covered
hopper and tank railcars. Under this agreement, CIT has agreed
to buy a minimum of 3,000 railcars from us in each of 2006, 2007
and 2008 and we have agreed to offer to sell to CIT up to 1,000
additional railcars in each of those years. CIT may choose to
satisfy its purchase obligations from among a variety of covered
hopper and tank railcars described in the agreement. CIT may
reduce its future purchase obligations or cancel pending
purchase orders, upon prior written notice to us, under certain
conditions, including a reduction of the then current American
Railway Car Institute&#146;s most recently reported quarterly
backlog below specified levels. As of September 30, 2005, the
American Railway Car Institute reported a quarterly backlog of
in excess of 60,900 railcars. If during the term of the
agreement, the levels of quarterly backlog reported by American
Railway Car Institute fall below 45,000 railcars but remains
above 35,000 railcars, CIT has the right, on 240&nbsp;days prior
written notice, to cancel pending purchase orders or reduce
subsequent purchase obligations for the then current agreement
year, in either case such that actual purchases by CIT would not
fall below 50% of that agreement year&#146;s original minimum
purchase requirements. If the American Railway Car
Institute&#146;s reported quarterly backlog falls below 35,000
railcars, CIT has the right to cancel or suspend all, or any,
pending purchase orders or remaining purchase obligations under
the Agreement upon at least 180&nbsp;days prior written notice.
If CIT elects to cancel any pending purchase order under these
provisions within at least 120&nbsp;days of the delivery date of
the order, we may require that CIT purchase from us, at our
cost, all material which we had purchased and identified to such
cancelled purchase order. CIT also has the right to reduce its
railcar orders from us if market prices for the railcars subject
to our agreement are reduced significantly below our quoted
prices and we fail to meet such price reductions. Under the
agreement, purchase prices for railcars are subject to steel
surcharges and certain other material cost increases applicable
at the time of production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our backlog consists of orders for railcars. We define backlog
as the number and sales value of railcars that our customers
have committed in writing to purchase from us that have not been
recognized as revenues. Although we generally have one to three
year contracts with most of our fleet management customers,
neither orders for our railcar repair and refurbishment services
business nor our fleet management business are included in our
backlog because we generally deliver our services in the same
period in which orders are received. Similarly, orders for our
component manufacturing
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 95</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
business are not included in our backlog because we generally
deliver components to our customers in the same period in which
orders for the components are received.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Due to the large size of railcar orders and variations in the
number and mix of railcars ordered in any given period, the size
of our reported backlog at the end of any such period may
fluctuate significantly. See &#147;Risk factors&#151; Risks
related to our business&#151; The variable purchase patterns of
our railcar customers and the timing of completion, delivery and
acceptance of customer orders may cause our revenues and income
from operations to vary substantially each quarter, which could
result in significant fluctuations in our quarterly
results.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table shows our reported railcar backlog, and
estimated future revenue value attributable to such backlog, at
the end of the periods shown. This reported backlog includes
9,000 railcars relating to CIT&#146;s minimum purchase
obligations under its agreement with us based upon an assumed
product mix consistent with CIT&#146;s orders for railcars.
Changes in product mix from that assumed would affect the dollar
amount of our backlog from CIT.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Year ended December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="20" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar backlog at start of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,547</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New railcars delivered</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,766</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,557</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,384</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,980</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New railcar orders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,861</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar backlog at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,547</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,567</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Estimated railcar backlog value at end of period (in
    thousands)(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>129,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>494,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>365,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,132,798</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    Estimated backlog value reflects the total revenues expected to
    be attributable to the backlog reported at the end of the
    particular period as if such backlog were converted to actual
    revenues. Estimated backlog does not reflect potential price
    increases and decreases under certain customer contracts that
    provide for variable pricing based on changes in the cost of
    certain raw materials and railcar components or the cancellation
    or delay of railcar orders that may occur.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Historically, we have experienced little variation between the
number of railcars ordered and the number of railcars actually
delivered, however, our backlog is not necessarily indicative of
our future results of operations. As orders may be canceled or
delivery dates extended, we cannot guarantee that our reported
railcar backlog will convert to revenue in any particular
period, if at all, nor can we guarantee that the actual revenue
from these orders will equal our reported backlog estimates or
that our future revenue efforts will be successful. See
&#147;Risk factors&#151; Risks related to our business&#151; The
level of our reported railcar backlog may not necessarily
indicate what our future revenues will be and our actual
revenues may fall short of the estimated revenue value
attributed to our railcar backlog.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SUPPLIERS AND MATERIALS</B>
</DIV>

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We employ a just-in-time supply strategy for our manufacturing.
We believe this strategy improves working capital efficiency,
reduces operating costs and improves our flexibility to adjust
rapidly to production capacity. Our business depends on the
adequate supply of numerous railcar components, such as railcar
wheels, brakes, sideframes, axles, bearings, yokes, tank railcar
heads, bolsters and other heavy castings, and raw materials,
such as steel and normalized steel plate, used in the production
of railcars. Over the last few years, many components and raw
materials suppliers have been acquired or ceased operations,
which has caused the number of alternative suppliers of railcar
components and raw materials to decline. The combination of
industry consolidation and high demand has caused recent
industry-wide shortages of many critical components and raw
materials as reliable suppliers are
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<B> 96</B>
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<B>Business</B>
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frequently at or near production capacity. In some cases, such
as those described below, as few as one significant supplier
produces the type of component or raw material we use in our
railcars. See &#147;Risk factors&#151; Risks related to our
business&#151; Fluctuations in the supply of components and raw
materials we use in manufacturing railcars could cause
production delays or reductions in the number of railcars we
manufacture, which could materially adversely affect our
business and results of operations.&#148;
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The cost of raw materials and railcar components represents
approximately 80% to 85% of the direct manufacturing costs of
most of our railcar product lines. Prices for steel, the primary
component in railcars and railcar components, rose sharply in
2004 as a result of strong demand, limited availability of scrap
metal for steel processing, reduced capacity and import trade
barriers. As of September&nbsp;30, 2005, most of our railcar
manufacturing contracts contain price variability provisions
that track fluctuations in the prices of certain raw materials
and railcar components, including steel, so that increases in
our manufacturing costs caused by increases in the prices of
these raw materials and components are passed directly on to our
customers. Conversely, if the price of those materials or
components decreases, a discount is applied to reflect the
decrease in cost. In our component manufacturing business, we
add a surcharge to every product to account for increases in
steel costs. Though we do not have similar contractual
protections in connection with the aluminum we use in our
manufacturing processes, we believe the risks are much less
significant primarily due to the overall lower amounts of
aluminum we use in our manufacturing, the relative price of
aluminum to steel and the historical range of aluminum prices.
</DIV>

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Our customers often specify particular railcar components and
the suppliers of such components. We continually monitor
inventory levels to ensure adequate support of production. We
periodically make advance purchases to avoid possible shortages
of material due to capacity limitations of railcar component
suppliers and possible price increases. We do not typically
enter into binding long-term contracts with suppliers because we
rely on established relationships with major suppliers to ensure
the availability of raw materials and specialty items.
</DIV>

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In 2004, no single supplier accounted for more than 12% of our
total purchases and our top ten suppliers accounted for 63% of
our total purchases. See &#147;Risk factors&#151;Risks related
to our business&#151;The cost of the raw materials that we use
to manufacture railcars, particularly steel, are high and these
costs are expected to increase. Any increase in these costs or
delivery delays of these raw materials may materially adversely
affect our business, financial condition and results of
operations.&#148;
</DIV>

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In October 2005, we entered into two vendor supply contracts
with minimum volume commitments with suppliers of materials used
at our railcar manufacturing facilities. These agreements relate
to railcar components, and have terms of two and three years,
respectively. We have agreed to purchase a combined total of
$67.6&nbsp;million from these two suppliers over the next three
years. In 2006, 2007 and 2008 we expect to purchase
$16.0&nbsp;million, $27.1&nbsp;million and $24.5&nbsp;million
respectively under these agreements.
</DIV>

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<I>Steel.</I> We use both regular and normalized steel plate to
manufacture railcars. Currently, there is only one domestic
supplier of the form and size of normalized steel plate that we
need for our manufacturing operations, and that supplier is our
only source of this product. We believe we can acquire regular
steel from other suppliers. Normalized steel plate is a special
form of heat treated steel that is stronger and can withstand
puncture better than regular steel. Normalized steel plate is
required by Federal regulations to be used in tank railcars
carrying certain types of hazardous cargo, including liquefied
petroleum gas. We use normalized steel plate in the production
of many of our tank railcars.
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In June 2005, we entered into an agreement with another supplier
that is constructing a facility to manufacture normalized steel
plate, including normalized steel plate of the form and size we
need for our manufacturing operations to supply us with a
portion of our normalized steel plate requirements. We believe
construction of this normalized steel production facility is
scheduled for completion by
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<B> 97</B>
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<B>Business</B>
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early 2006. Although our arrangements with this supplier will
not satisfy all of our normalized steel requirements, we expect
this facility will provide us an alternative source of
normalized steel plate and decrease our reliance on the current
sole supplier of this critical raw material.
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We also have entered into a supply agreement with this supplier
for the purchase of regular steel plate. Both agreements have a
term of five years and may be terminated by either party at any
time after two years, upon twelve months prior notice. Each
agreement requires us to purchase the lesser of a fixed volume
or 75% of our requirements for the steel plate covered by that
agreement at prices that fluctuate with the market.
</DIV>

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<I>Tank heads and floor sheet reinforcements.</I> ACF supplies
us with tank railcar heads, head blocks, head pads, floor sheet
reinforcements, wheel sets, mounting frames and sheared panels.
ACF is our sole supplier of tank railcar heads and floor sheet
reinforcements. See &#147;Risk Factors&#151;Risks related to our
business&#151;After this offering, companies affiliated with
Carl C. Icahn will continue to be important suppliers and
customers.&#148;
</DIV>

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<I>Castings.</I> Heavy castings we use in our railcar
manufacturing primarily include bolsters, sideframes, couplers
and yokes. These castings form part of the truck assemblies upon
which railcars must be placed. The companies that supply the
railcar industry with heavy castings are unable to meet current
demands of all the railcar manufacturers and, as such, the
production capacity of many railcar manufacturers is limited by
the restricted availability of these components. In 2003, our
management team helped found and develop, and continues to
operate Ohio Castings, a joint venture, in which we own a
one-third interest. The joint venture leased a foundry in
Cicero, Illinois and acquired a foundry in Alliance, Ohio and
produces sideframes, bolsters, couplers and yokes. We also have
entered into supply agreements with an affiliate of one of our
Ohio Castings joint venture partners to purchase up to 25% and
33%, respectively, of the car sets, consisting of sideframes and
bolsters, produced at each of these foundries. Our purchase
commitments under these supply agreements are dependent upon the
number of car sets manufactured by these foundries, which are
jointly controlled by us and the other two members of Ohio
Castings. We believe that our involvement in this joint venture
helps us maintain our levels of production at competitive
prices, despite industry-wide shortages of these potentially
capacity constraining components. See &#147;Risk factors&#151;
Risks related to our business&#151; Our relationships with our
partners in our Ohio Castings Company, LLC joint venture may not
be successful, which could materially adversely affect our
business,&#148; and &#147;&#151;Certain relationships and
related party transactions.&#148;
</DIV>

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<I>Wheels and brakes.</I> There also have been supply
constraints and shortages of wheels and brakes used in railcars.
Currently, there are only two domestic suppliers of each of
these components. For both wheels and brakes, we primarily rely
on one supplier. We also obtain limited quantities of
refurbished wheels from scrapped railcars. If necessary, we
believe we can also obtain railcar wheels from a Chinese
supplier at a significantly higher cost.
</DIV>

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<B>COMPETITION</B>
</DIV>

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</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The railcar manufacturing business is extremely competitive. We
compete primarily with Trinity Industries, Inc. and National
Steel Car Limited in the covered hopper railcar market and with
Trinity Industries and, to a lesser degree, Union Tank Car
Company in the tank railcar market. Both Trinity Industries, and
Union Tank Car Company have substantially greater resources and
produce substantially more tank railcars than us. However, Union
Tank primarily produces tank railcars for its own leased fleet.
Trinity Industries produces substantially more covered hopper
railcars than we do. For example, according to Trinity
Industries, Inc.&#146;s annual report for the year ended
December&nbsp;31, 2004 and its quarterly report for the nine
months ended September&nbsp;30, 2005, Trinity delivered a total
of approximately 15,100 and 17,016 railcars, respectively,
during those periods in North America. By
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</FONT></DIV>

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<B> 98</B>
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<B>Business</B>
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comparison, for the year ended December&nbsp;31, 2004 and for
the nine months ended September&nbsp;30, 2005, we delivered a
total of approximately 4,384 and 4,980 railcars, respectively,
during those periods in North America.
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</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Some of our competitors have greater financial and technological
resources than we do. They may increase their participation in
the railcar markets in which we compete and other railcar
manufacturers that currently do not manufacture covered hopper
railcars or tank railcars may choose to compete directly with
us. Railcar purchasers&#146; sensitivity to price and strong
price competition within the industry have historically limited
our ability to increase prices to obtain better margins on our
railcars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We face intense competition in our other markets as well. Our
competition for the sale of railcar components includes our
competitors in the railcar manufacturing market as well as a
concentrated group of companies whose primary business focus is
the production of one or more specialty components. In addition,
new competitors, or alliances among existing competitors, may
emerge and rapidly gain market share. We compete with numerous
companies in our railcar services and fleet management
businesses, ranging from companies with greater resources than
we have to small, local companies. Our principal competitors in
these businesses include Rescar and Millennium Rail.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition to price, competition in all our markets is based on
quality, reputation, reliability of delivery, customer service
and other factors. Any of these factors as well as technological
innovation by any of our existing competitors, or new
competitors entering any of the markets in which we do business,
could put us at a competitive disadvantage. We may be unable to
compete successfully or retain our market share in our
established markets. Increased competition for the sales of our
railcar products and services could result in price reductions,
reduced margins and loss of market share, which could negatively
affect our prospects, business, financial condition and results
of operations.
</DIV>

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<B>INTELLECTUAL PROPERTY</B>
</DIV>

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We rely on a combination of investments, copyrights and patents
to protect our intellectual property. Due to the change that has
historically characterized the railcar manufacturing industry,
we believe that the improvement of existing technology and the
development of new products may be more important than patent
protection in establishing and maintaining a competitive
advantage. Nevertheless, we have obtained patents and will
continue to make efforts to obtain patents, when available, in
connection with product developments and designs. We cannot
guarantee that any patent obtained will provide protection or be
of commercial benefit to us, or that its validity will not be
challenged.
</DIV>

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We have ten U.S. and two non-U.S.&nbsp;patents, two pending
non-U.S.&nbsp;patent applications, seven registered trademarks,
and numerous unregistered copyrights and trade names. Our
patents expire at various times from 2005 to 2021.
</DIV>

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<B>EMPLOYEES</B>
</DIV>

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As of September&nbsp;30, 2005, we had 2,336 full-time employees
in various locations throughout the United States and Canada,
including 2,217 engaged in our manufacturing, railcar repair and
railcar fleet management operations and 119 in various corporate
support functions. At our Longview, Texas and North Kansas City,
Missouri repair facilities, and at our Longview, Texas steel
foundry and components manufacturing facility, 50, 45 and 289
employees, respectively, are covered by collective bargaining
agreements. These agreements expire in January 2008, September
2007 and April 2008, respectively. We are also party to a
collective bargaining agreement at our Milton, Pennsylvania
repair facility, which is currently idle. Employees at our other
locations are not covered by collective bargaining agreements.
We believe that our relations with our employees are generally
good.
</DIV>

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<B> 99</B>
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<B>Business</B>
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<B>REGULATION</B>
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The Federal Railroad Administration, or FRA, administers and
enforces U.S.&nbsp;federal laws and regulations relating to
railroad safety. These regulations govern equipment and safety
compliance standards for railcars and other rail equipment used
in interstate commerce. The Association of American Railroads,
or AAR, promulgates a wide variety of rules and regulations
governing safety and design of equipment, relationships among
railroads with respect to railcars in interchange and other
matters. The AAR also certifies railcar manufacturers and
component manufacturers that provide equipment for use on
railroads in the United States. New products must generally
undergo AAR testing and approval processes. As a result of these
regulations, we must maintain certifications with the AAR as a
railcar manufacturer, and products that we sell must meet AAR
and FRA standards. We must comply with the rules of the
U.S.&nbsp;Department of Transportation, or DOT, and we are also
subject to oversight by Transport Canada. To the extent that we
expand our business internationally, we will increasingly be
subject to the regulations of other non-U.S.&nbsp;jurisdictions.
</DIV>

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Due to the health and safety risks posed by several types of
hazardous cargo transported by pressure tank railcars, including
liquefied petroleum gas, chlorine and anhydrous ammonia,
pressure tank railcars are subject to regulations to which many
other types of railcars are not subject. For example, in
response to general safety and homeland security concerns, there
are currently proposals pending by governmental and
non-governmental railcar authorities that address, among other
things, the impact resistance of the steel used in the
manufacture of pressure tank railcars. These proposals may
result in additional regulation concerning the required use of
normalized steel, and the testing of its impact resistance, in
pressure tank railcars. Prior to 1989, normalized steel was not
typically used in the manufacture of pressure tank railcars and,
according to AAR and DOT data, approximately 28,000 pressure
tank railcars currently in the U.S.&nbsp;railcar fleet were not
manufactured with normalized steel. Because normalized steel is
used to form railcars&#146; shells, it is generally not feasible
to retrofit railcars with normalized steel. We believe we are
well positioned to take advantage of any increased demand for
new pressure tank railcars that could result from regulations
requiring the increased use of normalized steel in pressure tank
railcars or the removal of any pre-1989 pressure tank railcars
from the U.S.&nbsp;railcar fleet.
</DIV>

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<B>ENVIRONMENTAL MATTERS</B>
</DIV>

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We are subject to comprehensive federal, state, local and
international environmental laws and regulations relating to the
release or discharge of materials into the environment, the
management, use, processing, handling, storage, transport or
disposal of hazardous materials and wastes, or otherwise
relating to the protection of human health and the environment.
These laws and regulations expose us to liability for the
environmental condition of our current or formerly owned or
operated facilities and our own negligent acts, and also may
expose us to liability for the conduct of others or for our
actions that were in compliance with all applicable laws at the
time these actions were taken. In addition, these laws may
require significant expenditures to achieve compliance, and are
frequently modified or revised to impose new obligations. Civil
and criminal fines and penalties and other sanctions may be
imposed for non-compliance with these environmental laws and
regulations. Our operations that involve hazardous materials
also raise potential risks of liability under the common law.
</DIV>

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Environmental operating permits are, or may be, required for our
operations under these laws and regulations. These operating
permits are subject to modification, renewal and revocation. We
regularly monitor and review our operations, procedures and
policies for compliance with permits, laws and regulations.
Despite these compliance efforts, risk of environmental
liability is inherent in the operation of our businesses, as it
is with other companies engaged in similar businesses. Many of
our properties were transferred to us by ACF in 1994. We are
involved in investigation and remediation activities at
properties that we now own or lease to address historic
contamination and potential contamination by
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<B> 100</B>
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<B>Business</B>
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third parties. We are also involved with state agencies in the
cleanup of two sites under these laws. These investigations are
at a preliminary stage, and it is impossible to estimate, with
any certainty, the timing and extent of remedial actions that
may be required, and the costs that would be involved in such
remediation. Substantially all of the issues identified relate
to the use of the properties prior to their transfer to us in
1994 by ACF and for which ACF has retained liability for
environmental problems that may have existed at the time of
their transfer to us and ACF has also agreed to indemnify us for
any cost that might be incurred with those existing problems.
However, if ACF fails to honor its obligations to us, we would
be responsible for the cost of such remediation.
</DIV>

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In connection with its ongoing obligations, ACF, in consultation
with us, is investigating and, as appropriate, remediating those
sites that it transferred to us. We have been advised that, for
the remainder of 2005, ACF estimates that it will spend
approximately $0.1 million on environmental investigation and,
in each of 2006 and 2007, it will spend approximately $0.2
million on environmental investigation, relating to
contamination that existed at properties prior to their transfer
to us and for which ACF has retained liability and agreed to
indemnify us. We believe that our operations and facilities are
in substantial compliance with applicable laws and regulations
and that any noncompliance is not likely to have a material
adverse effect on our operations or financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Future events, such as new environmental regulations or changes
in or modified interpretations of existing laws and regulations
or enforcement policies, or further investigation or evaluation
of the potential health hazards of products or business
activities, may give rise to additional compliance and other
costs that could have a material adverse effect on our financial
conditions and operations. In addition, we have in the past
conducted investigation and remediation activities at properties
that we own to address historic contamination. To date such
costs have not been material. Although we believe we have
satisfactorily addressed all known material contamination
through our remediation activities, there can be no assurance
that these activities have addressed all historic contamination.
The discovery of historic contamination or the release of
hazardous substances into the environment at our current or
formerly owned or operated facilities could require us in the
future to incur investigative or remedial costs or other
liabilities that could be material or that could interfere with
the operation of our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition to environmental laws, the transportation of
commodities by railcar raises potential risks in the event of a
derailment or other accident. Generally, liability under
existing law in the United States for a derailment or other
accident depends on the negligence of the party, such as the
railroad, the shipper or the manufacturer of the railcar or its
components. However, for certain hazardous commodities being
shipped, strict liability concepts may apply.
</DIV>

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<B>PROPERTY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our headquarters are located in St. Charles, Missouri. ARL, an
affiliate of Carl C. Icahn, leases this facility and permits us
to occupy it for a fee pursuant to a service agreement. Either
party may terminate this agreement on six months notice.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 101</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table presents information about our railcar
manufacturing and components manufacturing facilities as of
September&nbsp;30, 2005:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="21%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Leased or</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Lease</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="center" nowrap><B>Location</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Use</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Size</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Expiration Date</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Paragould, Arkansas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Covered hopper railcar manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    546,680&nbsp;square feet on 82&nbsp;acres</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Owned(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    &#151;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Marmaduke, Arkansas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tank railcar manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    441,075&nbsp;square feet on 55&nbsp;acres</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Owned</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    &#151;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    St. Charles, Missouri</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Aluminum foundry and machining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    128,626&nbsp;square feet on 3&nbsp;acres</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Leased</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    February&nbsp;28, 2006</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jackson, Missouri</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar components manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    110,240&nbsp;square feet on 8&nbsp;acres</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Owned(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    &#151;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Kennett, Missouri</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Covered hopper and tank railcar subassembly and small components
    manufacturing</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    78,375&nbsp;square feet on 9&nbsp;acres</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Owned(1)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    &#151;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Longview, Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Steel foundry and machining</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    155,030&nbsp;square feet on 31&nbsp;acres</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">
    Owned</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    &#151;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp; (1)&nbsp;</TD>
    <TD align="left">
    Our manufacturing facility located in Paragould, Arkansas is
    subject to a mortgage that secures the $9,500,000 industrial
    revenue bonds issued on April&nbsp;27, 1995 by Paragould,
    Arkansas. As of September&nbsp;30, 2005, approximately
    $4.5&nbsp;million of these bonds remain outstanding. Our
    manufacturing facility located in Jackson, Missouri is subject
    to a mortgage that secures the approximately $2.5&nbsp;million
    industrial development revenue bonds issued on July&nbsp;1, 1996
    by Jackson, Missouri. As of September&nbsp;30, 2005,
    approximately $1.5&nbsp;million of these bonds remain
    outstanding. Our manufacturing facility located in Kennett,
    Missouri is subject to a mortgage that secures the approximately
    $5.5&nbsp;million industrial development revenue bonds issued on
    June&nbsp;22, 1995 by Kennett, Missouri. As of
    September&nbsp;30, 2005, approximately $2.6&nbsp;million of
    these bonds remain outstanding. We occupy the real property at
    these facilities through lease-back arrangements. We intend to
    repay all of these bonds in full with the proceeds of this
    offering. Each of these properties will be re-conveyed to us
    when the bonds secured by the properties are paid in full. The
    industrial revenue bonds are guaranteed by affiliates of
    Mr.&nbsp;Icahn, and these affiliates will be released from such
    guarantees upon repayment of the industrial revenue bonds. In
    addition, James J. Unger, our president and chief executive
    officer, and his wife own $0.4&nbsp;million of the industrial
    revenue bonds issued by Paragould, Arkansas. Mr.&nbsp;Unger and
    his wife will receive approximately $0.4&nbsp;million upon our
    repayment in full of the amounts due under the industrial
    revenue bonds. See &#147;Use of proceeds,&#148; &#147;Certain
    relationships and related party transactions&#151;Guarantees of
    indebtedness by ACF and other related parties&#151;Industrial
    revenue bonds&#148; and &#147;Certain relationships and related
    party transactions&#151;Certain transactions involving James J.
    Unger&#151;Industrial revenue bonds&#148; for more details.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We also provide railcar repair, cleaning, maintenance and other
services at facilities we own in Longview and Goodrich, Texas;
North Kansas City, Missouri; and Tennille, Georgia; and at
facilities we lease in Gonzales, Louisiana; Green River,
Wyoming; Deer Park, Texas; Bude, Mississippi; and Sarnia,
Ontario. We also own a repair facility in Milton, Pennsylvania
that has been idle since 2003. Our facility located in Tennille,
Georgia is secured by a $0.6&nbsp;million mortgage due
February&nbsp;10, 2008. As of September&nbsp;30, 2005,
approximately $0.2&nbsp;million remained outstanding on this
mortgage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INSURANCE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We maintain insurance on terms typical of our industry. Our
policies cover standard industry risks, including general and
products liability, workers compensation, automobile liability
and other casualty and property risks.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 102</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Business</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 21pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LEGAL PROCEEDINGS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been named the defendant in a law suit in which the
plaintiff, OCI&nbsp;Chemical Company, claims we were responsible
for the damage caused by allegedly defective railcars that were
manufactured by us. The lawsuit was filed on September&nbsp;19,
2005 in the United States District Court, Eastern District of
Missouri. The plaintiff seeks unspecified damages in excess of
$75,000. The plaintiffs allege that the failures in certain
components caused the contents transported by these railcars to
spill out of the railcars causing property damage, clean-up
costs, monitoring costs, testing costs and other costs and
damages. We believe that we are not responsible for the damage
and have meritorious defenses against liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are from time to time party to various other legal
proceedings arising out of our business. Such proceedings, even
if not meritorious, could result in the expenditure of
significant financial and managerial resources. We believe that
there are no proceedings pending against us which, if determined
adversely, would have a material adverse effect on our business,
financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 103</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='112'></A>
</DIV>

<!-- link1 "Management" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Management
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIRECTORS AND EXECUTIVE OFFICERS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Set forth below is information concerning our current directors
and executive officers, including their ages as of
September&nbsp;30, 2005.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="52%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Age</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Position</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Carl C. Icahn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chairman of the Board</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James J. Unger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President, Chief Executive Officer and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Cowan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President and Chief Operating Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William P. Benac</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President and Chief Financial Officer</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan C. Lullman</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President Sales, Marketing and Services</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vincent J. Intrieri</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President, Treasurer, Secretary and Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jon F. Weber</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keith Meister</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James C. Pontious*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James M. Laisure*</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Pontious and Mr.&nbsp;Laisure have each consented to
    serve as a director at such time as our common stock is listed
    on the Nasdaq National Market.</TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Carl C. Icahn, chairman of the board</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Icahn has been our principal beneficial stockholder and
has served as our chairman of the board and as a director since
1994. Mr.&nbsp;Icahn has served as chairman of the board and a
director of Starfire Holding Corporation, or Starfire, (formerly
Icahn Holding Corporation), a privately-held holding company,
and chairman of the board and a director of various subsidiaries
of Starfire, since 1984. Mr.&nbsp;Icahn has also been chairman
of the board and president of Icahn&nbsp;&#38; Co., Inc., a
registered broker-dealer and a member of the National
Association of Securities Dealers, since 1968. Since November
1990, Mr.&nbsp;Icahn has been chairman of the board of American
Property Investors, Inc., the general partner of American Real
Estate Partners, L.P., a public limited partnership that invests
in real estate and holds various other interests, including the
interests in its subsidiaries that are engaged, among other
things, in the oil and gas business and casino entertainment
business. Mr.&nbsp;Icahn has been a director of Cadus
Pharmaceutical Corporation, a firm that holds various
biotechnology patents, since 1993. From August 1998 to August
2002, Mr.&nbsp;Icahn served as chairman of the board of
Maupintour Holding LLC (f/k/a/&nbsp;Lowestfare.com, LLC), an
Internet travel reservations company. From October 1998 through
May 2004, Mr.&nbsp;Icahn was the president and a director of
Stratosphere Corporation, which operates the Stratosphere Hotel
and Casino. Since September&nbsp;29, 2000, Mr.&nbsp;Icahn has
served as the chairman of the board of GB&nbsp;Holdings, Inc.,
which owns all of the outstanding stock of Atlantic Coast
Entertainment Holdings, Inc., which owns an interest in The
Sands Hotel and Casino in Atlantic City, New Jersey. In
January&nbsp;2003, Mr.&nbsp;Icahn became chairman of the board
and a director of XO&nbsp;Communications, Inc., a
telecommunications company. In May 2005, Mr.&nbsp;Icahn became a
director of Blockbuster Inc., a provider of in-home movie rental
and game entertainment. Mr.&nbsp;Icahn received his B.A. from
Princeton University.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>James J. Unger, president, chief executive officer and
director</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Unger has served as our president and chief executive
officer since March 1995. Prior to joining us, he served ACF as
its president from 1988 to 1995, as its senior vice president
and chief financial
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 104</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
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officer from 1984 to 1988 and on its board of directors from
August 1993 to March 2005. After he joined us in 1995,
Mr.&nbsp;Unger simultaneously continued to serve as the vice
chairman of ACF until March 2005. ACF is controlled by
Mr.&nbsp;Icahn. Mr.&nbsp;Unger has served as president of Ohio
Castings, the joint venture in which we have a one-third
interest, since June 2003. Mr.&nbsp;Unger has been on the board
of directors of Aspen Resources Group, an oil and gas
exploration company since May 2002. Mr.&nbsp;Unger participates
in several industry organizations, including as an executive
committee member and board member for the Railway Supply
Institute, Inc., or &#147;RSI&#148;. He also is a board member
of the American Railway Car Institute, a member of the project
review committee for the RSI-AAR Railroad Tank Car Safety
Research Test Project, a steering committee member of the RSI
Committee on Tank Railcars, and a member of the National Freight
and Transportation Association. Mr.&nbsp;Unger served as a
member of the board of directors of Ranken Technical College
from 1990 to 2002. Mr.&nbsp;Unger received a B.S. in accounting
from the University of Missouri, Columbia and is a certified
public accountant.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>James A. Cowan, executive vice president and chief operating
officer</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Cowan has served as our executive vice president and
chief operating officer since December 2005. Prior to joining
us, he spent the last 26&nbsp;years in various positions
involving the engineering, construction and manufacturing of
multiple steel and tubular products. From March 2003 to August
2005, Mr.&nbsp;Cowan served as president and chief operating
officer of Maverick Tube Corporation, a North American
manufacturer of welded tubular steel products used in the energy
industry. Prior to this position, from June 2002 to March 2003,
Mr.&nbsp;Cowan served as president and chief operating officer
of Vallourec&nbsp;&#38; Mannesmann Star, a French, German and
Japanese joint venture and seamless manufacturer of tubular
steel products. From January 1992 to June 2002, he served as
general manager responsible for all sales and operations of
three different steel manufacturing facilities for North Star
Steel, a business previously owned by Cargill. Mr.&nbsp;Cowan
was responsible for the complete greenfield development,
construction and start-up of one of these facilities. From July
1979 to January 1992, he served in differing operational
capacities for Cargill&#146;s steel group, North Star Steel. For
two years, during 2000 and 2001, Mr.&nbsp;Cowan served as the
Chairman of the Governor of Ohio&#146;s Steel Council.
Mr.&nbsp;Cowan received his B.S. in Metallurgical Engineering
from Michigan Technological University.
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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>William P. Benac, senior vice president and chief financial
officer</B>
</DIV>

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Mr.&nbsp;Benac has served as our senior vice president and chief
financial officer since January 2005. Prior to joining us, he
spent the last 32&nbsp;years in various corporate finance,
turnaround and value creation positions. Mr.&nbsp;Benac
co-founded bpmx, a financial services and consulting
restructuring company, where he served as senior managing
director and chief financial officer from December 2003 to
January 2005. From August 2002 to February 2003, Mr.&nbsp;Benac
served Kinko&#146;s Inc., a print services company, as senior
vice president and chief financial officer. From November 2000
to November 2001, Mr.&nbsp;Benac was the executive vice
president and chief financial officer of Grass Valley Group, a
manufacturer of digital broadcast technology. Mr.&nbsp;Benac
served simultaneously as an executive vice president and chief
financial officer of UICI, a diversified financial services
company, and as chief executive officer of United Credit
National Bank, a subsidiary of UICI and a credit card bank, from
May 1999 to November 2000. Mr.&nbsp;Benac has held a variety of
other financial management positions, including serving
Electronic Data Systems Corporation from February 1992 to
October 1997 as global vice president and treasurer, and
numerous positions with Verizon Corporation and its predecessor
companies from 1973 to 1990, including as president of GTE
Finance Corp. from 1986 to 1990. Mr.&nbsp;Benac is a certified
public accountant and a certified management accountant. He has
served on the National Advisory Council of the Marriott School
of Management&#151;Brigham Young University since 1997.
Mr.&nbsp;Benac received his B.A. and his M.B.A. from Brigham
Young University and his J.D. from Pace University School of Law.
</DIV>

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</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 105</B>
</DIV>
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<B>Management</B>
</DIV>

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</DIV>

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<B>Alan C. Lullman, senior vice president sales, marketing and
services</B>
</DIV>

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Mr.&nbsp;Lullman has served as our senior vice president sales,
marketing and services since October 2004. From August 1998 to
September 2004, he served as our vice president sales and
marketing. Prior to joining us, he served as a regional sales
manager at the Houston office of ACF from March 1989 to July
1998, where he was responsible for sales across 22&nbsp;states.
From August 1987 to February 1989, Mr.&nbsp;Lullman was a
district sales manager at ACF. He held numerous other sales
positions at ACF sales offices in the Southwest, Midwest and
Northeast from October 1978 to July 1987. Mr.&nbsp;Lullman is a
member of the Transportation and Logistics Committee of the
American Plastics Council. He received a B.A. from Westminster
College. He also served in the U.S.&nbsp;Marine Corps Reserve
from 1973 to 1976, when he received an honorable discharge.
</DIV>

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<B>Vincent J. Intrieri, senior vice president, treasurer,
secretary and director</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Intrieri has served as our senior vice president,
treasurer and secretary since March&nbsp;2005 and has served on
our board of directors since August 2005. Mr.&nbsp;Intrieri is a
senior managing director of Icahn Partners LP and Icahn Partners
Master Fund&nbsp;LP, private investment funds controlled by
Mr.&nbsp;Icahn. Since January&nbsp;1, 2005, Mr.&nbsp;Intrieri
has been senior managing director of Icahn Associates Corp. and
High River Limited Partnership, which is primarily engaged in
the business of holding and investing in securities. From March
2003 to December 2004, Mr.&nbsp;Intrieri served as a managing
director and from 1998 to March 2003, he served as a portfolio
manager of Icahn Associates Corp. and High River. Each of Icahn
Associates Corp. and High River are under the control of
Mr.&nbsp;Icahn. From 1995 to 1998, Mr.&nbsp;Intrieri served as
portfolio manager for distressed investments with Elliott
Associates L.P., a New York investment fund. Prior to 1995,
Mr.&nbsp;Intrieri was a partner at the Arthur Andersen
accounting firm. Mr.&nbsp;Intrieri is a certified public
accountant. Mr.&nbsp;Intrieri is chairman of the board of
directors and a director of Viskase Companies, Inc., a publicly
owned producer of cellulose and plastic casings used in
preparing and packaging meat products, in which Mr.&nbsp;Icahn
has an interest through the ownership of securities. In
addition, Mr.&nbsp;Intrieri has served on the board of directors
of XO Communications, Inc., a telecommunications services
company controlled by Mr.&nbsp;Icahn, since January 2003.
Mr.&nbsp;Intrieri received a B.S. in Accounting from The
Pennsylvania State University.
</DIV>

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<B>Jon F. Weber, director</B>
</DIV>

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Mr.&nbsp;Weber has served on our board of directors since August
2005. Since April 2005, Mr.&nbsp;Weber has served as the
president of American Property Investors, Inc., which is the
general partner of American Real Estate Partners, L.P., a public
limited partnership controlled by Mr.&nbsp;Icahn that invests in
real estate and holds various other interests, including the
interests in its subsidiaries that are engaged, among other
things, in the oil and gas business and casino entertainment
business. Mr.&nbsp;Weber has, since April 2003, been head of
portfolio company operations and chief financial officer at
Icahn Associates Corp., an entity controlled by Mr.&nbsp;Icahn.
Since May 2003, Mr.&nbsp;Weber has been a director of Viskase
Companies, Inc. and was the chief executive officer of Viskase
Companies, Inc. from May 2003 to October 2004. Since March 2003,
he has served as chief executive officer and a director of
Philip Services Corporation, a metal recycling and industrial
services company affiliated with Mr.&nbsp;Icahn. He served as
chief financial officer of venture-backed companies QuantumShift
Inc. and Alchemedia Ltd. from October 2001 to July 2002 and
November 2000 to October 2001, respectively. From May 1998 to
November 2000, Mr.&nbsp;Weber served as managing
director&#151;investment banking for JP Morgan Chase and its
predecessor, Chase Manhattan Bank, in S&#227;o Paulo, Brazil. He
has served as a director of XO Communications, Inc., since May,
2005. Previously, Mr.&nbsp;Weber was an investment banker at
Morgan Stanley and Salomon Brothers.
</DIV>

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</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 106</B>
</DIV>

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<B>Management</B>
</DIV>

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</DIV>

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<B>Keith Meister, director</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Meister has served on our board of directors since
August 2005. Since June 2002, Mr.&nbsp;Meister has been a senior
investment analyst of High River, a company owned and controlled
by Mr.&nbsp;Icahn that is primarily engaged in the business of
holding and investing in securities. Mr.&nbsp;Meister is also a
senior investment analyst of Icahn Partners LP and Icahn
Partners Master Fund&nbsp;LP. He is also a director of Icahn
Fund&nbsp;Ltd., which is the feeder fund of Icahn Partners
Master Fund&nbsp;LP. Icahn Partners LP and Icahn Partners Master
Fund&nbsp;L.P. are private investment funds controlled by
Mr.&nbsp;Icahn. Since August 2003, Mr.&nbsp;Meister has served
as the chief executive officer of American Property Investors,
Inc., or API, which is the general partner of American Real
Estate Partners, L.P., a public limited partnership controlled
by Mr.&nbsp;Icahn that invests in real estate and holds various
other interests, including the interests in its subsidiaries
that are engaged, among other things, in the oil and gas
business and casino entertainment business. Mr.&nbsp;Meister
served API as its president from August 2003 to April 2005. From
March 2000 through the end of 2001, Mr.&nbsp;Meister co-founded
and served as co-president of J Net Ventures, a venture capital
fund focused on investments in information technology and
enterprise software businesses. From 1997 through 1999,
Mr.&nbsp;Meister served as an investment professional at
Northstar Capital Partners, an opportunistic real estate
investment partnership. Prior to his work at Northstar,
Mr.&nbsp;Meister served as an investment analyst in the
investment banking group at Lazard Freres. Mr.&nbsp;Meister is a
director of XO Communications, Inc., a telecommunications
services company controlled by Mr.&nbsp;Icahn. Mr.&nbsp;Meister
also is a director of American Entertainment Properties Corp.
and American Casino&nbsp;&#38; Entertainment Properties Finance
Corp., which are gaming companies, and Scientia Corporation, a
private health care venture company, all of which are companies
controlled by American Real Estate Partners, L.P. In August
2005, Mr.&nbsp;Meister also became a director of ADVENTRX
Pharmaceuticals, Inc., a biopharmaceutical company.
Mr.&nbsp;Meister received his A.B. in Government cum laude from
Harvard College.
</DIV>

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<B>James C. Pontious, director</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

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Mr.&nbsp;Pontious has agreed to serve on our board of directors
at such time as our common stock is listed on the Nasdaq
National Market. Since May 2005, Mr.&nbsp;Pontious has been a
consultant in the areas of business development and acquisitions
to Wabtec Corporation, a public company that supplies air brakes
and other equipment for locomotives, freight cars and passenger
transit vehicles. In 2005, Mr.&nbsp;Pontious helped Wabtec found
Intermodal Trailer Express Corp, an intermodal operating company
established to focus on hauling highway trailers over the
nation&#146;s railroads. Mr.&nbsp;Pontious is a principal of
this newly founded company. Mr.&nbsp;Pontious served Wabtec as
vice president of special projects from January 2003 through
April 2005 and as vice president of sales and marketing from
April 1990 to January 2003. Mr.&nbsp;Pontious also served as
vice president of sales and marketing at New York Air Brake
Company, a unit of General Signal Corporation, from 1977 to
1990. Prior to this, Mr.&nbsp;Pontious served the
Pullman-Standard division of Pullman, Inc., a freight and
passenger railcar manufacturer, from 1961 to 1977 in various
management positions in the areas of sales, marketing and
operations. Mr.&nbsp;Pontious currently serves as a director of
the Intermodal Transportation Institute at the University of
Denver. Mr.&nbsp;Pontious holds a B.B.A. from the University of
Minnesota.
</DIV>

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</FONT></DIV>

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</FONT></DIV>

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<B>James M. Laisure, director</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Laisure has agreed to serve on our board of directors
at such time as our common stock is listed on the Nasdaq
National Market. Since May 2005, Mr.&nbsp;Laisure has been
consulting as an independent contractor for the automotive and
industrial manufacturing space. Prior to this, he spent
32&nbsp;years in various corporate accounting, sales,
engineering and operational positions with Dana Corporation, a
publicly held corporation that designs, manufactures and
supplies vehicle components and technology, and its
predecessors. Mr.&nbsp;Laisure served as president of
Dana&#146;s Automotive Systems Group from
</DIV>

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</FONT></DIV>

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</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 107</B>
</DIV>

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<B>Management</B>
</DIV>

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</DIV>

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March 2004 to May 2005. From December 2001 to February 2004,
Mr.&nbsp;Laisure served as president of Dana&#146;s engine and
fluid management group and, from December 1999 to November 2001,
he served as president of Dana&#146;s fluid management group. In
addition, he served on the board of directors of various Dana
Corporation joint ventures, including joint ventures in Germany,
Indonesia, Mexico and Turkey. Mr.&nbsp;Laisure served as
director of finance of P.T. Spicer Indonesia, a manufacturer of
axles and driveshafts, from 1982 to 1984. Also, he served as
accountant, internal auditor and controller at Perfect Circle, a
manufacturer of automotive engine components, from 1973 to 1981.
Mr.&nbsp;Laisure received a B.A. degree in Accounting from Ball
State University and an M.B.A. from Miami (Ohio) University, and
has completed the Harvard Advanced Management Program.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>KEY EMPLOYEES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Set forth below is information concerning our key employees,
including their ages as of September&nbsp;30, 2005.
</DIV>

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<B>Jackie R. Pipkin, 56, director of railcar manufacturing</B>
</DIV>

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Mr.&nbsp;Pipkin has served as our director of railcar
manufacturing since July 1996, after serving as plant manager of
our Paragould and Kennett manufacturing facilities. Prior to
joining us, Mr.&nbsp;Pipkin served Thrall Car Manufacturing, a
railcar manufacturer, as manufacturing manager from January 1992
to March 1994 and as general superintendent from December 1989
to December 1992. He served ACF in various roles from February
1969 to December 1989. Mr.&nbsp;Pipkin has supervised or helped
supervise the launch of several new railcar manufacturing
facilities during his employment with ACF and with us, including
the original construction of our Paragould and Marmaduke
facilities and the addition of the third manufacturing line at
our Paragould facility.
</DIV>

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<B>Michael R. Williams, 44, vice president engineering and
manufacturing</B>
</DIV>

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Mr.&nbsp;Williams has served as our vice president engineering
and manufacturing since October 2004 and in various product and
account management roles since April 1997. Prior to joining us,
Mr.&nbsp;Williams served ACF as a strength analyst of covered
hopper and tank railcars from January 1991 to March 1997.
Mr.&nbsp;Williams served as an airframe designer and analyst at
McDonnell Douglas Corporation from May 1983 to December 1990.
Mr.&nbsp;Williams received his B.S. in mechanical engineering
from the University of Illinois and a M.S. in Mechanical
Engineering and a M.B.A. from Washington University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>BOARD OF DIRECTORS</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our board of directors presently consists of five members. Upon
the listing of our common stock on the Nasdaq National Market we
will expand the size of our board of directors to seven members
with the addition of Mr.&nbsp;Pontious and Mr.&nbsp;Laisure as
independent directors. Our directors are expected to serve until
the next annual meeting of our stockholders and until their
respective successors have been duly elected and qualified. We
believe that, within the one-year transition period available to
us following the completion of this offering, we will comply
with all applicable requirements of the SEC and the Nasdaq
National Market relating to director independence and the
composition of the committees of our board of directors,
including the designation of an &#147;audit committee financial
expert.&#148;
</DIV>

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We have been advised that in December 2005 an affiliate of Carl
C. Icahn, our principal beneficial stockholder and the chairman
of our board of directors, entered into a stock purchase
agreement with our other principal stockholder, the Foundation
for a Greater Opportunity, or the Foundation, to acquire all of
our common stock held by the Foundation. The consummation of
this acquisition requires the completion of this offering and
the approval of applicable authorities of the State of New
</DIV>

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</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 108</B>
</DIV>

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<B>Management</B>
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
York. If the parties obtain this approval, we have been advised
that the parties expect that the purchase would be completed in
the first three months of 2006. Pending the closing of this
purchase, and for so long as the stock purchase agreement has
not been terminated, the Foundation has granted the affiliate of
Mr.&nbsp;Icahn purchasing the shares owned by the Foundation an
irrevocable proxy to vote all of the shares of our common stock
held by the Foundation. The stock purchase agreement may be
terminated by either party if the purchase does not occur by May
2006. As a result of these contemplated arrangements, we expect
that Mr.&nbsp;Icahn will control
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the voting
power of our outstanding common stock following the offering.
Consequently, we would be a &#147;controlled company&#148;
within the meaning of the listing standards governing companies
with stock quoted on the Nasdaq National Market. Under these
rules, a &#147;controlled company&#148; may elect not to comply
with certain Nasdaq National Market corporate governance
requirements, including requirements that (1)&nbsp;a majority of
the board of directors consist of independent directors,
(2)&nbsp;compensation of officers be determined or recommended
to the board of directors by a majority of its independent
directors or by a compensation committee that is composed
entirely of independent directors and (3)&nbsp;director nominees
be selected or recommended for selection by a majority of the
independent directors or by a nominating committee composed
solely of independent directors. If, at the time of this
offering, we are a &#147;controlled company&#148; under the
listing standards of the Nasdaq National Market, we intend to
avail ourselves of those exemptions and will not have a majority
of independent directors on our board. See &#147;Risk
factors&#151;Risks related to the purchase of our common stock
in this offering&#151;Upon the closing of this offering we may
be a &#147;controlled company&#148; within the meaning of the
Nasdaq National Market rules and you will not have the same
protections afforded to shareholders of companies that are not
&#147;controlled companies&#148; and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements.&#148;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMMITTEES OF OUR BOARD OF DIRECTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If we are a &#147;controlled company&#148; following this
offering, we intend to use exemptions available to us under the
corporate governance listing standards of the Nasdaq National
Market. In that circumstance, we expect that we would not have a
compensation committee and we would not have a nominating
committee. If we are not a &#147;controlled company&#148;
following this offering, we intend to comply with all applicable
corporate governance requirements of the Nasdaq National Market
within the transition periods allowed companies following their
initial public offering of common stock. Accordingly, if we are
not a &#147;controlled company&#148; at the time this offering
is completed, the standing committees of our board of directors
will consist of an audit committee, a compensation committee and
a nominating committee. See &#147;Risk factors&#151;Risks
related to the purchase of our common stock in this
offering&#151;Upon the closing of this offering we may be a
&#147;controlled company&#148; within the meaning of the Nasdaq
National Market rules and you will not have the same protections
afforded to shareholders of companies that are not
&#147;controlled companies&#148; and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In any event, we may establish special committees under the
direction of the board of directors when necessary to address
specific issues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Audit committee</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our Audit Committee will be responsible for oversight of the
qualifications, independence, appointment, retention,
compensation and performance of the Company&#146;s independent
registered public accounting firm and for assisting the board of
directors in monitoring the Company&#146;s financial reporting
process, accounting functions and internal controls. It also
will be responsible for oversight of &#147;whistle-blowing&#148;
procedures and certain other compliance matters.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 109</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The composition of the Audit Committee following the completion
of this offering will comply with applicable SEC and Nasdaq
National Market requirements, including the requirement that at
least one member of the Audit Committee qualify as a
&#147;financial expert&#148; under SEC rules and the stricter
definition of independence for audit committee members under the
rules of the Nasdaq National Market. Our board of directors will
adopt a written charter for our Audit Committee. That charter
will conform to recently adopted rules and regulations of the
SEC and the Nasdaq National Market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Corporate governance</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that shortly after completion of this offering, we
will comply with all applicable Nasdaq National Market corporate
governance and listing requirements. In the interim, we will
rely on transition periods available to companies following
their initial public offering of common stock. See &#147;Risk
factors&#151;Risks related to the purchase of our common stock
in this offering&#151;Upon the closing of this offering we may
be a &#147;controlled company&#148; within the meaning of the
Nasdaq National Market rules and you will not have the same
protections afforded to shareholders of companies that are not
&#147;controlled companies&#148; and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements,&#148; &#147;Management&#151;Board of
directors&#148; and &#147;Management&#151;Committees of our
board of directors.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Codes of conduct and ethics</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon completion of this offering, we will have adopted written
codes of conduct and ethics applicable to all of our directors,
executive officers and employees including, without limitation,
all of our senior financial officers, that will be designed to
deter wrongdoing and to promote:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">honest and ethical conduct;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">full, fair, accurate, timely and
    understandable disclosure in reports and documents that we file
    with the SEC and in our other public communications;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">compliance with applicable laws,
    rules and regulations, including insider trading
    compliance;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">accountability for adherence to
    the code and prompt internal report of violations of the code,
    including illegal or unethical behavior regarding accounting or
    auditing practices.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our codes of conduct and ethics will also comply with applicable
requirements of the Nasdaq National Market. The Audit Committee
of our board of directors will review our codes of conduct and
ethics on a regular basis and will propose or adopt additions or
amendments as it considers required or appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Director compensation</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Each director is entitled to reimbursement for out-of-pocket
expenses incurred for each meeting of the full board or a
committee of the board attended. The annual compensation for our
independent directors is $30,000. In addition, each independent
director is entitled to receive $1,000 for each board or
committee meeting attended and an annual stipend of $5,000 if he
is a chairperson of a committee.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 110</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>EXECUTIVE COMPENSATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth the compensation of our chief
executive officer and each of our other most highly compensated
executive officers during the year ended December&nbsp;31, 2004.
We refer to these officers as the named executive officers. We
did not maintain any option plans through December&nbsp;31,
2004, and no options were granted to or exercised by any of our
named executive officers during the year ended December&nbsp;31,
2004.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="44%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Annual Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Other Annual</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>All Other</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Compensation</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Compensation</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Name and principal position</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Salary</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Bonus</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(4)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(5)</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="17" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James J. Unger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President and Chief Executive Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>350,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>48,532</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>13,918</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Cowan(1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Executive Vice President and Chief Operating Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William P. Benac(2)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President and Chief<BR>
    Financial Officer</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan C. Lullman</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President Sales,<BR>
    Marketing and Services</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>140,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William L. Finn(3)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Senior Vice President Operations</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>25,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,218</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(1)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Cowan started his employment with us on
    December&nbsp;5, 2005.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Benac started his employment with us on
    January&nbsp;31, 2005.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Finn retired effective May&nbsp;1, 2005.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    Includes the following payments we made on behalf of
    Messrs.&nbsp;Unger, Lullman and Finn:</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap>Car</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap>Country</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap>Allowances</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap>Club Dues</TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Unger</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,651</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,881</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Lullman</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>611</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Finn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,711</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Includes the following payments we made on behalf of
    Messrs.&nbsp;Unger, Lullman and Finn.</TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 9pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Life Insurance*</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>401(k) Matching</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Premiums</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Contributions**</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    Mr. Unger</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,150</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Lullman</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mr. Finn</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,030</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,188</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>*&nbsp;&nbsp;</TD>
    <TD align="left">
    These amounts represent the taxable income related to payment of
    premiums for group term life insurance and executive survivor
    insurance for the benefit of the employee.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>**&nbsp;</TD>
    <TD align="left">
    These amounts represent matching contributions to each
    employee&#146;s 401(k) plan equal to 50% of the employee&#146;s
    deferrals up to a maximum of 6% of each employee&#146;s
    compensation.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 111</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Employment agreements</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>James J. Unger.</I></B> In November&nbsp;2005, we entered
into a new employment agreement with Mr.&nbsp;Unger. Upon the
closing of this offering, this new employment agreement will
supersede our original agreement with Mr. Unger which we entered
into in 1994. The original agreement with Mr.&nbsp;Unger,
provided that Mr.&nbsp;Unger shall be granted an option to
purchase 2.0% of our outstanding common shares at a price equal
to 2.0% of the common equity contribution by Carl C.&nbsp;Icahn
at our formation. The agreement provided that this option shall
be exercisable at the time of our initial public offering, and
should we be sold to parties other than in a public offering,
Mr.&nbsp;Unger shall receive 2.0% of the sales price, net of the
preferred interest established at our formation, and net of the
contribution for common stock. The original agreement further
provided that the above options and or rights shall remain in
effect as long as Mr.&nbsp;Unger is employed by us, and that
should we go public with an offering and Mr.&nbsp;Unger exercise
his stock option, Mr.&nbsp;Unger will agree, if we or our board
of directors so desires, to a three-year employment contract
providing no reductions in salary or fringe benefits.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr. Unger&#146;s term as our president and chief executive
officer under the new employment agreement is effective for one
year following the completion of this offering and may be
extended for two additional one-year terms at the sole option of
our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the terms of the new employment agreement, Mr. Unger
receives a base salary of $350,000. In addition, Mr. Unger is
eligible to receive an annual bonus, as determined by our board
of directors from year to year. The new employment agreement
also provides that Mr. Unger is entitled to receive healthcare,
vacation, 401(k) participation, transportation and other similar
benefits we offer our senior employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the terms of the new employment agreement, if Mr. Unger is
terminated without cause (as defined in the new employment
agreement) or resigns for good reason (as defined in the new
employment agreement), then we shall pay him, in addition to any
unpaid and earned base salary and bonus, the base salary Mr.
Unger would have earned through the end of his term, as
extended, if applicable, by our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr. Unger&#146;s new employment agreement contains
non-competition, non-solicitation and confidentiality
provisions. The non-competition and non-solicitation provisions
prohibit Mr. Unger from directly or indirectly competing with
us, or soliciting our employees as long as he is our employee
and generally for a one-year period thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the new employment agreement, we also entered
into a letter agreement with Mr.&nbsp;Unger that replaces any
option grants to Mr. Unger under the original agreement. Upon
the closing of this offering, we are required to issue Mr. Unger
such number of shares of our common stock obtained by dividing
$6&nbsp;million by the public offering price per share as set
forth on the cover page of this prospectus (assuming an initial
public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
which represents the midpoint of the range on the cover page of
this prospectus, Mr.&nbsp;Unger will
receive &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock). Of these shares, 40% will be transferable
without contractual restrictions by Mr.&nbsp;Unger after
180&nbsp;days from the closing of this offering, 30% will be
transferable without contractual restrictions by Mr. Unger one
year after the closing of this offering and the remaining 30%
will be freely transferable 540 days after the closing of this
offering. If Mr. Unger is terminated for cause (as defined in
the letter agreement), or resigns without good reason (as
defined in the letter agreement) within one year from the
closing date of this offering, Mr. Unger shall return to us 60%
of the shares of our common stock we granted to him. We have
agreed to use commercially reasonable efforts to file a
registration statement on Form S-8 with the SEC to cover the
registration of 40% of these shares. We have agreed to include
the balance of these shares in any registration statement we
file on behalf of Mr. Icahn with regard to the registration for
sale of our shares held by Mr. Icahn, provided the contractual
restrictions and applicable lock-up period of these shares have
lapsed.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 112</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>William P. Benac.</I></B> In July 2005, we entered into an
employment agreement with William P. Benac to serve as our chief
financial officer for a period of one year. The agreement is
effective as of April&nbsp;22, 2005, and automatically renews
for successive one-year terms unless terminated by either party
at least 180&nbsp;days before the expiration of the then
applicable term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the terms of the agreement, Mr.&nbsp;Benac will receive a
minimum annual base salary of $250,000. Mr.&nbsp;Benac is also
entitled to a non-prorated cash bonus of at least $150,000 for
the 2005 fiscal year. Criteria for cash bonuses that may be
awarded for each year the agreement is extended are subject to
negotiation and will be determined during the first quarter of
each calendar year the agreement is renewed. It is expected that
the target bonus amounts during such years will not be less than
$150,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition to the salary and bonus compensation described
above, Mr.&nbsp;Benac will receive a one-time special cash bonus
of $500,000 on April&nbsp;22, 2007 if, prior to that date, we
issue common stock to the public in an offering registered with
the SEC or Mr.&nbsp;Icahn sells his controlling interest in us
to a third party in a private transaction. If at any time on or
before April&nbsp;22, 2007, we terminate Mr.&nbsp;Benac&#146;s
employment without cause, he resigns for good reason, or a
change in control occurs, he will be entitled to receive the
special cash bonus of $500,000 upon the occurrence of such
event. In addition, if we terminate Mr.&nbsp;Benac&#146;s
employment other than for cause, death or disability, or if he
terminates his employment for good reason, he is entitled to
receive a lump sum severance payment of $200,000.
Mr.&nbsp;Benac&#146;s right to the special cash bonus of
$500,000 and any severance immediately terminates if his
employment is terminated for cause or he resigns without good
reason.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Benac will be reimbursed for reasonable and necessary
business related expenses, including those expenses associated
with commuting from Dallas to our headquarters in St. Charles,
Missouri, such as air and car travel and reasonable living
expenses. He is eligible to participate in all health, medical,
retirement and other employee benefit plans we generally provide
to our senior executives. Mr.&nbsp;Benac&#146;s employment
agreement also contains provisions requiring him to protect our
confidential information during his employment and at all times
thereafter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Benac may terminate his employment for good reason upon
at least 30&nbsp;days prior written notice to us, or without
good reason upon at least 60&nbsp;days prior written notice to
us. We may terminate Mr.&nbsp;Benac&#146;s employment without
cause upon 30&nbsp;days written notice or immediately for cause
or upon his death or disability.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>James A. Cowan.</I></B> In December 2005, we entered into
an employment agreement with Mr.&nbsp;Cowan to serve as our
chief operating officer through December&nbsp;31, 2008, unless
earlier terminated pursuant to the agreement.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the terms of the agreement, Mr.&nbsp;Cowan receives a base
salary at an annual rate of $300,000&nbsp;per year.
Mr.&nbsp;Cowan is also entitled to an annual bonus for each
calendar year of employment ending on or after December&nbsp;31,
2006 of up to 50% of his then applicable base salary, provided
certain performance targets established by our board of
directors are achieved.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition to the compensation described above, we have agreed
to grant to Mr.&nbsp;Cowan, on the closing date of our initial
public offering of common stock registered with the SEC, an
option to purchase&nbsp;1.25% of our outstanding shares of
common stock immediately following the offering, assuming the
over-allotment option is not exercised. The exercise price of
the option will be equal to the fair market value of the common
stock at the time of grant.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Cowan is eligible to participate in all health,
medical, retirement and other employee benefit plans we
generally provide to our senior executives. In addition, he will
be reimbursed for the reasonable use of an automobile and for
the payment of reasonable country club dues (excluding
initiation fees) on terms consistent with our other senior
executives.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 113</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Cowan may terminate the agreement upon 30&nbsp;days
written notice. We may terminate Mr.&nbsp;Cowan&#146;s
employment at any time, with or without cause. If
Mr.&nbsp;Cowan&#146;s employment is terminated due to death or
disability, he is entitled to receive earned and accrued base
salary and unreimbursed business expenses due and unpaid as of
the date of his termination, bonus compensation earned and due
with respect to a completed calendar year but not paid as of the
date of termination, and a pro-rated portion of his bonus
compensation payable for any incomplete calendar year. If
Mr.&nbsp;Cowan is terminated without cause, he is entitled to
receive earned and accrued base salary and unreimbursed business
expenses due and unpaid as of the date of his termination, bonus
compensation earned and due with respect to a completed calendar
year but not paid as of the date of termination, a pro-rated
portion of his bonus compensation payable for any incomplete
calendar year and, in addition, a continuation of the payment of
the base salary he would have earned through December&nbsp;31,
2008 had he continued to be employed by us through such date. If
Mr.&nbsp;Cowan resigns or if we terminate Mr.&nbsp;Cowan for
cause, he is entitled to receive earned and accrued base salary
and unreimbursed business expenses due and unpaid as of the date
of his termination.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Cowan&#146;s employment agreement contains
non-competition and non-solicitation provisions that prohibit
Mr.&nbsp;Cowan from directly or indirectly competing with us
during the term of his employment and generally for a one-year
period thereafter. Mr.&nbsp;Cowan&#146;s employment agreement
also contains provisions requiring him to protect confidential
information during his employment and at all times thereafter.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Equity incentive plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>2005 Equity Incentive Plan.</I> We expect to adopt prior to
the completion of this offering, our 2005 equity incentive plan
to provide long-term incentives and rewards to our employees,
officers, directors, consultants and advisors. The 2005 plan
permits us to issue stock and grant stock options, restricted
stock, stock units and other equity interests to purchase or
acquire up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock. Awards covering no more
than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
may be granted to any person during any fiscal year. If any
award expires, or is terminated, surrendered or forfeited, then
shares of common stock covered by the award will again be
available for grant under the 2005 plan. The 2005 plan is
administered by our board of directors or a committee of the
board. The board or committee has broad discretion to determine
the terms of an award granted under the 2005 plan, including, to
the extent applicable, the vesting schedule, purchase or grant
price, option exercise price, or the term of the option or other
award; provided that the exercise price of any options granted
under the 2005 plan may not be less than the fair market value
of the common stock on the date of grant. The board or committee
also has discretion to implement an option exchange program,
whereby outstanding stock options are exchanged for stock
options with a lower exercise price, substitute another award of
the same or different type for an outstanding award, and
accelerate the vesting of, including, as applicable, lapse of
restrictions with respect to, stock options and other awards at
any time. The terms and conditions of stock options or other
awards granted under the 2005 plan will be set forth in a
separate agreement between us and the recipient of the award.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Concurrently with the closing of this offering, we intend to
grant a total of
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;options
to purchase shares of our common stock under our 2005 equity
incentive plan, including the following estimated number of
shares to our executive officers and key employees:
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="83%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Estimated</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Executive Officer/Key Employee</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A. Cowan</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jackie R. Pipkin</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan C. Lullman</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Michael R. Williams</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 114</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the terms of his employment agreement, James&nbsp;A. Cowan
is entitled to receive an option to purchase 1.25% of our
outstanding shares of common stock immediately following the
offering (excluding the shares that may be issued upon the
exercise, if any, of the over-allotment option). As a result,
the actual number of shares subject to the option granted to
Mr.&nbsp;Cowan will be proportionately adjusted if the number of
shares to be issued by us in this offering is increased or
decreased. The actual number of shares to be subject to the
options granted to Mssrs.&nbsp;Pipkin, Lullman and Williams will
be determined by dividing the dollar value of the shares
allocated to each of them by the exercise price as so
determined. For the purpose of estimating the number of shares
to be subject to these options, the table above assumes an
exercise price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, which represents the midpoint of the range on the cover
of this prospectus. All of the options will be issued at an
exercise price equal to the fair market value of the shares on
the date of the grant. The options will have a term of five
years and vest in equal annual installments over a three year
period.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Retirement plans</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Supplemental Executive Retirement Plan.</I> Mr.&nbsp;Unger is
entitled to benefits from a supplemental executive retirement
plan, or SERP. The SERP benefit is generally equal to the
benefit that would be provided under the Employees&#146;
Retirement Plan of ACF&nbsp;Industries LLC, if certain Internal
Revenue Code limits and exclusions from compensation under the
retirement plan did not apply, less the actual benefit payable
under the ACF retirement plan. ACF is responsible for payment of
that portion of Mr.&nbsp;Unger&#146;s SERP benefit related to
service with ACF prior to the 1994 ACF asset transfer and we are
responsible for payment of that portion of the benefit related
to service with us after that transfer. The SERP benefits were
frozen effective as of March&nbsp;31, 2004. As a result, no
further benefits are accruing under the SERP. These benefits are
generally paid at the same time and in the same form as the
participant&#146;s benefit under the retirement plan. No funds
have been set aside for the benefits payable under the SERP. The
estimated annual SERP benefit for Mr.&nbsp;Unger is $117,799, of
which $106,769 is payable by us and $11,030 is payable by ACF.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Pension Plan.</I> We provide pension benefits to certain of
our salaried employees, including Mr.&nbsp;Unger, Mr.&nbsp;Finn
and Mr.&nbsp;Lullman, under the Employees&#146; Retirement Plan
of ACF Industries, LLC. Each executive&#146;s benefit under the
retirement plan is based on 2.25% of average annual compensation
for each year of service after April&nbsp;30, 1981; plus the
highest of the executive&#146;s annual compensation for five
consecutive years of employment prior to May&nbsp;1, 1981 that
results in the highest such average multiplied by number of
years of service completed prior to May&nbsp;1, 1981; plus a
fixed dollar amount. This fixed dollar amount is $12,800 for
Mr.&nbsp;Unger, $15,600 for Mr.&nbsp;Finn and $6,108 for
Mr.&nbsp;Lullman. For purposes of this plan, years of service
include years of service with both ACF and us. This total is
then reduced by an amount equal to 0.5% of the executive&#146;s
final average compensation multiplied by the number of years of
service up to 35. The benefits under this plan were frozen
effective as of March&nbsp;31, 2004. As a result, no additional
benefits are accruing under this plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The benefits under the ACF retirement plan are generally paid
monthly for the life of the executive, following retirement in
the form of a joint and survivor annuity. As most recently
determined by the actuaries for the retirement plan, based on
current years of service with us and ACF, the estimated annual
pension commencing at age&nbsp;65 for each of the named
executives is as follows: Mr.&nbsp;Unger: $99,633;
Mr.&nbsp;Finn: $72,966; and Mr.&nbsp;Lullman: $49,752. These
named executives are fully vested in their retirement plan
benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Postretirement Obligations.</I> We also provide
postretirement health and life insurance benefits for certain of
our salaried employees under plans sponsored by ACF. Our named
executive officers may become eligible for these benefits if
they retire after attaining specified age and service
requirements. In anticipation of this offering, we will be
assuming sponsorship of these benefits for our employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>Executive Survivor Insurance Plan.</I> We provide an
executive survivor insurance plan for certain of our salaried
employees, including the named executive officers. This plan
provides life insurance
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 115</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Management</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
benefits to the qualified spouse of a named executive officer
upon his death during his employment or following retirement at
or after age&nbsp;55. We have purchased a group term life
insurance policy to off-set the cost of providing this benefit.
Benefits payable under this plan are separate from any benefit
payable under our retirement plans. If the named executive
officer retires and dies after attaining age&nbsp;55, then his
qualified spouse is entitled to a monthly benefit equal to what
would have been payable under our retirement plan if the named
executive officer had retired with a 50% joint and survivor
benefit. If the named executive officer dies while actively
employed and before attaining age&nbsp;55, then his qualified
spouse is entitled to a monthly benefit equal to 20% of the
named executive officer&#146;s salary, reduced by any amount
payable under the survivor provisions of our retirement plan. If
the named executive officer dies while actively employed and on
or after attaining age&nbsp;55, then his qualified spouse is
entitled to a benefit equal to the greater of (a)&nbsp;the
benefit described in the preceding sentence (for death while
employed and not yet 55) and (b)&nbsp;the amount determined as
if the named executive officer had retired on the first day of
the month coincident with or next following the date of death.
In no event may the amounts paid under this plan exceed
$6,500&nbsp;per month. We have reserved the right to amend,
modify or terminate this plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Executive incentive plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<I>2005 Executive Incentive Plan.</I> We established our 2005
executive incentive plan to provide additional compensation to
eligible participants for their contribution to the achievement
of our objectives, to encourage and stimulate superior
performance, and to assist in attracting and retaining highly
qualified key employees. Our key managers, other than James J.
Unger and William P. Benac, are eligible to participate in the
2005 executive incentive plan. The plan permits us to make cash
awards to participants based upon a percentage of each
participant&#146;s base salary, as measured against each
participant&#146;s personal performance and our financial
performance. Personal performance goals are established by each
participant and his or her supervisor at the beginning of each
fiscal year. Our financial performance goals are based on
certain EBITDA targets relating to our performance at each of
our facilities, Ohio Castings and us as a whole, as established
by our board of directors based on our annual business plan.
Participants are entitled to payment of a partial award if,
during a fiscal year, a participant, among other things, dies,
retires or becomes permanently disabled, provided that the
participant was an active employee for a minimum of 30
consecutive calendar days during such fiscal year. The plan is
subject to the control and supervision of our chief executive
officer and our board of directors.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 116</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

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<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='113'></A>
</DIV>

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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain relationships and related party transactions
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Other than the transactions described below, for the last three
full fiscal years there has not been, nor is there currently
proposed, any transaction or series of similar transactions to
which we are or will be a party:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">in which the amount involved
    exceeded or will exceed $60,000;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">in which any director, executive
    officer, holder of more than 5% of our common stock on an
    as-converted basis or any member of their immediate family has
    or will have a direct or indirect material interest.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We believe that each of the transactions described below that is
to remain in effect following the completion of this offering is
on terms no less favorable to us than could have been obtained
from unaffiliated third parties. Although we do not have a
separate conflicts policy, we intend to comply with Delaware law
with respect to transactions involving potential conflicts.
Delaware law requires that all transactions between us and any
director or executive officer are subject to full disclosure and
approval of the majority of the disinterested members of our
board of directors, approval of the majority of our stockholders
or the determination that the contract or transaction is
intrinsically fair to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TRANSACTIONS WITH CARL C. ICAHN AND ENTITIES AFFILIATED WITH
CARL C. ICAHN</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our company was formed in 1988 as a company beneficially owned
by Carl C. Icahn. Mr.&nbsp;Icahn is our principal beneficial
stockholder and is the chairman of our board of directors. We
grew our company through the transfer of certain assets to us
from ACF, a company also beneficially owned by Mr.&nbsp;Icahn.
Since our formation, we have entered into agreements relating to
the acquisition of assets from and disposition of assets to
entities controlled by Mr.&nbsp;Icahn, the provision of goods
and services to us by entities controlled by Mr.&nbsp;Icahn, the
provision of goods and services by us to entities affiliated
with Mr.&nbsp;Icahn and other matters involving entities
controlled by Mr.&nbsp;Icahn. We receive substantial benefit
from these agreements and we expect that in the future, we will
continue to conduct business with entities affiliated with or
controlled by Mr.&nbsp;Icahn. In addition, we receive other
benefits from our affiliation with Mr.&nbsp;Icahn and companies
controlled by Mr.&nbsp;Icahn, such as financial and advisory
support, sales support and our participation in buying groups
and other arrangements with entities controlled by
Mr.&nbsp;Icahn. Until recently, most of our capital needs have
been provided by entities controlled by Mr.&nbsp;Icahn. Lease
sales agents of ARL, a company beneficially owned by
Mr.&nbsp;Icahn, and ACF, in connection with their own leasing
sales activities, have, from time to time, referred their
customers or contacts to us that prefer to purchase rather than
lease railcars, which has, in some cases, led to us selling
railcars to these customers or contacts. At this time there is
no formal arrangement under which these referrals are provided
and we do not compensate ARL, ACF or any of their leasing sales
agents for any railcar sales that we make as a result of these
referrals. As an accommodation to some of their customers and
contacts that they referred to us, ARL and ACF from time to time
accepted orders to purchase our railcars and then assigned those
orders to us. ARL and ACF have discontinued accepting orders to
sell railcars on our behalf. See &#147;Risk factors&#151;Risks
related to our business&#151;After this offering, companies
affiliated with Carl C. Icahn will continue to be important
suppliers and customers,&#148; &#147;Risk factors&#151;Risks
related to our business&#151;Services being provided to us by
ARL, an entity controlled by Carl C. Icahn, may not be
sufficient to meet our needs, which may require us to incur
additional costs,&#148; &#147;Risk factors&#151;Risks related to
our business&#151;After this offering, we may have reduced
access to resources of, and benefits provided by, entities
affiliated with Carl C. Icahn&#148; and &#147;Risk
factors&#151;Risks related to our business&#151;We could be
liable for liabilities associated
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 117</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
with pension plans sponsored by companies controlled by Carl C.
Icahn&#148; for a description of certain risks associated with
our affiliation with Mr.&nbsp;Icahn and entities affiliated with
Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We describe below the material arrangements and other
relationships that we are, or have been, a party to with
Mr.&nbsp;Icahn and entities affiliated with Mr.&nbsp;Icahn since
January&nbsp;1, 2002. As noted below, some of these arrangements
and relationships have been terminated or otherwise will no
longer be in effect following the completion, and the
application of the net proceeds of, this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Application of the net proceeds of this offering</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to use the net proceeds of this offering to, among
other things, repay certain indebtedness that we owe to entities
controlled by Mr.&nbsp;Icahn and to redeem all of the
outstanding shares of our preferred stock, all of which are held
by Mr.&nbsp;Icahn and his affiliates. As of September&nbsp;30,
2005, the total amount of this indebtedness outstanding was
approximately $60.1&nbsp;million, including accrued interest of
$1.3 million. As a result, entities controlled by Mr.&nbsp;Icahn
will receive approximately $20.0&nbsp;million of the net
proceeds of this offering. We also intend to use the net
proceeds of this offering to repay in full amounts due under our
industrial revenue bonds. As of September&nbsp;30, 2005, the
total amount of this indebtedness outstanding was approximately
$8.3&nbsp;million in principal amount and $0.3&nbsp;million in
accrued interest. The industrial revenue bonds are guaranteed by
affiliates of Mr.&nbsp;Icahn and these affiliates will be
released from such guarantees upon the repayment of the bonds.
In addition James J. Unger, our president and chief executive
officer, and his wife own $0.4&nbsp;million of the industrial
revenue bonds. See &#147;Use of proceeds,&#148;
&#147;&#151;Guarantees of indebtedness by ACF and other related
parties&#151;Industrial revenue bonds&#148; and &#147;Certain
transactions involving James J. Unger&#151;Industrial revenue
bonds&#148; and the transactions described below for more
information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REDEMPTION OF NEW PREFERRED STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Concurrently with the closing of this offering, we intend to use
approximately $91.3&nbsp;million of the net proceeds of this
offering to redeem our new preferred stock, including all
accumulated and unpaid dividends due on our new preferred stock.
See &#147;&#151;Certain Transactions Involving American Railcar
Leasing LLC&#151;The ARL exchange&#148; for more information. We
will redeem each outstanding share of new preferred stock for an
amount equal to the liquidation preference of each share of new
preferred stock, which is $1,000&nbsp;per share, plus all
accumulated and unpaid dividends on each share of new preferred
stock through the date of the redemption. Assuming the
redemption occurred on September&nbsp;30, 2005, the aggregate
amount required to redeem all of the outstanding shares of our
new preferred stock, including accumulated and unpaid dividends,
would have been $91.3&nbsp;million. All of our new preferred
stock is held by entities beneficially owned and controlled by
Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REDEMPTION OF MANDATORILY REDEEMABLE PREFERRED STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On or before the closing of this offering, we intend to redeem
our one outstanding share of mandatorily redeemable preferred
stock, which is held by Mr.&nbsp;Icahn. As of September&nbsp;30,
2005, there was $770 of accumulated and unpaid dividends on that
stock. This share became mandatorily redeemable for $1,000 on
February&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN TRANSACTIONS WITH ACF INDUSTRIES LLC AND AMERICAN
RAILCAR LEASING LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have entered into a variety of agreements and transactions
with ACF Industries LLC (which we refer to, along with its
predecessor ACF Industries, Inc., as ACF), American Railcar
Leasing LLC (which we refer to as ARL) and certain other parties
related to these companies. These transactions and agreements
are described in further detail below. During the periods
discussed, ACF and ARL
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 118</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
were beneficially owned and controlled by Mr.&nbsp;Icahn, and
they continue to be so owned and controlled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On October&nbsp;1, 1994, under an asset transfer agreement with
ACF, we acquired from ACF, properties and assets used in its
railcar components manufacturing business and its railcar
servicing business at specified locations, and certain
intellectual property rights associated with the transferred
assets and businesses, as well as specified assets used in the
manufacture and sale of industrial size mixing bowls. We refer
to this transaction as the 1994 ACF asset transfer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2004, ACF and its subsidiaries, through a series of
transactions, transferred some of the railcar fleets that they
then owned and held primarily for lease to third parties, to ARL
and its subsidiaries. At the time, we owned all the common
interests of ARL. As of June&nbsp;30, 2005, we transferred our
entire interest in ARL in exchange for the redemption of shares
of our new preferred stock, in a transaction we refer to as the
ARL exchange. All of our shares of new preferred stock were and
continue to be owned by entities beneficially owned and
controlled by Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Manufacturing Operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to the transfer of ACF&#146;s and its subsidiaries&#146;
railcar fleets to ARL and its subsidiaries in 2004, we sold
railcars and railcar components to ACF and its subsidiaries for
use in their railcar fleets. Since the transfer of these fleets
to ARL, we sell railcars to ARL. We believe that since
ARL&#146;s formation in 2004, we have been the only supplier of
railcars to ARL, although ARL is not precluded from purchasing
railcars from others. In 2002, 2003 and 2004, our revenues from
manufacturing operations included $63.6&nbsp;million,
$62.9&nbsp;million and $64.4&nbsp;million, respectively, from
transactions with affiliates. In the nine months ended
September&nbsp;30, 2005, our revenues from manufacturing
operations included $44.5&nbsp;million from transactions with
affiliates. Most of these revenues were attributable to railcars
and railcar components that we sold to ACF, ARL and their
respective subsidiaries. As of September&nbsp;30, 2005, our
backlog included $44.1&nbsp;million for railcar orders by ARL.
These orders are on substantially the same terms as we provide
to our other customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ACF has also been a significant supplier of components for our
business. Components supplied to us by ACF include tank railcar
heads, wheel sets and various structural components. In 2002,
2003 and 2004, we purchased inventory of $15.7&nbsp;million,
$19.0&nbsp;million, and $31.3&nbsp;million, respectively, of
components from ACF. In the nine months ended September&nbsp;30,
2005, we purchased inventory of $56.2&nbsp;million from ACF. As
of September&nbsp;30, 2005, we had outstanding purchase orders
for $8.7&nbsp;million of inventory from ACF.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During 2003 and 2004, Castings LLC, a joint venture partner in
Ohio Castings, was a wholly owned subsidiary of ACF Industries
Holding Corp., an indirect parent of ACF that is beneficially
owned and controlled by Mr.&nbsp;Icahn. Effective
January&nbsp;1, 2005, we acquired Castings LLC from ACF
Industries Holding Corp. as described under &#147;&#151;Certain
Transactions Involving Ohio Castings.&#148; Our cost of railcar
manufacturing for the years ended December&nbsp;31, 2003 and
2004, and the nine months ended September&nbsp;30, 2005 included
$3.0&nbsp;million, $19.9&nbsp;million and $14.0&nbsp;million,
respectively, in railcar components produced by Ohio Castings.
Expenses of $0.4&nbsp;million and $3.2&nbsp;million paid to
Castings LLC under a supply agreement are also included in the
cost of railcar manufacturing for the years ended
December&nbsp;31, 2003 and 2004, respectively. We also have been
charged $0.2&nbsp;million in the year ended December&nbsp;31,
2003 relating to certain costs incurred by Castings LLC in the
establishment of Ohio Castings. In the first nine months of
2005, we purchased $15.0&nbsp;million in railcar components
produced by Ohio Castings. Inventory at December&nbsp;31, 2003,
2004 and September&nbsp;30, 2005 includes approximately
$0.3&nbsp;million, $5.3&nbsp;million and $2.3&nbsp;million,
respectively, of purchases from Ohio Castings. In September
2003, Castings LLC loaned Ohio Castings $3.0&nbsp;million under
a promissory note which was due in January 2004. The note was
renegotiated for $2.2 million and bears interest at
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 119</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
4.0%. Payments are made in quarterly installments with the last
payment due in November 2008. As of September&nbsp;30, 2005,
$2.2&nbsp;million was outstanding under this note.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Railcar services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have provided railcar repair and maintenance services and
fleet management services to ACF and ARL and we continue to
provide these services to ARL. As of September&nbsp;30, 2005, we
managed approximately 22,000 railcars for ARL, and we also
provide repair and maintenance services for these railcars. In
2002, 2003 and 2004, our revenues from railcar repair and
refurbishment and fleet management services included
$12.8&nbsp;million, $11.0&nbsp;million and $18.2&nbsp;million,
respectively, from transactions with affiliates. In the nine
months ended September&nbsp;30, 2005, our revenues from railcar
repair and refurbishment and fleet management services included
$16.0&nbsp;million from transactions with affiliates. Almost all
of these revenues were attributable to services we provided to
ACF, ARL and their subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Cost of railcar services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Through September&nbsp;30, 2005, ACF and ARL have provided
certain leasing and other fleet management services that we were
required to provide to subsidiaries of ARL, under management
agreements we entered into with those companies in July and
October 2004. Through March&nbsp;31, 2005, we paid to ACF and,
from March&nbsp;31, 2005 through September&nbsp;30, 2005, we
paid to ARL, the leasing and management fees we received under
those management agreements. In 2004 and the nine months ended
September&nbsp;30, 2005, we incurred $1.2&nbsp;million and
$2.0&nbsp;million, respectively, of cost of railcar services in
connection with these arrangements. These arrangements were
terminated on June&nbsp;30, 2005, when we assigned our
management agreements to ARL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Administrative and other support expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the current and last three fiscal years, ACF and ARL have
provided us outsourced services related to our information
technology needs as well as other administrative and support
services. We incurred $0.3&nbsp;million of expenses in each of
2002, 2003 and 2004 in connection with these arrangements, and
in the first nine months of 2005, we incurred $1.1&nbsp;million
of such expenses. The increased expenses in 2005 reflect
additional information technology services not provided in
previous years. Until October 2004, ACF received the majority of
our cash receipts and disbursed our cash on our behalf. We
maintained a receivable/payable from affiliates bearing interest
at ACF&#146;s internal cost of funds in accordance with an
administration agreement between ACF and us, which is described
below. Under this arrangement, ACF provided financing to us
based on our cash flow needs. We have also subleased our
headquarters facility which is located in St. Charles, Missouri,
from affiliates. The St.&nbsp;Charles property is owned by an
affiliate of James Unger, our chief executive officer. In each
of 2002, 2003 and 2004, our expenses included $0.1&nbsp;million
of rent and $0.4&nbsp;million of related facility expense
payments required to be made to affiliates associated with our
lease of the St. Charles headquarters facility. In the nine
months ended September&nbsp;30, 2005, our expenses included
$0.1&nbsp;million of rent and $0.2&nbsp;million of related
expense for these facilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Amounts due to affiliates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of September&nbsp;30, 2005, net amounts due to affiliates
were $22.1&nbsp;million relating to the above referenced
transactions and included:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">an amount payable to ACF of
    $2.1&nbsp;million;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">an amount payable of
    $7.4&nbsp;million to Arnos Corp., a company beneficially owned
    and controlled by Mr.&nbsp;Icahn, representing the principal and
    interest due under a demand note in the principal amount of
    $7.0&nbsp;million that we issued in connection with a working
    capital loan from Arnos Corp.;&nbsp;and
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 120</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">an amount payable of
    $12.6&nbsp;million to ACF Industries Holding Corp., a company
    beneficially owned and controlled by Mr.&nbsp;Icahn,
    representing the principal and interest due under a demand note
    in the principal amount of $12.0&nbsp;million that we issued in
    connection with our purchase of Castings LLC from ACF Industries
    Holding Corp.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to use a portion of the net proceeds of this offering
to repay in full the notes to Arnos Corp. and ACF Industries
Holding Corp.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN TRANSACTIONS WITH ACF INDUSTRIES LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>1994 ACF asset transfer</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On October&nbsp;1, 1994, under an asset transfer agreement with
ACF, we acquired properties and assets used in ACF&#146;s
railcar components manufacturing business and its railcar
servicing business at specified locations, and certain
intellectual property rights associated with the transferred
assets and businesses, as well as specified assets used in the
manufacture and sale of industrial size mixing bowls. We refer
to this transaction as the 1994 ACF asset transfer. The
properties covered by this agreement included the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="29%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Component manufacturing</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>Repair plants</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>plant and warehouse</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Mobile units</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    Bude, Mississippi</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Jackson, Missouri</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Addis, Louisiana</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Milton, Pennsylvania</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Convent, Louisiana</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Tennille, Georgia</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ingleside, Texas</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    North Kansas City,</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Deer Park, Texas</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Missouri</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Taft, Louisiana</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Longview, Texas</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the 1994 ACF asset transfer, ACF retained and agreed
to indemnify us for certain liabilities and obligations relating
to ACF&#146;s conduct of business and ownership of the assets at
these locations prior to their transfer to us, including
liabilities relating to employee benefit plans, subject to
exceptions for transferred employees described below, workers
compensation, environmental contamination and third-party
litigation. As part of the 1994 ACF asset transfer, we agreed
that the ACF employees transferred to us would continue to be
permitted to participate in ACF&#146;s employee benefit plans
for so long as we remained a part of ACF&#146;s controlled
group, and we further agreed to assume the ongoing expense for
such employees&#146; continued participation in those plans. In
the event that we cease to be a member of ACF&#146;s controlled
group, ACF is required to terminate the further accrual of
benefits by our transferred employees under its benefit plans,
and we and ACF are required to cooperate to achieve an
allocation of the assets and liabilities of the benefits plans
accrued after the 1994 ACF asset transfer with respect to each
of our and ACF&#146;s employees as we and ACF deem appropriate.
Upon completion of the offering, we will no longer be a part of
ACF&#146;s controlled group. As of December&nbsp;31, 2004, we
estimate that the total retained liabilities of ACF under the
asset transfer agreement were $11.1&nbsp;million, primarily
relating to pension and postretirement liabilities. In 2002,
2003 and 2004, ACF paid $0.7&nbsp;million, $0.6&nbsp;million and
$1.4&nbsp;million, respectively, relating to the retained
liabilities. In the nine months ended September&nbsp;30, 2005,
ACF paid $0.8&nbsp;million relating to the retained liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In anticipation of our no longer being a part of ACF&#146;s
controlled group upon completion of this offering, we have been
discussing with ACF an appropriate arrangement for allocating
the assets and liabilities of the pension benefit plans retained
by ACF in the 1994 ACF asset transfer in which some of our
employees continue to participate, and for relieving us of our
further employee benefit reimbursement obligations to ACF under
the 1994 ACF asset transfer agreement. The principal employee
benefit plans affected by this arrangement are two ACF sponsored
pension plans, known as
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 121</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
the ACF Employee Retirement Plan and the ACF Shippers Car Line
Pension Plan, and certain ACF sponsored retiree medical and
retiree life insurance plans.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the proposed arrangement, in exchange for our agreement to
pay ACF approximately $9.2&nbsp;million and to become the
sponsoring employer under the ACF Shippers Car Line Pension
Plan, including the assumption of all obligations for our and
ACF&#146;s employees under that plan, we will cease to be a
participating employer under the ACF Employee Retirement Plan
and will be relieved of all further reimbursement obligations,
including for our employees, under that plan. We estimate that
as of December&nbsp;1, 2005, the ACF Shippers Car Line Pension
Plan had $4.0&nbsp;million of unfunded liabilities on an
accounting basis, that will be assumed by us in connection with
this arrangement. The payment of approximately $9.2&nbsp;million
to be made by us to ACF represents our and ACF&#146;s estimate
of the payment required to be made by us to achieve an
appropriate allocation of the assets and liabilities of the
benefit plans accrued after the 1994 ACF asset transfer, with
respect to each of our and ACF&#146;s employees in connection
with the two plans. This allocation will be determined in
accordance with the actuarial calculations that would be
required to used by us and ACF in allocating plan assets and
liabilities at such time as we cease to be a member of
ACF&#146;s controlled group.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As part of this arrangement, we will also assume sponsorship of
a retiree medical and retiree life insurance plan for active and
identified former ARI employees that are covered by the ACF
sponsored medical and retiree life insurance plans, and ACF will
be relieved of all further liability under those plans with
respect to those employees. We estimate that as of
December&nbsp;1, 2005, the post-retirement liability related to
this obligation was approximately $3.9&nbsp;million. ACF will
pay us approximately $2.9&nbsp;million to assume the pre-1994
portion of this liability.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the foregoing, we anticipate that we will
record an expense of approximately $10.4&nbsp;million during the
period in which these transactions are completed, including
$6.3&nbsp;million for the net cash payment to ACF,
$4.0&nbsp;million for the unfunded liability assumed under the
Shippers Car Line pension plan and $3.9&nbsp;million for the
assumption and sponsorship of an unfunded post retirement
medical and retiree life insurance plan for our employees. We
have previously accrued an estimated liability related to this
settlement of $3.8&nbsp;million.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the 1994 ACF asset transfer, certain of our
employees, including Mr.&nbsp;Unger, our president, continued to
participate in the ACF supplemental executive retirement plan,
or SERP. The SERP benefit is generally equal to the benefit that
would be provided under the Employees&#146; Retirement Plan of
ACF Industries LLC, if certain Internal Revenue Code limits and
exclusions from compensation under the retirement plan did not
apply, less the actual benefit payable under the ACF retirement
plan. ACF remained responsible for payment of that portion of
those employees&#146; SERP benefit related to service with ACF
prior to the 1994 ACF asset transfer and we are responsible for
payment of that portion of the benefit related to service with
us after that transfer. The SERP benefits were frozen effective
as of March&nbsp;31, 2004. As a result, no further benefits are
accruing under the SERP. In anticipation of our no longer being
a part of ACF&#146;s control group upon completion of this
offering, we are adopting a separate SERP to cover our allocable
portion of the SERP obligations to those of our employees who
participated in ACF&#146;s SERP. ACF will remain obligated to
pay that portion of any liability associated with the SERP
related to service of those employees performed prior to the
1994 ACF asset transfer. See &#147;Management&nbsp;&#151;
Retirement plans.&#148;
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Also in connection with the 1994 ACF asset transfer, we entered
into the following administrative and operating agreements with
ACF, effective as of October&nbsp;1, 1994:
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">manufacturing services agreement;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">license agreement from ACF;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">license agreement to ACF;
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 122</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">administration agreement;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">railcar servicing
    agreement;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">supply agreement.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Only the manufacturing services agreement and the two license
agreements remain in effect. The other agreements were all
terminated as of April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Manufacturing Services Agreement.</I></B> Under the
manufacturing services agreement, ACF has agreed to manufacture
and, upon our instruction, to distribute various railcar
components and industrial size mixing bowls, using assets that
we acquired pursuant to the 1994 ACF asset transfer, but were
retained by ACF at its Milton, Pennsylvania and Huntington, West
Virginia manufacturing facilities. This equipment included
presses and related equipment that were impracticable to move to
our premises. ACF transferred its Milton, Pennsylvania repair
facility, but not its Milton, Pennsylvania manufacturing
facility, to us under the 1994 asset transfer. Under our
manufacturing services agreement, ACF is required to maintain
and insure the equipment during the term of the manufacturing
services agreement and is permitted to use the equipment for its
own purposes in the ordinary course of business, provided that
it does not interfere with ACF&#146;s timely performance of the
manufacturing services under this agreement. Upon termination of
the agreement, ACF is required, at our expense, to remove and
deliver the equipment to any site designated by us in the
continental U.S.&nbsp;As payment for these services, we agreed
to pay ACF its direct costs, including the cost of all raw
materials not supplied by us, and a reasonable allocation of
overhead expenses attributable to the services, including the
cost of maintaining employees to provide the services. We
believe that payments to ACF under this arrangement are
comparable to the cost we would have paid to an independent
third party to manufacture such components. This agreement
remains in effect and automatically renews on an annual basis
unless we provide six months prior written notice of
termination. There is no right of termination for ACF under this
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>License Agreement from ACF.</I></B> Under a license
agreement with ACF, ACF granted us a non-exclusive, perpetual,
royalty-free license to the patents and other intellectual
property owned by it, which could be used by us in the conduct
of our business, but did not exclusively relate to our business,
including the 12 patents and one patent application, now issued
as a patent, listed in that agreement. Of these patents, ten
patents have expired and the remaining three patents have
expiration dates ranging from 2012 to 2013. These remaining
patents primarily relate to pneumatic outlets and railcar hopper
gaskets. Under this agreement, we could not use the licensed
patents for the production of railcar components for third
parties without the consent of ACF. In 1997, ACF transferred the
patents covered by this license to us. This license is not
assignable by either party, without the prior consent of the
other, except in connection with the sale of substantially all
of either party&#146;s business. This agreement remains in
effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>License Agreement to ACF.</I></B> Under a license
agreement with ACF, we granted ACF a non-exclusive, perpetual,
royalty-free license to the intellectual property exclusively
relating to our business that was transferred to us in the 1994
asset transfer. There are no restrictions on ACF&#146;s use of
the information licensed under this agreement. This license is
not assignable by either party, without the prior consent of the
other, except in connection with the sale of substantially all
of either party&#146;s business. This agreement remains in
effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Administration Agreement.</I></B> Under an administration
agreement with ACF, ACF agreed to provide us information
technology services and other administrative services. We agreed
to pay ACF its direct costs, including a reasonable allocation
of overhead expenses attributable to providing the services,
including the cost of maintaining employees to provide the
services. Until October 2004, under this agreement, ACF received
the majority of our cash receipts and disbursed our cash on our
behalf. We maintained a receivable/payable from affiliates
bearing interest at ACF&#146;s internal cost of funds. Under
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 123</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
this arrangement, ACF provided financing to us based upon our
cash flow needs. We also subleased our headquarters facility in
St. Charles Missouri from ACF under this agreement. This
agreement was terminated on April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Railcar Servicing Agreement.</I></B> Under a railcar
servicing agreement with ACF, we agreed to provide railcar
repair and maintenance services for railcars owned or managed by
ACF and leased or held for lease by ACF, to provide ACF with
fleet management services, and to provide ACF with consulting
services on safety and environmental matters. For maintenance
services, ACF paid us for components at our actual costs plus
15% and for our labor at a fixed rate that has been adjusted
from time to time to reflect market conditions. Painting, lining
and cleaning services were billed at current market rates, and
fleet management services were billed at a monthly fee per
railcar serviced. Other services were billed at our direct costs
plus 5.0%. Our direct costs included a reasonable allocation of
overhead expenses attributable to providing the services,
including the cost of maintaining employees to provide the
services. This agreement was terminated on April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Supply Agreement.</I></B> Under a supply agreement with
ACF, we agreed to manufacture and sell to ACF specified
components. In addition, under this agreement, we agreed to sell
ACF other components manufactured by us on terms not less
favorable than the terms on which we sell those products to
third parties. We sold specified components under the agreement
for a price equal to the then current market price or our cost
plus a gross profit percentage. This gross profit percentage has
been revised annually and has ranged from 5.0% to 25.0%,
depending upon the component and which one of our facilities
manufactured the product. This agreement was terminated on
April&nbsp;1, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>2005 Consulting agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On April&nbsp;1, 2005, we entered into two business consultation
agreements with ACF, whereby each of us has agreed to provide
services to the other. ACF has agreed to assist us in labor
litigation, labor relations support and consultation, and labor
contract interpretation and negotiation. In 2005, we anticipate
that we will require the services of at least one ACF employee
for no more than 20&nbsp;hours a week under this agreement. We
pay $150&nbsp;per hour for these services. We have agreed to
provide ACF with engineering consultation and advice. In 2005,
we anticipate that ACF will require the services of at least one
of our employees for no more than 20&nbsp;hours a week under
this agreement. ACF is required to pay $150&nbsp;per hour for
these services. We do not believe that either party will be
required to pay more than $60,000&nbsp;per year under either of
these agreements. These agreements remain in effect through
March 2015, subject to the right of either party to terminate
the agreement on 30&nbsp;days notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>1998 Loan to ACF</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In October 1998, we loaned $57.2&nbsp;million to ACF. This loan
accrued interest at a variable rate, adjusted quarterly, equal
to LIBOR plus 3.0% or the base rate of the Industrial Bank of
Japan plus 1.5%, as elected by ACF. This loan was repaid in full
in 2004 in connection with the formation and capitalization of
ARL. See &#147;Certain Transactions Involving American Railcar
Leasing LLC&#151;Formation of ARL and Related
Contributions.&#148; In 2002, 2003 and 2004, we recorded
interest income relating to this loan of $2.8&nbsp;million,
$2.5&nbsp;million and $1.8&nbsp;million, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Guarantees of indebtedness by ACF and other related
parties</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Industrial Revenue Bonds.</I></B> ACF and ACF Industries
Holding Corp., an indirect parent of ACF, have guaranteed our
obligations under our industrial revenue bonds. As of
September&nbsp;30, 2005, $8.3&nbsp;million was outstanding under
these bonds. These bonds are payable through 2011 and, as of
September&nbsp;30, 2005, bear interest at rates ranging from
7.75% to 8.5%. We intend to use a portion of the net proceeds of
this offering to repay these bonds in full. ACF and ACF
Industries Holding Corp. will be released from their guarantees
upon the repayment of the bonds.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 124</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Senior Secured Credit Facility.</I></B> In 1998, we
obtained a senior secured credit facility from the Industrial
Bank of Japan, as administrative agent, with a total
availability of $150&nbsp;million. This facility was guaranteed
by ACF, ACF Industries Holding Corp., an indirect parent of ACF,
and NMI Holding Corp., a wholly owned subsidiary of ACF
Industries Holding Corp. This facility was repaid in full in
July 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Subordinated Note.</I></B> In 1998, we obtained a
$10.0&nbsp;million loan from Boeing Financial under a promissory
note. This note was guaranteed by ACF and ACF Industries Holding
Corp. and was repaid in full in July 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>CIT Equipment Lease.</I></B> In 1999, we entered into a
master equipment lease agreement with CIT that was guaranteed by
ACF. This lease relates to equipment that we use to manufacture
railcars and railcar components at our Paragould, Marmaduke,
Jackson and Kennett facilities. The interest rate on the lease
is LIBOR plus 2.75% (6.1% at September&nbsp;30, 2005). As of
September&nbsp;30, 2005, a balance of $7.4&nbsp;million was
outstanding under this lease, including amounts subject to our
purchase option at the expiration of the lease term. The lease
expires in November 2005. While we are not committed to do so,
we currently intend to exercise our purchase option under this
lease.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Interest rate swap contract</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2001, we entered into a derivative instrument in the form of
an interest rate swap contract with an underlying notional
amount of $49.0&nbsp;million. We assigned this contract to ACF,
effective as of the date of its execution, and all rights and
obligations of this contract were passed through to ACF. This
contract expired on February&nbsp;28, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Raw material and other product purchase agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We, together with ACF, have entered into agreements for the
purchase of products by each of us, including steel and gas.
Under these agreements, we and ACF are entitled to favorable
pricing based upon the aggregate amount of our purchases. We
allocate the benefits under these purchase agreements
proportionally based upon the amount of products that each of us
purchases during the applicable period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Corbitt equipment lease and purchase</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We leased from ACF, leasehold improvements and equipment that we
placed in service at our Corbitt manufacturing facility in St.
Charles, Missouri from July&nbsp;1, 2001 through June&nbsp;1,
2003. During 2002, 2003 and 2004, we paid ACF $0.3&nbsp;million,
$0.3&nbsp;million and $0.4&nbsp;million, respectively, for the
use of these leasehold improvements and equipment. We did not
pay any rent for these assets in 2005. Rather, on March&nbsp;31,
2005, we purchased these assets from ACF for $2.8&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN TRANSACTIONS INVOLVING AMERICAN RAILCAR LEASING
LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Formation of ARL and related contributions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We formed ARL as our wholly owned subsidiary in June 2004. As
part of the formation of ARL and its further capitalization, ACF
and certain of its subsidiaries transferred to us and ARL
railcars and related leases, as well as equity in certain of
ACF&#146;s subsidiaries that supported ACF&#146;s leasing
business, in exchange for shares of our new preferred stock and
preferred interests of ARL. We, in turn, contributed the assets
we so received to ARL and made a cash investment in ARL of
$25.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with these transactions, all of which occurred in
2004:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">we were issued all of the common
    interests in ARL;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">ACF and its subsidiaries were
    issued all of ARL&#146;s B-1 preferred interests;
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 125</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">Vegas Financial Subsidiary Corp.,
    a company beneficially owned and controlled by Mr.&nbsp;Icahn,
    was issued all of ARL&#146;s B-2 preferred interests in exchange
    for an investment of $40&nbsp;million;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">we issued 34,500&nbsp;shares of
    our new preferred stock to ACF and its subsidiaries;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our $57.2&nbsp;million loan to ACF
    was repaid in full.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The B-1 and B-2 preferred interests of ARL were convertible into
shares of our new preferred stock. On June&nbsp;30, 2005, the
terms of these interests were modified, among other things, to
eliminate this conversion feature.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The ARL exchange</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On June&nbsp;30, 2005, we transferred all our interest in ARL,
consisting of all its outstanding common A units, pro rata, to
the holders of our new preferred stock in exchange for the
redemption of 116,116&nbsp;shares of our new preferred stock
held by them, including all dividends accumulated on those
shares. The value of the total liquidation preference and
accumulated dividends on the shares of new preferred stock
redeemed in this transaction was $125.0&nbsp;million. All of the
shares of our new preferred stock are held by companies
beneficially owned and controlled by Mr.&nbsp;Icahn. We refer to
this transaction as the ARL exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Agreements relating to ARL and its subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2004 and 2005, we entered into the following agreements
relating to ARL and its subsidiaries:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">railcar management agreements with
    ARI First LLC and ARI Third LLC;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">ACF administration agreement;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">ARL railcar services agreement;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">ARL railcar servicing agreement;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">ARL services agreement;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">guarantee of ARI Second LLC loan
    agreement.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The ARL railcar servicing agreement and the ARL services
agreement remain in effect. All other agreements were terminated
or assigned to ARL at various times during 2005, as described
below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Railcar Management Agreements with ARI First LLC and ARI
Third LLC.</I></B> On July&nbsp;20, 2004, we entered into a
railcar management agreement with ARI First LLC and on
October&nbsp;7, 2004, we entered into a railcar management
agreement with ARI Third LLC. ARI First LLC and ARI Third LLC
are wholly owned subsidiaries of ARL that hold railcars forming
a portion of the railcar lease fleet owned by ARL and its
subsidiaries. Under these railcar management agreements, we
provided ARI First and ARI Third with marketing, leasing,
administration, maintenance, recordkeeping and insurance
services for the railcars owned by ARI First and ARI Third. ARI
First and ARI Third paid us a monthly management fee, based upon
the number of railcars covered, and reimbursed us for all costs
incurred in performing these services. We assigned this
agreement to ARL effective June&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>ACF Administration Agreement.</I></B> On July&nbsp;20,
2004, we entered into an ACF administration agreement with ACF
and ARL. Under this agreement, ACF agreed to provide us with
railcar management services which we were required to provide
under the management agreements with ARI First LLC and ARI Third
LLC described above (except maintenance, insurance and risk
management services). In addition, ACF provided us with lease
administration services for the railcars owned by ARI First LLC
and ARI Third LLC, respectively. Under this agreement, we were
required to pay ACF a per railcar monthly fee equal to the per
railcar fee that we were receiving under our railcar
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 126</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
management agreements with ARI First LLC and ARI Third LLC. This
Agreement terminated on March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>ARL Railcar Services Agreement.</I></B> On April&nbsp;1,
2005, we entered into a railcar services agreement with ARL.
Under this agreement, ARL provided us with railcar services
which we were required to provide to ARI First LLC and ARI Third
LLC under our railcar management agreements with ARI First LLC
and ARI Third LLC. Under this agreement, we were required to pay
ARL all compensation that we received from ARI First LLC and ARI
Third LLC under our railcar management agreements with them.
This agreement was terminated July&nbsp;1, 2005 when we assigned
our railcar management agreements with ARI First LLC and ARI
Third LLC to ARL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>ARL Railcar Servicing Agreement.</I></B> On April&nbsp;1,
2005, we entered into a railcar servicing agreement with ARL.
Under this agreement, we provide ARL with substantially the same
services that we had previously provided to ACF under our 1994
railcar servicing agreement with ACF described above under
&#147;Certain Transactions with ACF Industries, LLC&#151;1994
ACF Asset Transfer&#151;Railcar Servicing Agreement,&#148; for
railcars that ARL or its affiliates own or manage. Under the
agreement with ARL, ARL is required to pay us a monthly fee,
based upon the number of railcars covered, plus a charge for
labor, components and materials. For materials and components we
manufacture, ARL pays us our current market price, and for
materials and components we purchase, ARL pays us our purchasing
costs plus 15%. For painting, lining and cleaning services, ARL
pays the then current market rate. For other labor costs, ARL
pays us a fixed hourly fee. We have further agreed that the
charges for our services will be on at least as favorable terms
as our terms with any other party for similar purposes. The per
railcar fees paid to us through September&nbsp;30, 2005 under
the railcar management agreements for ARI First LLC and ARI
Third LLC are credited against the amounts due us under the ARL
railcar servicing agreement. This agreement extends through
June&nbsp;30, 2006, and is automatically renewable for
additional one year periods unless either party gives at least
six months prior notice of termination. If we elect to terminate
this agreement, we must pay a termination fee of
$0.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>ARL Services Agreement.</I></B> On April&nbsp;1, 2005, we
entered into a services agreement with ARL. Under this
agreement, ARL has agreed to provide us certain information
technology services, rent and building services and limited
administrative services. The rent and building services includes
our use of our headquarters space which is leased by ARL from an
affiliate of James J. Unger, our President and Chief Executive
Officer. See &#147;Certain Transactions Involving James J.
Unger.&#148; Also under this agreement, we have agreed to
provide purchasing and engineering services to ARL. Each party
is required to pay the other a fixed annual fee for each of the
listed services under this agreement. The total annual fees that
we are required to pay ARL for all services that ARL is
providing us, under this agreement is $2.2&nbsp;million, and the
total annual fees that ARL is required to pay us for all
services that we are providing ARL under this agreement is
$0.2&nbsp;million. The annual fees under our services agreements
with ARI and ARL were determined in the following manner: first,
we allocated for the cost of each department of ARL providing
services to us; second, we calculated these costs based on the
number of employees providing these services and the attendant
cost associated with them; third, we applied the same formula to
value the services we provided to ARL; and finally, we
calculated the fee allocations relating to rent and building
services using an agreed upon percentage of space utilized and
headcount between the two companies. Either party may terminate
any of these services, and the associated costs for those
services, on at least six months prior notice at any time prior
to the termination of the agreement on December&nbsp;31, 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Guarantee of ARI Second LLC Loan Agreement.</I></B> On
July&nbsp;20, 2004, ARI Second LLC, a subsidiary of ARL, entered
into a loan agreement with HSH Nordbank AG, under which ARI
Second borrowed $64.3&nbsp;million. We guaranteed ARI Second
LLC&#146;s obligations under this loan agreement. This loan was
repaid in full in October 2004.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 127</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Health and welfare benefit plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Employees of ARL participate in our 401(k) plan and certain of
our health and welfare benefit plans. ARL is responsible for the
costs and benefits for its employees under these plans. As part
of the ARL Exchange, ARL is in the process of establishing its
own 401(k) and health and welfare benefit plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN TRANSACTIONS INVOLVING OHIO CASTINGS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In February 2003, Castings LLC, a wholly owned subsidiary of ACF
Industries Holding Corp., a company beneficially owned and
controlled by Mr.&nbsp;Icahn, acquired a one-third ownership
interest in Ohio Castings Company, LLC, a joint venture with
affiliates of two established railcar industry companies, Amsted
Industries, Inc. and The Greenbrier Companies, Inc. Ohio
Castings operates two foundries that produce heavy castings.
Effective as of January&nbsp;1, 2005, ACF Industries Holding
Corp. transferred its interest in Castings LLC to us for total
consideration of $12.0&nbsp;million, represented by a promissory
note bearing an interest rate equal to the prime rate plus 0.5%,
payable on demand. In connection with this transfer, we agreed
to assume certain, and indemnify all liabilities related to and
arising from ACF Industries Holding Corp.&#146;s investment in
Castings LLC, including the guarantee of Castings LLC&#146;s
obligations to Ohio Castings, the guarantee of bonds in the
amount of $10.0&nbsp;million issued by the State of Ohio to one
of Ohio Castings&#146; subsidiaries, of which $8.0&nbsp;million
was outstanding as of September&nbsp;30, 2005, and the guarantee
of a $2.0&nbsp;million state loan that provides for purchases of
capital equipment, of which $0.8&nbsp;million was outstanding as
of September&nbsp;30, 2005. The two other partners of Ohio
Castings have made similar guarantees of these obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have entered into supply agreements with an affiliate of
Amsted Industries, Inc., an affiliate of one of our Ohio
Castings joint venture partners, to purchase up to 25% and 33%,
respectively, of the products produced at each of two foundries
being operated by Ohio Castings. We pay Castings LLC a fee in
connection with those purchases. Our purchases and payments
relating to these purchases and fees are set forth above under
&#147;&#151;Certain Transactions with ACF Industries LLC and
American Railcar Leasing LLC&#151;Manufacturing Operations.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN TRANSACTIONS WITH MR. ICAHN AND OTHER RELATED
ENTITIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Carl C. Icahn and ARL loans</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In October 2004, we advanced Mr.&nbsp;Icahn $165.0&nbsp;million
under a secured promissory note due in 2007 and bearing interest
at the prime plus 1.75%. At the same time, we borrowed
$130.0&nbsp;million from ARL represented by a promissory note
due in 2007 and bearing interest at the prime rate plus 1.5%. In
January 2005, we transferred our entire interest in the Icahn
note to ARL in exchange for additional common interests in ARL
and in satisfaction of our obligations under the ARL note. In
2004 and the nine months ended September&nbsp;30, 2005, we
recorded interest income of $2.0&nbsp;million and
$0.8&nbsp;million, respectively, and interest expense of
$1.5&nbsp;million and $0.6&nbsp;million, respectively, relating
to these notes.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Arnos Corp. note&nbsp;payable</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, we borrowed $7.0&nbsp;million from Arnos
Corp., a company beneficially owned and controlled by
Mr.&nbsp;Icahn, under a promissory note. The note bears interest
at the prime rate plus 1.75% (8.0% at September&nbsp;30, 2005)
and is payable on demand. We intend to use a portion of the net
proceeds of this offering to repay this loan in full.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transactions with Vegas Financial Corp.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Purchase of Mandatorily Redeemable Payment-in-Kind
Preferred Stock.</I></B> We issued to Vegas Financial Corp., a
company beneficially owned and controlled by Mr.&nbsp;Icahn,
15,000&nbsp;shares of our
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 128</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
mandatorily redeemable payment-in-kind preferred stock, known as
PIK preferred stock, for $15.0&nbsp;million in June 2002, and
10,000&nbsp;shares of PIK preferred stock for $10.0&nbsp;million
in June 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Conversion into and Purchase of New Preferred
Stock.</I></B> In July 2004, Vegas Financial Corp. converted all
of its PIK preferred stock, consisting of 95,517.04&nbsp;shares
of PIK preferred stock, representing all of the shares of PIK
preferred stock outstanding, into 96,171&nbsp;shares of our new
preferred stock. In addition, Vegas Financial Corp.
simultaneously purchased an additional 67,500&nbsp;shares of new
preferred stock for $67.5&nbsp;million. We intend to use the net
proceeds of this offering to, among other things, redeem all of
the outstanding shares and pay all accrued dividends on our new
preferred stock, including those held by Vegas Financial Corp.
As a result, Vegas Financial Corp, will receive
$89.2&nbsp;million of the net proceeds of this offering. See
&#147;Redemption of New Preferred Stock.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transactions with Hopper Investments LLC</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2004, Hopper Investments LLC, a company beneficially owned
and controlled by Mr.&nbsp;Icahn, paid $42.5&nbsp;million for
195&nbsp;shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Transactions with Philip Environmental Services Corp.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We engaged Philip Environmental Services Corp., an environmental
consulting company beneficially owned and controlled by
Mr.&nbsp;Icahn, to provide environmental consulting services to
us. In the nine months ended September&nbsp;30, 2005 we incurred
$0.2&nbsp;million of expenses associated with that engagement.
We have continued to use Philip Environmental Services Corp. to
assist us in our environmental compliance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CERTAIN TRANSACTIONS INVOLVING JAMES J. UNGER</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Facilities leasing arrangements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our headquarters facilities and our Corbitt manufacturing
facilities in St. Charles, Missouri are owned by St. Charles
Properties, an entity controlled by James J. Unger, our
President and Chief Executive Officer. Under two leases dated
May&nbsp;1, 1995 and March&nbsp;1, 2001, St. Charles Properties
leased these facilities to ACF. We reimbursed ACF for our
proportionate share of the cost of renting these facilities
through April&nbsp;1, 2005. On that date, ACF assigned the
March&nbsp;1, 2001 lease, covering our Corbitt manufacturing
facilities, to us and the May&nbsp;1, 1995 lease, covering our
and ARL&#146;s headquarters facility, to ARL. We continue to
maintain our headquarters in the space that has been leased to
ARL. Under our services agreement with ARL, we pay ARL
$0.5&nbsp;million per year, which represents the estimate of our
proportionate share of ARL&#146;s costs for the space that we
use under the lease, including rent and building services. The
terms of the underlying leases are as follows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the terms of the lease agreement assigned to ARL, ARL has
leased approximately 78,000&nbsp;square feet of office space.
The lease expires on December&nbsp;31, 2005 with an option to
renew the lease for one additional five-year term. Rent is
payable monthly in the amount of $20,833. If ARL exercises its
option to renew the lease, the monthly rent will be $25,000.
Under the terms of the lease, ARL pays one-tenth of the property
tax and insurance expenses levied upon the property. In
addition, ARL must pay 17% and 54% of any increase in taxes and
property insurances costs, respectively. ARL is also required to
repair and maintain the facility at its costs and expense. We
use approximately 46% of the office space leased by ARL under
this agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the terms of the lease agreement assigned to us, we occupy
approximately 128,000&nbsp;square feet of space which we use for
our Corbitt manufacturing facility. The lease expires on
February&nbsp;28, 2006 with an option to renew the lease for two
successive five-year terms. Rent is payable monthly in the
amount of $27,083. The maximum monthly rent for the first and
second renewal periods is $29,763
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 129</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
and $32,442&nbsp;per month, respectively. We are required to pay
27% of all tax increases assessed or levied upon the property
and the cost of the utilities we use, as well as repair and
maintain the facility at our expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2002, 2003 and 2004, we incurred $0.8&nbsp;million of costs
to affiliates in each of 2002, 2003 and 2004, under these two
leasing arrangements, and in the nine months ended
September&nbsp;30, 2005, we incurred $0.6&nbsp;million of such
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Grant of common stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon completion of this offering, we will issue Mr.&nbsp;Unger
that number of shares of our common stock obtained by dividing
$6.0&nbsp;million by the public offering price set forth on the
cover page of this prospectus (assuming an initial public
offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
which represents the midpoint of the range on the cover page of
this prospectus, Mr.&nbsp;Unger will
receive &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock). See &#147;Management&#151; Executive
compensation&#151; Employment agreements&#148; for more
information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Industrial revenue bonds</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Mr.&nbsp;Unger and his wife own $0.4&nbsp;million of the
industrial revenue bonds issued by Paragould, Arkansas.
Mr.&nbsp;Unger and his wife purchased these bonds at the time of
their original issuance on the same terms that all
non-affiliated entities purchased the bonds. We intend to use
the net proceeds of this offering to repay in full the amounts
due under all of our industrial revenue bonds. Mr.&nbsp;Unger
and his wife will receive approximately $0.4&nbsp;million upon
our repayment of the amounts due under the industrial revenue
bonds.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REGISTRATION RIGHTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to enter into a new registration rights agreement,
which will become effective upon the completion of this
offering, with certain of our existing stockholders as of
immediately prior to the completion of this offering. The
stockholders that are party to the new registration rights
agreement will have the right to require us, subject to certain
terms and conditions, to register their shares of our common
stock under the Securities Act of 1933, as amended, at any time
following expiration of the lock-up period as described under
the caption &#147;Shares eligible for future sale&#151;Lock-up
Agreements&#148;. These stockholders collectively will have an
aggregate of five demand registration rights, three of which
relate solely to registration on a short-form registration
statement, such as a Form&nbsp;S-3. In addition, if we propose
to register any additional shares of our capital stock under the
Securities Act, these stockholders will be entitled to customary
&#147;piggyback&#148; registration rights, which will entitle
them to include their shares of common stock in a registration
of our securities for sale by us or by other security holders.
The registration rights granted under the new registration
rights agreement will be subject to customary exceptions and
qualifications and compliance with certain registration
procedures. Following completion of this offering,
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>shares
of common stock, representing
<B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B>%
of our outstanding shares of common stock following completion
of this offering, will be entitled to the benefits of these
registration rights.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>SHARES PURCHASED BY CERTAIN RELATED PARTIES IN THIS
OFFERING</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters have reserved a portion of the shares of our
common stock for sale in this offering for purchase by certain
related parties through a directed share program. In connection
with the directed share program, any of our directors, officers,
nominees for election as director or an immediate family member
of any of these individuals may purchase shares of our common
stock with a value in excess of $60,000. See
&#147;Underwriting&#151; Directed Share Program&#148; for more
information on the directed share program.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
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</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 130</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Certain relationships and related party transactions</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>FUTURE TRANSACTIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
All future transactions, if any, between us and any of our
officers, directors and principal stockholders and their
affiliates, as well as any transactions between us and any
entity with which our officers, directors or principal
stockholders are affiliated, will be approved in accordance with
the then-current SEC rules and regulations, Nasdaq stock market
rules and applicable law governing the approval of the
transactions.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 131</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='121'></A>
</DIV>

<!-- link1 "Principal stockholders" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Principal stockholders
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table sets forth information known to us regarding
the beneficial ownership of our common stock calculated as of
September&nbsp;30, 2005, and as adjusted to reflect the
Transactions and the sale of the common stock offered hereby, by:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">each stockholder who is known by
    us to own beneficially more than 5% of our common stock;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our chief executive officer and
    our other most highly compensated executive officers;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">each of our directors and director
    nominees;&nbsp;and
    </FONT></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">all of our executive officers and
    directors as a group.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The number of shares beneficially owned by each stockholder,
director or officer is determined according to the rules of the
SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. The number of shares
and the percentage ownership of each stockholder prior to this
offering is calculated based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding immediately after the merger.
The percentage ownership of each stockholder after the offering
is calculated based
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding, which is derived from
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding after the merger and prior to
this offering, plus
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock that we intend to issue in this offering
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock that we expect to issue to James J. Unger,
our president and chief executive officer (based on an initial
public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
which represents the midpoint of the range on the cover of this
prospectus), but without giving effect to the underwriters&#146;
exercise of the over-allotment option. See
&#147;Management&#151; Executive compensation&#151; Employment
agreements&#148; for more information on the calculation of the
number of shares we will issue to Mr.&nbsp;Unger. To the extent
that the over-allotment is exercised, we will sell up to an
aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters have reserved a portion of the shares of our
common stock for sale in this offering for purchase by certain
related parties through a directed share program. In connection
with the directed share program, any of our directors, officers,
nominees for election as director or an immediate family member
of any of these individuals may purchase shares of our common
stock with a value in excess of $60,000. See &#147;Certain
relationships and related party transactions&#151; Shares
purchased by certain related parties in this offering&#148; and
&#147;Underwriting&#151; Directed Share Program&#148; for
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 132</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Principal stockholders</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
more information on the directed share program. The table below
does not reflect any potential purchases under the directed
share program.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares of Common</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Stock Beneficially Owned</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares of Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Shares of Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>After this Offering</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Stock Beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Stock Beneficially</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Assuming Full Exercise</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Owned Prior to this</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Owned After this</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>of the Over-Allotment</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Offering</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Option</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD align="left" nowrap><B>Name of beneficial owner</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Number</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Percent</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="24" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Carl C.
    Icahn<SUP style="font-size: 85%; vertical-align: text-top">(1)(2)(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foundation for a Greater
    Opportunity<SUP style="font-size: 85%; vertical-align: text-top">(1)(3)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38.5%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James J.
    Unger<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James A.
    Cowan<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William P.
    Benac<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Alan C.
    Lullman<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Vincent J.
    Intrieri<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Jon F.
    Weber<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Keith
    Meister<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    William L.
    Finn<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James C.
    Pontious<SUP style="font-size: 85%; vertical-align: text-top">(4)(6)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    James M.
    Laisure<SUP style="font-size: 85%; vertical-align: text-top">(4)(6)</SUP></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    All directors, director nominees and executive officers as a
    group <SUP style="font-size: 85%; vertical-align: text-top">(7)
    </SUP>(10 persons)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100.0%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 9pt;">
&nbsp;*&nbsp;&nbsp;&nbsp;Represents beneficial ownership of less
than 1%.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(1)&nbsp;The address of such person is c/o&nbsp;Icahn Associates
Corp. and Affiliated Companies, 767 Fifth Avenue,
47th&nbsp;Floor, New York, New York 10153.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(2)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Icahn beneficially owns 540 of these shares directly
    and an additional 195 of these shares are owned by Hopper
    Investments, LLC, which is a Delaware limited liability company
    that is wholly owned by Barberry Corp., which is a Delaware
    corporation that is wholly owned by Mr.&nbsp;Icahn. The
    remaining shares are owned by the Foundation for a Greater
    Opportunity, or the Foundation, subject to certain agreements
    with an affiliate of Mr.&nbsp;Icahn as described in
    footnote&nbsp;3.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(3)&nbsp;</TD>
    <TD align="left">
    In December 2005 Modal LLC, which is a Delaware limited
    liability company that is wholly owned by Mr.&nbsp;Icahn,
    entered into a stock purchase agreement with the Foundation to
    acquire all of our common stock held by the Foundation. Pending
    the closing of this acquisition, the Foundation has granted
    Modal LLC an irrevocable proxy to vote these shares. These
    agreements are described under &#147;&#151;Icahn agreement to
    purchase Foundation shares&#148; set forth below. See also
    &#147;Risk Factors&#151;Risks related to the purchase of our
    common stock in the offering&#151;Upon the closing of this
    offering we may be a &#147;controlled company&#148; within the
    meaning of the Nasdaq National Market rules and you will not
    have the same protections afforded to shareholders of other
    companies that are subject to all of the Nasdaq National Market
    corporate governance requirements.&#148;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(4)&nbsp;</TD>
    <TD align="left">
    The address of such person is c/o&nbsp;American Railcar
    Industries, Inc., 100 Clark Street, St. Charles, Missouri 63301.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(5)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Finn retired effective May&nbsp;1, 2005.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(6)&nbsp;</TD>
    <TD align="left">
    Mr.&nbsp;Pontious and Mr.&nbsp;Laisure have each consented to
    serve as a director at such time as our common stock is listed
    on the Nasdaq National Market.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

<TR valign="top">
    <TD>(7)&nbsp;</TD>
    <TD align="left">
    Includes Mr.&nbsp;Pontious and Mr.&nbsp;Laisure, each of whom
    has consented to serve as a director at such time as our common
    stock is listed on the Nasdaq National Market.</TD>
</TR>

<TR><TD><FONT size="1">

</FONT></TD></TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 133</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Principal stockholders</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Icahn agreement to purchase Foundation shares</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been advised that in December 2005 Modal LLC, an
affiliate of Mr.&nbsp;Icahn, entered into a stock purchase
agreement with the Foundation to acquire the 460&nbsp;shares of
our common stock held by the Foundation for a purchase price
equal to the greater of $100&nbsp;million or the fair market
value of the shares on the date of purchase. If the purchase
takes place on the date of, or within five days of the closing
of this offering, the fair market value will be the initial
public offering price. If the purchase takes place after this
five day period, the fair market value will be equal to the
average of the closing price of our common stock on the Nasdaq
National Market for the five days immediately preceding the
acquisition. The purchase price will be payable
$10.0&nbsp;million in cash and the balance in a five year
interest-only promissory note with monthly payments of interest
at the prime rate. The note may be prepaid without penalty and
will be secured by a pledge of all of the shares sold in the
transaction. The note also will be secured by the guarantee of
High Coast Limited Partnership, which is also an affiliate of
Mr.&nbsp;Icahn. The Foundation will be able to accelerate
repayment of the principal due under the note based on its cash
needs under terms outlined in the note.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consummation of this acquisition requires the completion of
this offering and the approval of applicable authorities of the
State of New York. If the parties obtain this approval, we have
been advised that the parties expect that the acquisition would
be completed in the first three months of 2006. Pending the
closing of this acquisition, and for so long as the stock
purchase agreement has not been terminated, the Foundation has
granted Modal LLC an irrevocable proxy to vote all of the shares
of our common stock held by the Foundation. The stock purchase
agreement may be terminated by either party if the acquisition
does not occur by May&nbsp;2006.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 134</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='114'></A>
</DIV>

<!-- link1 "Description of capital stock" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Description of capital stock
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following description of our capital stock is only a
summary. You should refer to our certificate of incorporation
and bylaws as in effect upon the closing of this offering, which
are included as exhibits to the registration statement of which
this prospectus is a part. See &#147;Where you can find more
information.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AUTHORIZED AND OUTSTANDING CAPITAL STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our authorized capital stock as of September&nbsp;30, 2005
consisted of 12,000&nbsp;shares of common stock, with a par
value of $0.01&nbsp;per share, 99,000&nbsp;shares of preferred
stock, with a par value of $0.01&nbsp;per share, which we refer
to as our mandatorily redeemable preferred stock,
150,000&nbsp;shares of payment-in-kind preferred stock, with a
par value of $0.01&nbsp;per share, which we refer to as our PIK
preferred stock, and 500,000&nbsp;shares of new preferred stock,
with a par value of $0.01&nbsp;per share. As of
September&nbsp;30, 2005, there were 1,195&nbsp;shares of our
common stock outstanding, one share of our mandatorily
redeemable preferred stock outstanding, no shares of our PIK
preferred stock outstanding and 82,055&nbsp;shares of our new
preferred stock outstanding. As of September&nbsp;30, 2005, our
shares of common stock were held of record by a total of three
stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to the closing of this offering, we will reincorporate in
Delaware through a merger with and into our wholly owned
Delaware subsidiary. Upon completion of that merger our
certificate of incorporation will authorize us to issue up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock, with a par value of $0.01&nbsp;per share, and
up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of preferred stock, with a par value of $0.01&nbsp;per share.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with this merger, we will exchange all of our
shares of common stock for shares of common stock on a
one-for-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;basis.
Following this merger, and prior to our issuance of shares of
common stock in this
offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock will be outstanding.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
After giving effect to our issuance
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock in this offering, we will
have &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding
and &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding if the underwriters exercise their
over-allotment option in full.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the merger, we will exchange one share of new
preferred stock, with substantially the same terms of our
existing new preferred stock, for each of the 82,055 shares of
new preferred stock then outstanding. We intend to use a portion
of the net proceeds of this offering to redeem all of the
outstanding shares of our new preferred stock. Immediately prior
to the merger, we will also redeem our one share of mandatorily
redeemable preferred stock. Following the closing of this
offering, we will be authorized to issue 1,000,000 shares of
preferred stock, with a par value of $0.01 per share, and there
will be no shares of any series of preferred stock designated or
outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Common stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The holders of our common stock are entitled to one vote for
each share held of record on the applicable record date on all
matters voted on by our shareholders. Except as otherwise
required by law or provided in any resolution adopted by our
board of directors with respect to any series of preferred
stock, the holders of our common stock exclusively possess all
voting power. All holders of our common stock have the same
voting rights and vote together as a single class. Our
certificate of incorporation does not provide for cumulative
voting in the election of directors or any preemptive rights to
purchase or subscribe for any stock or other securities, and
there are no conversion rights or sinking fund or redemption
provisions with respect to our common stock. Consequently,
holders of more than 50% of the shares of our common stock are
able to elect all directors eligible for election each year.
Holders of our common stock are entitled to dividends and other
distributions out of assets legally available if and when
declared by our board of directors. Upon our liquidation,
dissolution or winding up, the holders of our common stock are
entitled to share pro rata in the distribution of all of
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 135</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Description of capital stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
our assets remaining available for distribution after
satisfaction of all liabilities, including any prior rights of
any preferred stock which may be outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Preferred stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon completion of this offering, our board of directors,
subject to limitations prescribed by law, will be permitted to
establish one or more series of preferred stock and to
determine, with respect to any series of preferred stock, the
terms and rights of that series, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the designation of the series;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the number of shares of the
    series, which our board may, except where otherwise provided in
    the preferred stock designation, increase and decrease, but not
    below the number of shares then outstanding;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">whether dividends, if any, will be
    cumulative or non-cumulative and the dividend rate of the series;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the dividend rate, if any, and the
    dates at which dividends, if any, will be payable;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the redemption rights and price or
    prices, if any, for shares of the series;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the terms and amounts of any
    sinking fund provided for the purchase or redemption of shares
    of the series;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the amounts payable on shares of
    the series in the event of any voluntary or involuntary
    liquidation, dissolution or winding-up of the affairs of our
    company;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">whether the shares of the series
    will be convertible into shares of any other class or series, or
    any other security, of our company or any other corporation,
    and, if so, the specification of the other class or series or
    other security, the conversion price or prices or rate or rates,
    any rate adjustments, the date or dates as of which the shares
    will be convertible and all other terms and conditions upon
    which the conversion may be made;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">restrictions on the issuance of
    shares of the same series or of any other class or series;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the voting rights, if any, of the
    holders of the series;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the limitations, if any, on
    payment of dividends or making contributions on and on purchase
    and redemption of, common stock or shares ranking junior to such
    series; and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">restrictions, if any, on the
    creation of indebtedness.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisition and other
corporate purposes, could have the effect of making it more
difficult for a third party to acquire, or discourage a third
party from acquiring, a majority of our outstanding voting
stock. Our board of directors may issue preferred stock with
voting and conversion rights that could adversely affect the
voting power of the holders of our common stock. There are no
current agreements or understandings for the issuance of
preferred stock, and our board of directors has no present
intention to issue any shares of preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CORPORATE OPPORTUNITIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our certificate of incorporation provides that none of
Mr.&nbsp;Icahn or entities controlled by him (referred to as the
Founding Stockholders), or any director, officer, member,
partner, stockholder or employee of a Founding Stockholder (each
referred to as a Specified Party), will have any duty to refrain
from engaging directly or indirectly in the same or similar
business activities or lines of business as we do. In the event
that any Founding Stockholder or Specified Party acquires
knowledge of a potential transaction or matter that may be a
corporate opportunity for any Founding Stockholder or Specified
Party, as applicable, and us, none of the Founding Stockholders
or Specified Parties has any duty to communicate or offer such
corporate opportunity to us, and any Founding Stockholder or
Specified Party is entitled to pursue or acquire such corporate
opportunity for itself or to direct such corporate
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 136</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Description of capital stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
opportunity to another person or entity and we have no right in
or to such corporate opportunity or to any income or proceeds
derived therefrom.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In the event that one of our directors, officers or employees
who is also a Founding Stockholder or a Specified Party acquires
knowledge of a potential transaction or matter which may be a
corporate opportunity or otherwise is then exploiting any
corporate opportunity, subject to the following paragraph, we
will have no interest in such corporate opportunity and no
expectation that such corporate opportunity be offered to us, so
that such Specified Party will have no duty to communicate or
present such corporate opportunity to us, will have the right to
hold such corporate opportunity for its own account or to
recommend, sell, assign or transfer such corporate opportunity
to persons other than us and will not breach any fiduciary duty
to us by reason of the fact that such Specified Party pursues or
acquires such corporate opportunity for itself, directs, sells,
assigns or transfers such corporate opportunity to another
person or does not communicate information regarding such
corporate opportunity to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Notwithstanding the foregoing, our certificate of incorporation
will provide that we do not renounce any interest or expectation
we may have in any corporate opportunity that is offered to any
Founding Stockholder or Specified Party, if such opportunity is
expressly offered to such Founding Stockholder or Specified
Party solely in, and as a direct result of, his or her capacity
as our director, officer or employee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND
DIRECTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our bylaws will require us to indemnify each of our directors
and officers to the fullest extent permitted by law. Our bylaws
will also provide that an amendment to the indemnification
provisions of our bylaws will not affect the liability of any
director or officer for any act or omission occurring prior to
the effective time of such amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OTHER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND
BYLAWS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Board of directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our certificate of incorporation will provide that the number of
directors shall be determined in the manner specified by our
bylaws, and may be increased or decreased from time to time in
the manner prescribed by our bylaws. Our certificate of
incorporation will further provide that we may not adopt or
approve the classification of our directors for staggered terms
other than by an amendment to the certificate of incorporation
duly adopted by our stockholders. Currently, our board of
directors consists of five directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Prohibition against certain anti-takover defenses.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our certificate of incorporation will provide that we shall not,
other than by an amendment to our certificate of incorporation
duly adopted by our stockholders, adopt or approve any so called
rights plan, poison pill or other similar plan, agreement or
device designed to prevent or make more difficult a hostile
takeover of us by increasing the cost to a potential acquirer of
such a takeover either through the issuance of new rights,
shares of common stock or preferred stock or any other security
or device that may be issued to our stockholders, other than all
our stockholders, that carry severe redemption provisions,
favorable purchase provisions or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Amendment of bylaws</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our Board of Directors and stockholders will be authorized and
empowered to adopt, amend and repeal our bylaws.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 137</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Description of capital stock</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inapplicability of Delaware&#146;s antitakeover statute</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our certificate of incorporation will make the anti-takeover
protection of Section&nbsp;203 of The Delaware General
Corporation Law, which we refer to as the DGCL, inapplicable to
us. Generally, Section&nbsp;203 of the DGCL provides that any
person who acquires direct or indirect beneficial ownership of
15% or more of the outstanding voting stock of a Delaware
corporation becomes an &#147;interested shareholder.&#148;
Section&nbsp;203 prohibits a corporation from engaging in any
&#147;business combination&#148; with an interested shareholder
for a period of three years following the date that such
interested shareholder becomes an interested shareholder, unless
certain conditions are satisfied. Generally, a business
combination includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested
stockholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The listing requirements of the Nasdaq National Market, which
will apply to us while our common stock is listed on the Nasdaq
National Market, require stockholder approval of certain
issuances equal to or in excess of 20% of the voting power or
the number of shares of common stock. These additional shares
may be used for a variety of corporate purposes, including
future public offerings, to raise additional capital or to
facilitate acquisitions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
One of the effects of the existence of unissued and unreserved
common stock or preferred stock may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our company by means
of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management and possibly
deprive the stockholders of opportunities to sell their shares
of common stock at prices higher than prevailing market prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REGISTRATION RIGHTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to enter into a new registration rights agreement,
which will become effective upon the completion of this
offering, with certain of our existing stockholders as of
immediately prior to the completion of this offering. The
stockholders that are party to the new registration rights
agreement will have the right to require us, subject to certain
terms and conditions, to register their shares of our common
stock under the Securities Act of 1933, as amended, at any time
following expiration of the lock-up period as described under
the caption &#147;Shares eligible for future sale&#151;Lock-up
Agreements.&#148;. These stockholders collectively will have an
aggregate of five demand registration rights, three of which
relate solely to registration on a short-form registration
statement, such as a Form S-3. In addition, if we propose to
register any of our capital stock under the Securities Act, our
stockholders will be entitled to customary &#147;piggyback&#148;
registration rights which will entitle our stockholders to
include their shares of common stock in a registration of our
securities for sale by us or by other security holders. The
registration rights granted under the new registration rights
agreement are subject to customary exceptions and qualifications
and compliance with certain registration procedures. Following
the completion of this
offering, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock,
representing &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding shares of common stock following completion
of this offering, will be entitled to the benefits of these
registration rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>QUOTATION OF OUR COMMON STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect to have our common stock approved for quotation on the
Nasdaq National Market under the trading symbol &#147;ARII.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TRANSFER AGENT AND REGISTRAR</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The transfer agent and registrar for our common stock is
American Stock Transfer&nbsp;&#38; Trust Company.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 138</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='115'></A>
</DIV>

<!-- link1 "Shares eligible for future sale" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Shares eligible for future sale
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to this offering, there has not been a public market for
our common stock. Future sales of substantial amounts of our
common stock in the public market, or the possibility of these
sales, could adversely affect the trading price of the common
stock and could impair our future ability to raise capital
through the sale of our equity at a time and price we deem
appropriate.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon completion of this offering and the merger, we will have
outstanding &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock. Of these shares,
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
sold in this offering,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
if the underwriters&#146; over-allotment option is exercised in
full, will be freely tradable without restriction or further
registration under the Securities Act, except for any shares
purchased by our &#147;affiliates,&#148; as defined in
Rule&nbsp;144 under the Securities Act, which would be subject
to the limitations and restrictions described below.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock outstanding upon completion of this offering
will be &#147;restricted securities&#148; as defined in
Rule&nbsp;144. Restricted securities may be sold in the public
market only if they are registered or if they qualify for an
exemption from registration such as the exemption provided by
Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration
under Rules&nbsp;144 and 144(k) promulgated under the Securities
Act, which rules are summarized below. Subject to the lock-up
agreements described below and the provisions of Rules&nbsp;144
and 144(k), additional shares will be available for sale in the
public market as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="left" nowrap><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap><B>Date</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    After the date of this prospectus.</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    After 180&nbsp;days from the date of this prospectus.</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
All of these restricted securities will be eligible for sale in
the public market, subject in all cases to the volume
limitations and other restrictions of Rule&nbsp;144, beginning
upon expiration of the lock-up agreements described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RULE&nbsp;144</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In general, under Rule&nbsp;144 as currently in effect,
beginning 90&nbsp;days after this offering, a person (or persons
whose shares are required to be aggregated), including an
affiliate, who has beneficially owned shares of our common stock
for at least one year is entitled to sell in any three-month
period a number of shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">1% of then-outstanding shares of
    our common stock, which is
    approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock immediately after the completion of this
    offering;&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the average weekly reported
    trading volume of our common stock on the Nasdaq National Market
    during the four calendar weeks preceding the filing of a
    Form&nbsp;144 with respect to the sale, subject to certain
    restrictions.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sales under Rule&nbsp;144 are also subject to manner of sale
provisions and notice requirements and to the availability of
current public information about us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>RULE&nbsp;144(K)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition, a person who is not deemed to have been an
affiliate of ours at any time during the 90&nbsp;days preceding
a sale and who has beneficially owned the shares proposed to be
sold for at least two years, would be entitled to sell those
shares under Rule&nbsp;144(k) without regard to the manner of
sale, public information, volume limitation or notice
requirements of Rule&nbsp;144.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 139</B>
</DIV>
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<DIV align="left" style="font-size: 10pt;">
<B>Shares eligible for future sale</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LOCK-UP AGREEMENTS</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the SEC a registration statement under the Securities Act
relating to any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, or publicly disclose the intention to make
any offer, sale, pledge, disposition or filing, without the
prior written consent of UBS Securities LLC and Bear,
Stearns&nbsp;&#38;&nbsp;Co.&nbsp;Inc. for a period of
180&nbsp;days after the date of this prospectus. Our officers,
directors, all of our existing stockholders have also agreed,
and certain individuals who purchase shares of our common stock
through the directed share program may agree, that they will not
offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our common stock (other
than shares they may sell in this offering) or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, enter into a transaction that would have
the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock, whether
any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or
publicly disclose the intention to make any offer, sale, pledge
or disposition, or to enter into any transaction, swap, hedge or
other arrangement, without, in each case, the prior written
consent of UBS Securities LLC and Bear,
Stearns&nbsp;&#38;&nbsp;Co.&nbsp;Inc. until 180&nbsp;days after
the date of this prospectus. UBS Securities LLC and Bear,
Stearns&nbsp;&#38;&nbsp;Co.&nbsp;Inc. may, in their sole
discretion at any time without notice, release all or any
portion of the shares of our common stock held by our officers,
directors, existing stockholders and certain individuals who
have purchased shares of our common stock in the directed share
program, subject to these lock-up agreements.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 140</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='116'></A>
</DIV>

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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Material U.S.&nbsp;income tax considerations for
non-U.S.&nbsp;holders
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following summary describes material United States federal
income tax consequences of the ownership and disposition of
common stock by a Non-U.S.&nbsp;Holder (as defined below) as of
the date of this prospectus. This discussion does not address
all aspects of United States federal income taxation and does
not deal with estate, gift, foreign, state and local tax
consequences that may be relevant to such Non-U.S.&nbsp;Holders
in light of their personal circumstances. Special U.S.&nbsp;tax
rules may apply to certain Non-U.S.&nbsp;Holders, such as
&#147;controlled foreign corporations,&#148; &#147;passive
foreign investment companies,&#148; corporations that accumulate
earnings to avoid U.S.&nbsp;federal income tax, investors in
partnerships or other pass-through entities for
U.S.&nbsp;federal income tax purposes, dealers in securities,
holders of securities held as part of a &#147;straddle,&#148;
&#147;hedge,&#148; &#147;conversion transaction&#148; or other
risk reduction transaction, and certain former citizens or
long-term residents of the United States that are subject to
special treatment under the Internal Revenue Code of 1986, as
amended (which we also refer to as the Code). Such entities and
persons should consult their own tax advisors to determine the
U.S.&nbsp;federal, state, local and other tax consequences that
may be relevant to them. Furthermore, the discussion below is
based upon the provisions of the Code, and regulations,
administrative pronouncements of the Internal Revenue Service
(which we also refer to as the IRS) and judicial decisions
thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified with or without retroactive effect
so as to result in United States federal income tax consequences
different from those discussed below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If a partnership (or an entity treated as a partnership for
U.S.&nbsp;federal income tax purposes) holds the common stock,
the tax treatment of a partner will generally depend on the
status of the partner and the activities of the partnership.
Persons who are partners in partnerships holding the common
stock should consult their tax advisors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The authorities on which this summary is based are subject to
various interpretations, and any views expressed within this
summary are not binding on the IRS or the courts. No assurance
can be given that the IRS or the courts will agree with the tax
consequences described in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As used herein, a &#147;Non-U.S.&nbsp;Holder&#148; means a
beneficial owner of our common stock that is not any of the
following for U.S.&nbsp;federal income tax purposes:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">a citizen or resident of the
    United States,
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">a corporation, or other entity
    treated as a corporation for United States federal income tax
    purposes, created or organized in or under the laws of the
    United States, any state thereof or the District of Columbia,
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">an estate the income of which is
    subject to United States federal income taxation regardless of
    its source,&nbsp;or
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">a trust (i)&nbsp;which is subject
    to primary supervision by a court situated within the United
    States and as to which one or more United States persons have
    the authority to control all substantial decisions of the trust,
    or (ii)&nbsp;that has a valid election in effect under
    applicable U.S.&nbsp;Treasury regulations to be treated as a
    United States person.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 141</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Material U.S.&nbsp;income tax considerations for
non-U.S.&nbsp;holders</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Prospective purchasers are urged to consult their own tax
advisors regarding the U.S.&nbsp;federal income tax
consequences, as well as other U.S.&nbsp;federal, state, and
local income and estate tax consequences, and non-U.S.&nbsp;tax
consequences, to them of acquiring, owning, and disposing of our
common stock.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DIVIDENDS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If we make distributions on our common stock, such distributions
paid to a Non-U.S.&nbsp;Holder will generally constitute
dividends for U.S.&nbsp;federal income tax purposes to the
extent such distributions are paid from our current or
accumulated earnings and profits, as determined under
U.S.&nbsp;federal income tax principles. If a distribution
exceeds our current and accumulated earnings and profits, the
excess will be treated as a tax-free return of the
Non-U.S.&nbsp;Holder&#146;s investment to the extent of the
Non-U.S.&nbsp;Holder&#146;s adjusted tax basis in our common
stock. Any remaining excess will be treated as capital gain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Dividends paid to a Non-U.S.&nbsp;Holder generally will be
subject to withholding of United States federal income tax at a
30% rate or such lower rate as may be specified by an applicable
income tax treaty. A Non-U.S.&nbsp;Holder of common stock who
wishes to claim the benefit of an applicable treaty rate for
dividends will be required to (a)&nbsp;properly complete IRS
Form&nbsp;W-8BEN (or appropriate substitute form) and certify,
under penalties of perjury, that such holder is not a
U.S.&nbsp;person and is eligible for the benefits with respect
to dividends allowed by such treaty or (b)&nbsp;hold common
stock through certain foreign intermediaries and satisfy the
certification requirements for treaty benefits of applicable
Treasury regulations. A Non-U.S.&nbsp;Holder eligible for a
reduced rate of United States withholding tax pursuant to an
income tax treaty may obtain a refund of any excess amounts
withheld by timely filing an appropriate claim for refund with
the IRS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
This United States withholding tax generally will not apply to
dividends that are effectively connected with the conduct of a
trade or business by the Non-U.S.&nbsp;Holder within the United
States, and, if a treaty applies, attributable to a United
States permanent establishment or fixed base of the
Non-U.S.&nbsp;Holder. Dividends effectively connected with the
conduct of a trade or business, as well as those attributable to
a United States permanent establishment or fixed base of the
Non-U.S.&nbsp;Holder under an applicable treaty, are subject to
United States federal income tax generally in the same manner as
if the Non-U.S.&nbsp;Holder were a U.S.&nbsp;person, as defined
under the Code. Certain IRS certification and disclosure
requirements must be complied with in order for effectively
connected income to be exempt from withholding. Any such
effectively connected dividends received by a
Non-U.S.&nbsp;Holder that is a foreign corporation may, under
certain circumstances, be subject to an additional &#147;branch
profits tax&#148; at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>GAIN ON DISPOSITION OF COMMON STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A Non-U.S.&nbsp;Holder generally will not be subject to United
States federal income tax (or any withholding thereof) with
respect to gain recognized on a sale or other disposition of
common stock unless:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">The Non-U.S.&nbsp;Holder is an
    individual who is present in the United States for 183 or more
    days in the taxable year of the disposition and certain other
    conditions are met,
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the gain is effectively connected
    with a trade or business of the Non-U.S.&nbsp;Holder in the
    United States and, where a tax treaty applies, is attributable
    to a United States permanent establishment or fixed base of the
    Non-U.S.&nbsp;Holder,&nbsp;or
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 142</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Material U.S.&nbsp;income tax considerations for
non-U.S.&nbsp;holders</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">we are or have been a
    &#147;U.S.&nbsp;real property holding corporation&#148; within
    the meaning of Section&nbsp;897(c)(2) of the Code, also referred
    to as a USRPHC, for United States federal income tax purposes at
    any time within the five-year period preceding the disposition
    (or, if shorter, the Non-U.S.&nbsp;Holder&#146;s holding period
    for the common stock).
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Gain recognized on the sale or other disposition of common stock
and effectively connected with a United States trade or
business, or attributable to a United States permanent
establishment or fixed base of the Non-U.S.&nbsp;Holder under an
applicable treaty, is subject to United States federal income
tax on a net income basis generally in the same manner as if the
Non-U.S.&nbsp;Holder were a U.S.&nbsp;person, as defined under
the Code. Any such effectively connected gain from the sale or
disposition of common stock received by a Non-U.S.&nbsp;Holder
that is a foreign corporation may, under certain circumstances,
be subject to an additional &#147;branch profits tax&#148; at a
30% rate or such lower rate as may be specified by an applicable
income tax treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In general, a corporation is a USRPHC if the fair market value
of its &#147;U.S.&nbsp;real property interests&#148; equals or
exceeds 50% of the sum of the fair market value of its worldwide
(domestic and foreign) real property interests and its other
assets used or held for use in a trade or business. For this
purpose, real property interests include land, improvements, and
associated personal property. We believe that we currently are
not a USRPHC. In addition, based on these financial statements
and current expectations regarding the value and nature of our
assets and other relevant data, we do not anticipate becoming a
USRPHC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
If we become a USRPHC, a Non-U.S.&nbsp;Holder nevertheless will
not be subject to United States federal income tax if our common
stock is regularly traded on an established securities market,
within the meaning of applicable Treasury regulations, and the
Non-U.S.&nbsp;Holder holds no more than five percent of our
outstanding common stock, directly or indirectly, during the
five-year testing period identified in the third bullet point
immediately above. We expect that our common stock will be
quoted on the Nasdaq National Market and may be regularly traded
on an established securities market in the United States so long
as it is so quoted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION REPORTING AND BACKUP WITHHOLDING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We must report annually to the IRS and to each
Non-U.S.&nbsp;Holder the amount of dividends paid to such holder
and the tax withheld with respect to such dividends, regardless
of whether withholding was required. Copies of the information
returns reporting such dividends and withholding may also be
made available to the tax authorities in the country in which
the Non-U.S.&nbsp;Holder resides under the provisions of an
applicable income tax treaty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The United States imposes a backup withholding tax on dividends
and certain other types of payments to United States persons
(currently at a rate of 28%) of the gross amount. Dividends paid
to a Non-U.S.&nbsp;Holder will not be subject to backup
withholding if proper certification of foreign status (usually
on an IRS Form&nbsp;W-8BEN) is provided, and the payor does not
have actual knowledge or reason to know that the beneficial
owner is a United States person, or the holder is a corporation
or one of several types of entities and organizations that
qualify for exemption, also referred to as an exempt recipient.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Information reporting and backup withholding generally are not
required with respect to the amount of any proceeds from the
sale or other disposition of shares of common stock by a
Non-U.S.&nbsp;Holder outside the United States through a foreign
office of a foreign broker that does not have certain specified
connections to the United States. However, if a
Non-U.S.&nbsp;Holder sells or otherwise disposes of shares of
common stock through the U.S.&nbsp;office of a United States or
foreign broker, the broker will be required to report the amount
of proceeds paid to such holder to the IRS and to apply the
backup
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 143</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">
<B>Material U.S.&nbsp;income tax considerations for
non-U.S.&nbsp;holders</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
withholding tax (currently at a rate of 28%) to the amount of
such proceeds unless appropriate certification (usually on an
IRS Form&nbsp;W-8BEN) is provided to the broker of the
holder&#146;s status as either an exempt recipient or a
non-U.S.&nbsp;person, and the payor does not have actual
knowledge or reason to know that the beneficial owner is a
United States person. Information reporting also applies if a
Non-U.S.&nbsp;Holder sells or otherwise disposes of its shares
of common stock through the foreign office of a broker deriving
more than a specified percentage of its income from United
States sources or having certain other connections to the United
States and the foreign broker does not have certain documentary
evidence in its files of the Non-U.S.&nbsp;Holder&#146;s foreign
status.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Any amounts withheld under the backup withholding rules may be
allowed as a refund or a credit against such holder&#146;s
U.S.&nbsp;federal income tax liability provided the required
information is timely furnished to the IRS.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 144</B>
</DIV>

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<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='117'></A>
</DIV>

<!-- link1 "Underwriting" -->

<DIV align="left" style="font-size: 16pt;">
Underwriting
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We are offering the shares of our common stock described in this
prospectus through the underwriters named below. UBS Securities
LLC and Bear, Stearns&nbsp;&#38; Co. Inc. are the
representatives of the underwriters and joint book-running
managers of this offering. We have entered into an underwriting
agreement with the underwriters. Subject to the terms and
conditions of the underwriting agreement, each of the
underwriters has severally agreed to purchase the number of
shares of common stock from us listed next to its name in the
following table:
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Number of</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>Underwriters</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>shares</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    UBS Securities LLC</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bear, Stearns&nbsp;&#38; Co. Inc.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    BB&#38;T Capital Markets, a division of Scott &#38;
    Stringfellow, Inc.</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    CIBC World Markets Corp.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Morgan Keegan &#38; Company, Inc.&nbsp;</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriting agreement provides that the underwriters must
buy all of the shares if they buy any of them. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters&#146; over-allotment option
described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our common stock is offered subject to a number of conditions,
including:
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">receipt and acceptance of our
    common stock by the underwriters;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the underwriters&#146; right to
    reject orders in whole or in part.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been advised by the representatives that the
underwriters intend to make a market in our common stock but
that they are not obligated to do so and may discontinue making
a market at any time without notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with this offering, certain of the underwriters or
securities dealers may distribute prospectuses electronically.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>OVER-ALLOTMENT OPTION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have granted the underwriters an option to buy up to an
aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of our common stock. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if
any, made in connection with this offering. The underwriters
have 30&nbsp;days from the date of this prospectus to exercise
this option. If the underwriters exercise this option, they will
each purchase additional shares on a pro rata basis in
approximately the same proportion to the amounts specified in
the table above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Directed Share Program</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At our request, the underwriters have reserved up
to &nbsp;&nbsp;% of the shares of common stock for sale at the
public offering price set forth on the cover page of this
prospectus to persons who are directors, officers, employees,
and certain vendors, suppliers, customers and business
associates, or who are otherwise associated with us through a
directed share program. The number of shares of common stock
available for sale to the general public will be reduced by the
number of directed shares purchased by participants in the
directed share program. Any directed shares not purchased will be
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 145</B>
</DIV>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Underwriting</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
offered by the underwriters to the general public on the same
basis as all other shares of common stock offered. We have
agreed to indemnify the underwriters against certain liabilities
and expenses, including liabilities under the Securities Act, in
connection with the sales of the directed shares. We have been
advised by UBS&nbsp;Securities LLC that any participants in the
directed share program who purchase more than $100,000 of our
common stock will be required to sign a lock-up agreement, the
form of which will be the same as that of the lock-up agreements
to be entered into by all of our directors, officers and
existing stockholders. See &#147;Shares eligible for future
sale&#151; Lock-up agreements&#148; for a description of the
material terms of these agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>COMMISSIONS AND DISCOUNTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Shares sold by the underwriters to the public will initially be
offered at the initial offering price set forth on the cover of
this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. Any of these
securities dealers may resell any shares purchased from the
underwriters to other brokers or dealers at a discount of up to
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms. Sales of shares made outside of the United States
may be made by affiliates of the underwriters. Upon execution of
the underwriting agreement, the underwriters will be obligated
to purchase the shares at the prices and upon the terms stated
in the underwriting agreement and, as a result, will thereafter
bear any risk associated with changing the offering price to the
public or other selling terms.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table shows the per share and total underwriting
discounts and commissions we will pay to the underwriters
assuming both no exercise and full exercise of the
underwriters&#146; option to purchase up to an
additional &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>No exercise</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>Full exercise</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We estimate that the total expenses of this offering payable by
us, not including the underwriting discounts and commissions,
will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NO SALES OF SIMILAR SECURITIES</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We, our executive officers and directors and all of our existing
stockholders have entered, and certain individuals who purchase
shares of our common stock in this offering through the directed
share program may enter, into lock-up agreements with the
underwriters. Under these agreements, subject to certain
exceptions, we and each of these persons may not, without the
prior written approval of UBS Securities LLC and Bear,
Stearns&nbsp;&#38;&nbsp;Co.&nbsp;Inc., offer, sell, contract to
sell or otherwise dispose of, directly or indirectly, or hedge
our common stock or securities convertible into or exchangeable
for our common stock. These restrictions will be in effect for a
period of 180&nbsp;days after the date of this prospectus. At
any time and without public notice, UBS Securities LLC and Bear,
Stearns&nbsp;&#38;&nbsp;Co.&nbsp;Inc. may, in their sole
discretion, release all or some of the securities from these
lock-up agreements. Notwithstanding the foregoing, if
(1)&nbsp;during the last 17&nbsp;days of the 180-day lock-up
period we issue an earnings release or material news or a
material event relating to us occurs or (2)&nbsp;prior to the
expiration of the 180-day lock-up period, we announce that we
will release earnings results during the 16-day period beginning
on the last day of the 180-day lock-up period, then the
restrictions described above will continue to apply until the
expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or
material event.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 146</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Underwriting</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INDEMNIFICATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have agreed to indemnify the underwriters against certain
liabilities, including certain liabilities under the Securities
Act. If we are unable to provide this indemnification, we have
agreed to contribute to payments the underwriters may be
required to make in respect of those liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>LISTING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We expect to apply to have our common stock approved for
quotation on the Nasdaq National Market under the trading symbol
&#147;ARII.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>TRANSFER AGENT AND REGISTRAR</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The transfer agent and registrar for our common stock is
American Stock Transfer&nbsp;&#38; Trust Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>PRICE STABILIZATION, SHORT POSITIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with this offering, the underwriters may engage in
activities that stabilize, maintain or otherwise affect the
price of our common stock, including:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">stabilizing transactions;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">short sales;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">purchases to cover positions
    created by short sales;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">imposition of penalty
    bids;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">syndicate covering transactions.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
These transactions may also include making short sales of our
common stock, which involve the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in this offering and purchasing shares of common
stock in the open market to cover positions created by short
sales. Short sales may be &#147;covered short sales,&#148; which
are short positions in an amount not greater than the
underwriters&#146; over-allotment option referred to above, or
may be &#147;naked short sales,&#148; which are short positions
in excess of that amount.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters may close out any covered short position by
either exercising their over-allotment option, in whole or in
part, or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase
shares through the over-allotment option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Naked short sales are sales made in excess of the over-allotment
option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position
is more likely to be created if the underwriters are concerned
that there may be downward pressure on the price of the common
stock in the open market that could adversely affect investors
who purchased in this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The underwriters also may impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 147</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Underwriting</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
repurchased shares sold by or for the account of that
underwriter in stabilizing or short covering transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As a result of these activities, the price of our common stock
may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. The underwriters
may carry out these transactions on the Nasdaq National Market,
in the over-the-counter market or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>DETERMINATION OF OFFERING PRICE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to this offering, there has been no public market for our
common stock. The initial public offering price was determined
by negotiation by us and the representatives of the
underwriters. The principal factors considered in determining
the initial public offering price include:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the information set forth in this
    prospectus and otherwise available to representatives;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our history and prospects and the
    history and prospects for the industry in which we compete;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our past and present financial
    performance and an assessment of our management;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">our prospects for future earnings
    and the present state of our development;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the general condition of the
    securities markets at the time of this offering;
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">the recent market prices of, and
    demand for, publicly traded common stock of generally comparable
    companies;&nbsp;and
    </FONT></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT face="webdings">4</FONT></TD>
    <TD align="left">
    <FONT style="font-size: 10pt">other factors deemed relevant by
    the underwriters and us.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>AFFILIATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain of the underwriters and their affiliates have provided
in the past and may provide from time to time in the future
certain commercial banking, financial advisory, investment
banking and other services for us for which they will be
entitled to receive customary fees.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 148</B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='118'></A>
</DIV>

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<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Legal matters
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
An opinion regarding the legality of the shares of common stock
being offered in this offering is being provided by Brown
Rudnick Berlack Israels LLP, New York, New York. The
underwriters have been represented by Shearman&nbsp;&#38;
Sterling LLP, New York, New York.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='119'></A>
</DIV>

<!-- link1 "Experts" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Experts
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our consolidated financial statements as of and for the year
ended December&nbsp;31, 2004 included in this prospectus were
audited by Grant Thornton LLP (Grant Thornton), our independent
registered public accounting firm, as stated in their report
appearing therein. Our consolidated financial statements as of
December&nbsp;31, 2003 and for each of the years in the two year
period ended December&nbsp;31, 2003 have been included in this
prospectus in reliance upon the report of KPMG LLP (KPMG), our
former independent registered public accounting firm, appearing
elsewhere herein and upon the authority of said firm as experts
in accounting and auditing. KPMG&#146;s reports on our
consolidated financial statements as of December&nbsp;31, 2003
and for each of the years in the two year period ended
December&nbsp;31, 2003 contained no adverse opinion or
disclaimer of opinion and were not otherwise qualified or
modified as to uncertainty, audit scope or accounting
principles. On August&nbsp;11, 2004, we terminated KPMG. In
connection with its audits of our financial statements as of and
for the years ended December&nbsp;31, 2002 and 2003, and through
August&nbsp;11, 2004, there were no disagreements with KPMG on
any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of KPMG,
would have caused KPMG to make reference thereto in its report
on such statements for such periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Following KPMG&#146;s termination, we engaged Grant Thornton as
our independent certified public accountants effective
August&nbsp;12, 2004. The decision to hire Grant Thornton was
unanimously approved by our board of directors. We did not
consult with Grant Thornton with respect to the application of
accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might
be rendered on our financial statements, or a disagreement with
KPMG and there were no &#147;reportable events&#148; as defined
in Item&nbsp;304(a)(1)(v) of Regulation&nbsp;S-K promulgated
under the Exchange Act during this time frame. Grant Thornton
has been given access to prior years work papers by KPMG without
limitation in accordance with Statement on Auditing Standard
No.&nbsp;84, Communications Between Predecessor and Successor
Auditors.
</DIV>

<DIV align="left" style="font-size: 10pt;">
<A name='120'></A>
</DIV>

<!-- link1 "Where you can find more information" -->

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Where you can find more information
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have filed with the SEC a registration statement on
Form&nbsp;S-1 under the Securities Act with respect to the
shares to be sold in this offering. This prospectus, which
constitutes a part of the registration statement, does not
contain all of the information set forth in the registration
statement and the exhibits, schedules and amendments to the
registration statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For
further information about us and the shares to be sold in this
offering, please refer to the registration statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Statements contained in this prospectus as to the contents of
any contract, agreement or other document that we make reference
to, are not necessarily complete, and in each instance, where
applicable, please refer to the copy of the contract, agreement
or other document filed as an exhibit to the registration
statement, each statement being qualified in all respects by
this reference.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> 149</B>
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Where you can find more information</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Upon completion of this offering, we will become subject to the
reporting and information requirements of the Exchange Act and,
as a result, we will file periodic and current reports, proxy
statements and other information with the SEC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
You may read and copy all or any portion of the registration
statement or any reports, statements or other information we
file with the SEC following the completion of this offering at
the public reference room maintained by the SEC at 100 F Street,
N.E., Washington,&nbsp;D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information on the public reference
rooms. Copies of such material are also available by mail from
the SEC at prescribed rates. You can also find our SEC filings
at the SEC&#146;s website at www.sec.gov.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We intend to provide our stockholders with annual reports
containing consolidated financial statements that have been
examined and reported on, with an opinion expressed by, an
independent registered public accounting firm.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> 150</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 16pt;">
Index to financial statements
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="90%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Page</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Audited Consolidated Financial Statements of American Railcar
    Industries, Inc.</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#201'>Report of Grant Thornton LLP Independent
    Registered Public Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#202'>Report of KPMG LLP Independent Registered
    Public Accounting Firm</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-3</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#203'>Consolidated Balance Sheets as of
    December&nbsp;31, 2003 and 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-4</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#204'>Consolidated Statements of Operations for
    the years ended December&nbsp;31, 2002, 2003<BR>
    and 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#205'>Consolidated Statements of Cash Flows for
    the years ended December&nbsp;31, 2002, 2003<BR>
    and 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-6</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#206'>Consolidated Statements of
    Shareholders&#146; Equity and Comprehensive Income (Loss) for
    the years ended December&nbsp;31, 2002, 2003 and 2004</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-7</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#207'>Notes to Consolidated Financial
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Unaudited Condensed Consolidated Financial Statements of
    American Railcar Industries, Inc.</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#208'>Condensed Consolidated Balance Sheets as of
    December&nbsp;31, 2004 and September&nbsp;30, 2005
    (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-33</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#209'>Condensed Consolidated Statements of
    Earnings for the nine months ended September&nbsp;30, 2004 and
    2005 (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#210'>Condensed Consolidated Statements of Cash
    Flows for the nine months ended September&nbsp;30, 2004 and 2005
    (unaudited)</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    &nbsp;<A HREF='#211'>Notes to Condensed Consolidated Financial
    Statements</A></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-36</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Audited Consolidated Financial Statements of Ohio Castings
    Company, LLC</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Report of Grant Thornton LLP Independent Registered Public
    Accounting Firm</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-53</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Balance Sheets as of August&nbsp;31, 2003, 2004 and
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-54</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statements of Operations for the period from
    June&nbsp;20, 2003 to August&nbsp;31, 2003 and for the years
    ended August&nbsp;31, 2004 and 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statements of Cash Flows for the period from
    June&nbsp;20, 2003 to August&nbsp;31, 2003 and for the years
    ended August&nbsp;31, 2004 and 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-56</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Consolidated Statements of Members&#146; Equity for the period
    from June&nbsp;20, 2003 to August&nbsp;31, 2003 and for the
    years ended August&nbsp;31, 2004 and 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-57</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes to Consolidated Financial Statements</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>F-58</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-1</B>
</DIV>

<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='201'></A>
</DIV>

<!-- link1 "REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Board of Directors
</DIV>

<DIV align="left" style="font-size: 10pt;">
American Railcar Industries, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying consolidated balance sheet of
the manufacturing and railcar services operations of American
Railcar Industries, Inc. and subsidiaries (the
&#147;Company&#148;) as of December&nbsp;31, 2004, and the
related consolidated statements of operations,
shareholders&#146; equity and comprehensive income (loss), and
cash flows for the period then ended. These financial statements
are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the manufacturing and railcar services operations of American
Railcar Industries, Inc. and subsidiaries as of
December&nbsp;31, 2004, and the consolidated results of its
operations and cash flows for the period then ended, in
conformity with accounting principles generally accepted in the
United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Grant Thornton LLP
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Chicago, Illinois
</DIV>

<DIV align="left" style="font-size: 10pt;">
September&nbsp;30, 2005
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-2</B>
</DIV>

<!-- PAGEBREAK -->
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<A name='202'></A>
</DIV>

<!-- link1 "Report of Independent Registered Public Accounting Firm" -->

<DIV align="center" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Board of Directors
</DIV>

<DIV align="left" style="font-size: 10pt;">
American Railcar Industries, Inc.:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying consolidated balance sheet of
American Railcar Industries, Inc. and subsidiaries as of
December&nbsp;31, 2003, and the consolidated statements of
operations, shareholders&#146; equity and comprehensive income
(loss), and cash flows for each of the years in the two-year
period ended December&nbsp;31, 2003. These consolidated
financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of American Railcar Industries, Inc. and subsidiaries
as of December&nbsp;31, 2003, and the results of their
operations and their cash flows for each of the years in the
two-year period ended December&nbsp;31, 2003, in conformity with
U.S. generally accepted accounting principles.
</DIV>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="38%"></TD>
    <TD width="62%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    /s/ KPMG LLP</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD style="font-size: 18pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    St. Louis, Missouri</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    April&nbsp;23, 2004</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-3</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='203'></A>
</DIV>

<!-- link1 "CONSOLIDATED BALANCE SHEETS" -->

<DIV align="left" style="font-size: 10pt;">
<B>CONSOLIDATED BALANCE SHEETS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(In thousands, except for share and per share amounts)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Year Ended</B></TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="11" align="left" valign="top">
    <B>Assets</B></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,183</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amounts due from affiliates&#151; current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,065</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,350</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,816</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Construction in process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,686</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>124,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,829</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,878</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,951</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable from affiliates and interest thereon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>57,170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>663</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt issuance costs and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>905</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>615</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment in joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,251</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>196,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>356,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Liabilities and Shareholders&#146; Equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,524</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note payable to affiliate&#151; current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other amounts due to affiliates&#151; current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,137</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>45,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,795</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, net of current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,517</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note payable to affiliate&#151; noncurrent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other amounts due to affiliates&#151; noncurrent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mandatorily redeemable payment-in-kind preferred stock,
    $.01&nbsp;par value, 150,000&nbsp;shares authorized,
    89,899&nbsp;shares issued and outstanding at December&nbsp;31,
    2003, $1,000 liquidation price per share</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>89,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mandatorily redeemable preferred stock, stated value $1,000,
    99,000&nbsp;shares authorized, 1&nbsp;share issued and
    outstanding at December&nbsp;31, 2003 and 2004, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,395</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>190,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221,817</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New Preferred Stock, $.01&nbsp;par value per share, stated value
    $1,000 per share, 500,000&nbsp;shares authorized,
    111,685&nbsp;shares issued and outstanding at December&nbsp;31,
    2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,685</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $.01&nbsp;par value, 12,000&nbsp;shares
    authorized, 1,000 and 1,195 shares issued and outstanding at
    December&nbsp;31, 2003 and 2004, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,889</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,959</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(884</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,063</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,023</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>196,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>356,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See notes to the consolidated financial statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-4</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='204'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF OPERATIONS" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(In thousands, except share and per share amounts)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="15" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Manufacturing operations (including revenues from affiliates of
    $63,561, $62,882 and $64,372 in 2002, 2003 and 2004,
    respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>138,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>188,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>316,432</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar services (including revenues from affiliates of $12,838,
    $11,012 and $19,429 in 2002, 2003 and 2004, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38,624</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>217,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>355,056</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Costs of goods sold:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of manufacturing operations (including costs related to
    affiliates of $55,679, $54,394 and $59,052 in 2002, 2003 and
    2004, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,283</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of railcar services (including costs related to sales to
    affiliates of $12,152, $10,136 and $15,539 in 2002, 2003 and
    2004, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,473</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>340,756</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,603</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administrative and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,573</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,966</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (includes interest income from affiliates of
    $3,379, $2,998 and $3,885 in 2002, 2003 and 2004, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,422</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense including interest expense to affiliates of
    $1,524 in 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,667</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss from joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(604</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(609</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) before income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,807</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,204</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,112</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net earnings (loss)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,913</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less preferred dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,139</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,690</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,241</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Loss available to common shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,052</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,320</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average common shares outstanding&nbsp;&#151; basic and
    diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,087</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss per common share&nbsp;&#151; basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(11,052</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,625</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(10,414</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See notes to the consolidated financial statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-5</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='205'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF CASH FLOWS" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>(in thousands)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="51%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,913</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net earnings (loss) to net cash
    provided by operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,247</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in joint venture investment as a result of loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>609</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenses relating to pre-recapitalization liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,431</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailment gain</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for deferred income taxes (benefits)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,349</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,740</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for losses on accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-lived asset impairment and other charges</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Gain) loss on the disposition of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(19</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in operating assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,509</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,983</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(469</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,835</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(28,718</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(365</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(417</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,999</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,048</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,966</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,316</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,128</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,639</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17,082</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,816</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,301</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,441</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from the disposition of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in note and interest receivable from ACF</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Refund of sales tax on property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(535</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,251</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,037</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of ARL spin off</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Advance to affiliate under notes receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(165,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from issuance of notes payable from affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>137,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    (Increase) decrease in amount due from affiliate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,634</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,634</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in amount due to affiliate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(893</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,219</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,842</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(18,890</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40,222</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,369</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,997</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,293</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(118</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,878</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See notes to the consolidated financial statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-6</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
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<DIV align="left" style="font-size: 10pt;">
<A name='206'></A>
</DIV>

<!-- link1 "CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY AND COMPREHENSIVE INCOME (LOSS)" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY AND
COMPREHENSIVE INCOME&nbsp;(LOSS)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(in thousands except share data)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="18%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retained</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>New</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>earnings</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Preferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>New</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Common</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Total</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>income</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(accumulated</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>preferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Stock-</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>Common</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>paid-in</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>comprehensive</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>shareholders&#146;</B></TD><TD></TD>
</TR>

<TR style="font-size: 7pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(loss)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>deficit)</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shares</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>stock</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>capital</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>loss</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>equity</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="36" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance December&nbsp;31, 2001</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,662</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(427</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,561</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,913</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,913</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,913</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability adjustment, net of tax effect of $163</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(260</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,173</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution for expenses relating to pre-
    recapitalization liabilities retained by ACF</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>668</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on mandatorily redeemable payment-in-kind preferred
    stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,139</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,139</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance December&nbsp;31, 2002</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(687</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,917</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,065</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability adjustment, net of tax effect of $128</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(208</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(208</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(208</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution for expenses relating to pre-
    recapitalization liabilities retained by ACF</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>583</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Excess of purchase price over book value related to transfer of
    Castings from ACF</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,874</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,874</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on mandatorily redeemable payment-in-kind preferred
    stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,690</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,690</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance December&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,889</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,577</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(884</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,804</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,921</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Currency translation adjustment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Minimum pension liability adjustment, net of taxes of $109</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(193</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(193</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(193</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Dividends on preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,241</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,241</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer mandatorily redeemable PIK preferred to New Preferred
    Stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,517</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Conversion of PIK Preferred Dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>654</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net adjustments relating to spin off of ARL (Note&nbsp;1)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,486</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,486</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,148</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(100,634</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deemed distribution related to decrease in Castings book value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution for expenses relating to pre-
    capitalization liabilities retained by ACF</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,431</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,431</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance December&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(16,959</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,063</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135,023</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 21pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See notes to the consolidated financial statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-7</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='207'></A>
</DIV>

<!-- link1 "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <BR>
 </B>For the years ended December 31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;1&#151;Description of the Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying consolidated financial statements include the
manufacturing and railcar services operations of American
Railcar Industries, Inc. and its wholly owned subsidiaries
(collectively the &#147;Company&#148; or &#147;ARI&#148;). As
further described below, the Company purchased Castings, LLC (or
&#147;Castings&#148;) on January&nbsp;1, 2005. In accordance
with accounting principles generally accepted in the United
States of America, assets and liabilities transferred between
entities under common control are accounted for at historical
cost in a manner similar to a pooling of interests, and the
financial statements of previously separate companies for
periods prior to the acquisition are restated as if the transfer
occurred at the beginning of the year. The consolidated income
statement and statement of cash flows also include the activity
of Castings for all periods after its formation in June of 2003,
as if it were owned for these periods. All significant
intercompany balances and transactions have been eliminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI manufactures railcars, custom designed railcar parts for
industrial companies, railroads, and other industrial products,
primarily aluminum and special alloy steel castings, for
non-rail customers. ARI also provides railcar maintenance
services for railcar fleets, including that of its affiliate,
American Railcar Leasing, LLC (&#147;ARL&#148;). In addition,
ARI provides fleet management and maintenance services for
railcars owned by selected customers. Such services include
inspecting and supervising the maintenance and repair of such
railcars. The Company&#146;s operations are located in the
United States and Canada. The Company operates a small railcar
repair facility in Sarnia Ontario Canada. Canadian revenues were
0.7%, 0.5% and 0.5% of total company revenues for 2002, 2003 and
2004, respectively. Canadian assets were 0.5%, 0.5% and 0.3% of
total company assets for 2002, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI was recapitalized on October&nbsp;1, 1994 when ACF
Industries LLC (&#147;ACF&#148;), the former holder of
ARI&#146;s common stock, transferred to ARI the old common stock
of ARI along with the assets and liabilities of ACF&#146;s
railcar maintenance and railcar parts manufacturing businesses.
In exchange, ACF received 57,306&nbsp;shares of ARI&#146;s newly
issued mandatorily redeemable preferred stock. New shares of
ARI&#146;s common stock were issued to Carl C. Icahn, Chairman
of the Board of ACF, in exchange for cash of $6.4&nbsp;million.
In October 1998, ARI redeemed 57,305&nbsp;shares of the
preferred stock and the remaining share of preferred stock was
transferred to Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2003, ACF Industries Holding Corp. (&#147;ACF Holding&#148;),
an affiliate of ARI, formed a wholly-owned subsidiary, Castings.
Castings has a one-third ownership interest in Ohio Castings
Company, LLC (&#147;Ohio Castings&#148;), a limited liability
company formed to run two foundries which cast railcar
sideframes and bolsters for use or sale by the ownership group.
Starting in the third quarter of 2003, ARI has purchased
bolsters and sideframes produced by Ohio Castings. In June 2005,
ARI completed the purchase of its one-third ownership interest
in Castings from ACF Holding. The transaction was consummated on
January&nbsp;1, 2005. The cost of the acquisition was
$12.0&nbsp;million represented by a demand note that the Company
expects to pay in 2005. However, as Castings was owned by an
entity with ownership common to ARI, the investment in
subsidiary is recorded at the date of Castings&#146; inception,
June, 2003 at book value. The purchase price is recorded at full
value as a payable to the affiliate and the excess of fair value
over cost, totalling $4.9&nbsp;million, is presented as a
distribution from equity. Interest is accrued on the note
payable to the affiliate as of January&nbsp;1, 2005 as that is
the date the purchase was agreed to.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-8</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On July&nbsp;20, 2004, ARI formed ARL, a wholly owned
subsidiary. ARL&#146;s primary business is the leasing of
railcars. The subsidiary was capitalized through the issuance of
common and preferred stock. ARI&#146;s investment in ARL was
$116.7 million and $151.7 million at December&nbsp;31, 2004 and
June&nbsp;30, 2005, respectively. Preferred stock of ARL was
issued to affiliated companies in exchange for contributions of
cash or railcars totaling $102.7 million. In January 2005, ARI
obtained an additional $35 million of ARL common stock resulting
in a carrying value of $151.7 million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On June&nbsp;30, 2005, in anticipation of its public offering,
ARI sold its common interest in ARL for $125.0 million to
affiliated companies in return for the preferred stock
investment, valued at $116.1 million, plus accrued dividends of
$8.9 million that those affiliates held in ARI. At
December&nbsp;31, 2004, ARI&#146;s investment in ARL was
$116.7&nbsp;million. This investment was eliminated as of
December&nbsp;31, 2004 in order to present ARI on a stand alone
basis. New preferred stock of $86.5&nbsp;million plus accrued
dividends of $3.5&nbsp;million were eliminated from ARI&#146;s
equity and a charge of $26.7&nbsp;million was recorded to
additional paid in capital to reflect the difference between the
final transfer price of $125&nbsp;million and the ultimate
carrying value of ARI&#146;s investment in ARL of
$151.7&nbsp;million. The 2005 financial statements will reflect
a reduction of New Preferred Stock of $29.6&nbsp;million plus
accrued dividends of $5.4&nbsp;million to eliminate the
additional investment of $35&nbsp;million made in that period.
ARI retained no liabilities or other interests in ARL as a
result of this sale. The presentation of ARI&#146;s operations
has been prepared on a standalone basis excluding ARL&#146;s
operations for all periods, and all transactions giving effect
to ARL&#146;s formation have been eliminated from the financial
statements. Any differences related to the amounts originally
capitalized and the amount paid for ARL in the sale have been
recorded through adjustments to shareholders&#146; equity,
including certain tax benefits that ARI received as a result of
utilizing ARL&#146;s previously incurred tax losses. ARI
recorded a related deferred tax asset of $12.5 million for those
net operating loss carry forwards, as ARI has the legal right to
utilize them for tax purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table discloses the preferred stock transactions
and the effect on additional paid in capital for the year ended
December&nbsp;31, 2004 required to eliminate ARI&#146;s
investment in ARL at that time.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>New preferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>paid in capital</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    January&nbsp;1, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,577</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New preferred stock issued in exchange for mandatorily
    redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange of common interest in ARL for new preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,486</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,670</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ARL deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,522</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,431</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>111,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>41,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-9</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;2&#151;Summary of Significant Accounting
Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Significant accounting policies are described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenue recognition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenues from railcar sales are recognized following completion
of manufacturing, inspection, customer acceptance and shipment,
which is when title and risk for any damage or loss with respect
to the railcars passes to the customer. In some cases, paint and
lining work may be outsourced and, as a result, the sale will
not be recorded until the railcars are shipped from the
independent contractor and accepted by the customer. Revenues
from railcar and industrial parts and components are recorded at
the time of product shipment, in accordance with our contractual
terms. Revenue for railcar maintenance services are recognized
upon completion and shipment of railcars from our plants. The
Company does not bundle railcar service contracts with new
railcar sales. Revenue for fleet management services are
recognized as performed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company records amounts billed to customers for shipping and
handling as part of sales in accordance with EITF&nbsp;00-10,
<I>Accounting for Shipping and Handling Fees and Costs,</I> and
records related costs in cost of sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Debt issuance costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Debt issuance costs are incurred in connection with ARI&#146;s
issuance of long-term debt as described in Note&nbsp;6, and are
amortized over the term of the related debt, utilizing the
effective interest method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventories are stated at the lower of average cost or market on
a first-in, first-out basis, and include the cost of materials,
direct labor and manufacturing overhead.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounts receivable</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company carries its accounts receivable at cost, less an
allowance for doubtful accounts. On a periodic basis, the
Company evaluates its account receivable and establishes an
allowance for doubtful accounts, based on a history of past
write-offs and collections and current credit conditions.
Accounts are placed for collection on a limited basis once all
other methods of collection have been exhausted. Once it has
been determined that the customer is no longer in business
and/or refuses to pay, the accounts are written off.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Property, plant and equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Land, buildings, machinery and equipment are carried at cost,
including interest on funds borrowed to finance construction.
Maintenance and repair costs are charged directly to earnings.
Tooling is generally capitalized and amortized over a period of
two to five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Buildings are depreciated over estimated useful lives that range
from 14 to 50&nbsp;years. The estimated useful lives of other
depreciable assets, including equipment, vary from 3 to
25&nbsp;years. Depreciation is calculated on the straight-line
method for financial reporting purposes and on accelerated
methods for tax purposes.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-10</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Ohio Castings joint venture</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company uses the equity method to account for its investment
in Ohio Castings, owned by its subsidiary, Castings. Under the
equity method, the Company recognizes its share of the earnings
and losses of the joint venture as they accrue instead of when
they are realized. Advances and distributions are charged and
credited directly to the investment account. Ohio Castings
produces railcar parts that are sold to one of the joint venture
partners. The joint venture partner sells these parts to outside
third parties at current market prices and to the Company and
the other joint venture partner in Ohio Castings at cost plus a
licensing fee. The risk of loss to Castings and the Company is
limited to its investment in Ohio Castings and its one third
share of its guarantee of Ohio Castings debt which was
approximately $3.3&nbsp;million at December&nbsp;31, 2004. The
fair market value of the guarantee was approximately
$0.1&nbsp;million at December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The cost of railcar manufacturing for the years ended
December&nbsp;31, 2003 and 2004 included $3.0&nbsp;million and
$19.9&nbsp;million, respectively, in products produced by Ohio
Castings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The carrying amount of the investment in Ohio Castings by
Castings was $6.6&nbsp;million and $5.3&nbsp;million at
December&nbsp;31, 2003 and 2004, respectively. Summary combined
financial information for Ohio Castings, the investee company,
as of and for the 6 months ended December&nbsp;31, 2003 and as
of for the year ended December&nbsp;31, 2004 are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial position</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,111</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant, and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,407</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>30,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,518</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,674</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,184</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,709</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,858</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Member&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,660</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Results of Operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,789</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,793</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,770</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,812</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,827</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Impairment of long-lived assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of
assets may not be recoverable. The criteria for determining
impairment for such long-lived assets to be held and used is
determined by comparing the carrying value of these long-lived
assets to be held and used to management&#146;s best estimate of
future undiscounted cash flows expected to result from the use
of the assets. If the assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the
assets. The estimated fair value of the assets is measured by
estimating the present value of the future discounted cash flows
to be generated. An impairment loss in the years
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-11</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ended December&nbsp;31, 2002 and 2003 is discussed in
Note&nbsp;5. No impairment losses have been recorded in the year
ended December&nbsp;31, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Pension plans and other postretirement benefits</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain ARI employees participate in noncontributory, defined
benefit pension plans and a supplemental executive retirement
plan. Benefits for the salaried employees are based on salary
and years of service, while those for hourly employees are based
on negotiated rates and years of service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI also participates in defined contribution retirement plans,
health care and life insurance plans sponsored by a related
party covering certain employees. Benefit costs are accrued
during the years the employees render service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial reporting basis and the tax
basis of ARI&#146;s assets and liabilities at enacted tax rates
expected to be in effect when such amounts are recovered or
settled. ARI files a tax return separate from other members of
the controlled group.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Statement of cash flows</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the purpose of the consolidated statement of cash flows, ARI
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash
equivalents. Until October 2004, ACF received the majority of
ARI&#146;s cash receipts and disbursed ARI&#146;s cash on behalf
of ARI, and maintained an intercompany receivable/payable which
bore interest at ACF&#146;s internal cost of funds in accordance
with an administration agreement between ARI and ACF, which is
described in Note&nbsp;10. Since October 2004, ARI maintains its
own cash balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fair value of financial instruments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The carrying amounts of cash and cash equivalents, accounts
receivable, amounts due to/from affiliates and accounts payable
approximate fair values because of the short-term maturity of
these instruments. The fair value of long-term debt is discussed
in Note&nbsp;6. The fair value of the note receivable from ACF,
which is carried at face amount plus accrued interest, could not
reasonably be estimated due to the lack of market for similar
instruments. Fair value estimates are made at a specific point
in time, based on relevant market information about the
financial instrument. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment
and, therefore, cannot be determined with precision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Foreign currency translation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Balance sheet amounts from our Canadian operation are translated
at the exchange rates in effect at year-end, and operations
statement amounts are translated at the average rates of
exchange prevailing during the year. Currency translation
adjustments are included in Shareholders&#146; Equity.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-12</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Comprehensive income (loss)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Comprehensive income (loss) is defined as the change in equity
of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources.
Comprehensive income (loss) consists of net earnings (loss),
foreign currency translation adjustment and the Company&#146;s
minimum pension liability adjustment, which is shown net of tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Retained earnings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As ARI and ACF are entities under common control, accounting
principles generally accepted in the United States of America
require that ARI&#146;s initial carrying value of assets
transferred to it from ACF and the purchase of Castings be equal
to ACF&#146;s historical net book value at the time of transfer.
The excess of the fair value paid over the net book value of
assets and liabilities transferred to ARI is reflected as a
distribution of retained earnings and has the effect of reducing
shareholders&#146; equity by $24.1&nbsp;million as of
December&nbsp;31, 2003 and 2004. Of that amount,
$19.2&nbsp;million was recorded at the formation of ARI, and
$4.9&nbsp;million was recorded in 2003 from the acquisition of
Castings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Basic earnings (loss)&nbsp;per share are calculated as net
earnings (loss) attributable to common shareholders divided by
the weighted-average number of common shares outstanding during
the respective period. Diluted earnings (loss) per share are
calculated by dividing net earnings (loss)&nbsp;attributable to
common shareholders by the weighted-average number of shares
outstanding plus dilutive potential common shares outstanding
during the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of the years ended December&nbsp;31, 2002 and 2003, 1,000
common shares were issued and outstanding. As indicated in Note
13, an additional 195 common shares were issued in 2004 in
connection with the capital contribution received from Hopper
Investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Use of estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Management of ARI has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with
accounting principles generally accepted in the United States of
America. Significant items subject to estimates and assumptions
include deferred taxes, workers compensation accrual, valuation
allowances for accounts receivable and inventory obsolescence,
valuation of property, plant and equipment, and the reserve for
warranty claims. Actual results could differ from those
estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent accounting pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In January 2003, the Financial Accounting Standards Board
(&#147;FASB&#148;) issued Interpretation No. (&#147;FIN&#148;)
46, <I>Consolidation of Variable Interest Entities</I>, which
was later amended on December&nbsp;24, 2003
(&#147;FIN&nbsp;46R&#148;). FIN&nbsp;46R explains how to
identify variable interest entities and how an enterprise
assesses its interest in a variable interest entity to decide
whether to consolidate that entity. FIN&nbsp;46R requires
unconsolidated variable interest entities to be consolidated by
their primary beneficiaries. The provisions of FIN&nbsp;46R are
generally effective for periods after December&nbsp;31, 2003.
The adoption of this pronouncement has not had a material effect
on the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In May 2003, the FASB issued Statement of Financial Accounting
Standards (&#147;SFAS&#148;) No.&nbsp;150, <I>Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity</I>, (&#147;SFAS&nbsp;150&#148;), which
establishes standards for how companies classify and measure
certain financial
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-13</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
instruments with characteristics of both liabilities and equity.
It requires companies to classify a financial instrument that is
within its scope as a liability (or an asset in some
circumstances). ARI re-classified the mandatorily redeemable
payment-in-kind preferred stock (see Note&nbsp;12) as a
liability in accordance with SFAS&nbsp;150 in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In November 2004, the FASB issued SFAS&nbsp;No.&nbsp;151,
<I>Inventory Costs&#151;An Amendment of ARB No.&nbsp;43</I>,
<I>Chapter&nbsp;4</I>, which requires the recognition of costs
of idle facilities, excessive spoilage, double freight, and
rehandling costs as a component of current-period expenses. The
provisions of SFAS&nbsp;No.&nbsp;151 are effective for inventory
costs incurred during fiscal years beginning after June&nbsp;15,
2005. Since the Company produces railcars based upon specific
customer orders, management does not expect the provisions of
SFAS&nbsp;No.&nbsp;151 to have a material impact on the
Company&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, the FASB&nbsp;issued SFAS&nbsp;No.&nbsp;123R,
<I>Share-Based Payments.</I> SFAS&nbsp;No.&nbsp;123R is a
revision of SFAS&nbsp;No.&nbsp;123, <I>Accounting for Stock
Based Compensation,</I> and supersedes APB&nbsp;25. Among other
items, SFAS&nbsp;123R eliminates the use of Accounting
Principles Board (&#147;APB&#148;)&nbsp;25 and the intrinsic
value method of accounting, and requires companies to recognize
the cost of employee services received in exchange for awards of
equity instruments, based on the grant date fair value of those
awards, in the consolidated financial statements. The effective
date of SFAS&nbsp;123R is the first quarter of the
Company&#146;s year ending December&nbsp;31, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In March 2005, the FASB issued FIN&nbsp;47 as an interpretation
of FASB Statement&nbsp;143, <I>Accounting for Asset Retirement
Obligations </I>(&#147;FASB&nbsp;143&#148;). This interpretation
clarifies that the term conditional asset retirement obligation
as used in FASB&nbsp;143 and refers to a legal obligation to
perform an asset retirement activity in which the timing and/or
method of settlement are conditional on a future event that may
or may not be within the control of the entity. The obligation
to perform the asset retirement activity is unconditional even
though uncertainty exists about the timing and/or method of
settlement. Accordingly, an entity is required to recognize a
liability for the fair value of a conditional asset retirement
obligation if the fair value of the liability can be reasonably
estimated. This interpretation also clarifies when an entity
would have sufficient information to reasonably estimate the
fair value of an asset retirement obligation. FIN&nbsp;47 is
effective no later than the end of fiscal years ending after
December&nbsp;15, 2005. The Company believes that the adoption
of FIN&nbsp;47 will not have a material effect on the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On June&nbsp;1, 2005, the FASB issued Statement No.&nbsp;154,
<I>Accounting Changes and Error Corrections, a replacement of
APB&nbsp;Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3
</I>SFAS&nbsp;154. The Statement applies to all voluntary
changes in accounting principle, and changes the requirements
for accounting for and reporting of a change in accounting
principle. The Company will adopt SFAS&nbsp;154 at
December&nbsp;31, 2005 and does not anticipate any material
change to its operating results as a result of this adoption.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-14</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;3&#151;Accounts Receivable</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The allowance for doubtful accounts consists of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>482</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>572</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bad debt expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>209</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts written off</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(167</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(279</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(271</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Recoveries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>510</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;4&#151;Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventories consist of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Raw materials</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,655</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Work-in-process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,515</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Finished products</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,434</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>47,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>76,604</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>45,207</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>73,925</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventory reserves consist of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>948</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,310</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>559</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write off</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(268</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(122</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(190</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;5&#151;Long-Lived Asset Impairment and Other
Charges</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company reduced the carrying value of building improvements
and equipment by $0.2&nbsp;million and $0.8&nbsp;million in 2002
and 2003, for one of its car repair plants which is reflected in
the consolidated statement of operations in the costs of railcar
services. The scope of work performed at this facility was
reduced due the economic slow-down. As a result, an impairment
charge was recorded for equipment that was no longer in use. The
facility was idled in 2003.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-15</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;6&#151;Long-Term Debt</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Long-term debt at December&nbsp;31, 2003 and 2004 consists of:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Senior secured credit facilities, secured by all the assets of
    ARI, and guaranteed by ACF, ACF&#146;s parent, NMI Holding
    Corp., and ACF Holding, bearing interest at variable rates based
    on LIBOR(1), payable in installments through the year 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Industrial revenue bonds secured by certain buildings and
    manufacturing equipment and guaranteed by ACF and ACF Holding,
    with effective interest rates ranging from 6.75% to 8.5%,
    principal amounts due through the year 2011</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,600</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Subordinated note secured by all the assets of ARI and
    guaranteed by ACF and ACF Holding, bearing interest at variable
    rates based on LIBOR(1), payable in 2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term debt, including current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,851</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current portion of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term debt, net of current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,517</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(1)</TD>
    <TD align="left">
    LIBOR was 1.1% at December&nbsp;31, 2003, and 2.3% at
    December&nbsp;31, 2004.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Aggregate maturities of long-term debt over the next five years,
as of December&nbsp;31, 2004, are as follows (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="81%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,441</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,573</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,613</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009 and thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,890</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The senior secured credit facilities were issued for
$120.0&nbsp;million in 1998. Prior to termination of the
revolver in June 2002, the credit facilities provided for an
additional $30.0&nbsp;million revolving credit facility. There
were no amounts drawn on the revolving credit facility prior to
its termination in June 2002. Debt covenants require ARI to
maintain certain debt-to-earnings and coverage ratios with which
ARI was in compliance at December&nbsp;31, 2003 and 2004. The
Company repaid $15.8&nbsp;million, $17.7&nbsp;million and
$29.0&nbsp;million of the senior secured credit facilities in
2002, 2003 and 2004, respectively. On July&nbsp;20, 2004, ARI
repaid in full a $10.0&nbsp;million subordinated note. In
addition, the company repaid industrial revenue bonds of
$1.0&nbsp;million, $1.2&nbsp;million and $1.2&nbsp;million in
2002, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The fair value of long-term debt was approximately
$50.1&nbsp;million and $9.9&nbsp;million at December&nbsp;31,
2003 and 2004, respectively, as calculated by discounting cash
flows through maturity using ARI&#146;s current rate of
borrowing for similar liabilities.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-16</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;7&#151;Income Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Income tax expense (benefit) consists of:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>332</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State and local</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>71</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>449</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Federal</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,092</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,504</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State and local</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(332</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>239</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Foreign</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,349</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,742</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Income tax expense (benefit) attributable to earnings (loss)
from operations differed from the amounts computed by applying
the U.S.&nbsp;Federal income tax rate of 35% to earnings (loss)
from operations by the following amounts:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computed income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,032</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>771</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,439</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State and local taxes, net of federal tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(176</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>185</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-deductible expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>297</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>566</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,894</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,191</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="65%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="12" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Computed income tax expense (benefit)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(35.0</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35.0</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    State and local taxes, net of federal tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-deductible expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13.8</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(0.2</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effective income tax rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(32.6</TD>
    <TD align="left" valign="bottom" nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51.7</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>53.3</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-17</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The tax effects of temporary differences that have given rise to
deferred tax assets and liabilities are presented below:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current deferred taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provisions not currently deductible</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,065</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Non-current deferred taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provisions not currently deductible</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>627</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net operating loss carryforwards</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,144</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Pensions and post retirement</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,440</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,211</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,322</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,548</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total non-current deferred tax (liability) asset-net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,583</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>663</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total deferred tax (liability) asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,160</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,728</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The net deferred tax liability is classified in the balance
sheet as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax current asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,065</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax non-current (liability)&nbsp;asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(9,583</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>663</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net deferred tax (liability) asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(8,160</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,728</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In the consolidated balance sheets, these deferred tax assets
and liabilities are classified as either current or non-current
based on the classification of the related liability or asset
for financial reporting. A deferred tax asset or liability that
is not related to an asset or liability for financial reporting,
including deferred taxes related to carryforwards, is classified
according to the expected reversal date of the temporary
differences as of the end of the year. A valuation allowance is
provided when it is more likely than not that some portion or
all of the deferred tax assets will not be realized. No
valuation allowances have been recorded at December&nbsp;31,
2003 and 2004 as management believes that it is more likely than
not that all deferred tax assets will be fully realized based on
the expectation of taxable income in future years. At
December&nbsp;31, 2004, the Company had net operating loss
carry-forwards of $26&nbsp;million which begin to expire in 2024.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;8&#151;Warranties</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company records a liability for an estimate of costs that it
expects to incur under its basic limited warranty when
manufacturing revenue is recognized. Factors affecting the
Company&#146;s warranty liability include the number of units
sold and historical and anticipated rates of claims and costs
per claim. The Company periodically assesses the adequacy of its
warranty liability based on changes in these factors.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-18</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Changes in the Company&#146;s warranty reserve, which is
reflected on the balance sheet in accrued expenses, are as
follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability, beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,436</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense for new warranties issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Warranty claims</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(310</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(505</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(142</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability, end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,408</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;9&#151;Stock Options</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 1994, the Company entered into an agreement with
Mr.&nbsp;Unger, currently its chief executive officer, which
provided that Mr.&nbsp;Unger shall be granted an option to
purchase 2.0% of the outstanding common shares of ARI at a price
equal to 2.0% of the common equity contribution by
Carl&nbsp;C.&nbsp;Icahn (ARI&#146;s chairman of the board and a
principal stockholder) at the formation of ARI. The agreement
provided that this option shall be exercisable at the time of
ARI&#146;s initial public offering, and should ARI be sold to
parties other than in a public offering, Mr.&nbsp;Unger shall
receive 2.0% of the sales price, net of the preferred interest
established at the formation of ARI, and net of the contribution
for common stock. The agreement further provided that the above
options and or rights shall remain in effect as long as
Mr.&nbsp;Unger is employed by ARI. Compensation expense under
this arrangement would be recognized when the contingency is met
at the effective date of a public offering or the completion of
a sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;10&#151;Related Party Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As part of the 1994 recapitalization described in Note&nbsp;1,
ACF has retained certain liabilities existing as of the
recapitalization date, including employee benefits, workers
compensation, litigation, environmental and others. If ACF were
unable to honor or meet these obligations, ARI would be
responsible for such liabilities. In the opinion of management,
ACF has the present ability to meet these obligations. This
liability totaled approximately $10.0&nbsp;million and
$11.1&nbsp;million at December&nbsp;31, 2003 and 2004
respectively, consisting primarily of pension and postretirement
liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the 1994 ACF asset transfer, the Company
entered into the following administrative and operating
agreements with ACF, effective as of October&nbsp;1, 1994:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Manufacturing services agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under the manufacturing services agreement, ACF agreed to
manufacture and distribute, at the Company&#146;s instruction,
various products using certain assets that the Company acquired
pursuant to the 1994 ACF asset transfer agreement. In
consideration for these services, the Company agreed to pay ACF
based on agreed upon rates. Components supplied to ARI by ACF
include tank railcar heads, wheel sets and various structural
components. In the years ended December&nbsp;31, 2002, 2003 and
2004, ARI purchased inventory of $15.7&nbsp;million,
$19.0&nbsp;million and $31.3&nbsp;million, respectively, of
components from ACF. The agreement automatically renews unless
written notice is provided by the Company.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-19</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Administration Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under this agreement, ACF agreed to provide the Company with
office facilities and administrative services, primarily
information technology services. In exchange for the facilities
and services, the Company agreed to pay ACF based on agreed upon
rates. Management believes that these allocation methods are
reasonable for the relevant costs. Total amounts incurred under
this agreement totaled $0.8&nbsp;million, $0.8&nbsp;million and
$0.8&nbsp;million at December&nbsp;31, 2002, 2003, and 2004,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Until October 2004, ACF received the majority of ARI&#146;s cash
receipts and disbursed cash on its behalf. ARI maintained a
receivable/payable from affiliates bearing interest at
ACF&#146;s internal cost of funds in accordance with this
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
At the time of ARI&#146;s formation in 1994, when this
Administrative Agreement was entered into, ARI and ACF
contemplated that ARI would generally need funds to build its
facilities, acquire assets and provide for working capital
needs. ACF has provided financing to ARI and ARI has repaid
these amounts through an affiliate account based on ARI&#146;s
cash flow needs from month to month. ARI has classified its
relations with ACF through its affiliate account as financing
activities on the accompanying statements of cash flows. From
time to time this account has had a due from balance but ARI
does not believe that this changes the basic nature of the
financing relationship.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Included in amounts due to affiliates was a payable to ACF of
$4.0&nbsp;million as of December&nbsp;31, 2003. As of
December&nbsp;31, 2004, amounts due to affiliates included
$22.2&nbsp;million in payables to ACF and ARL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Railcar Servicing Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under this agreement, the Company agreed to provide ACF with
railcar repair and maintenance services, fleet management
services and consulting services on safety and environmental
matters for railcars owned or managed by ACF. ACF agreed to
compensate the Company based on agreed upon rates. Revenue
recorded under this arrangement totaled $12.8&nbsp;million,
$11.0&nbsp;million and $18.2&nbsp;million at December&nbsp;31,
2002, 2003, and 2004, respectively and is included under revenue
from affiliates on the statement of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B><I>Supply Agreement</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Under this agreement, we agreed to manufacture and sell to ACF
specified components at cost plus mark-up or on terms not less
favorable than the terms on which the Company sold the same
products to third parties. Revenue recorded under this
arrangement totaled $1.4&nbsp;million, $0.9&nbsp;million and
$0.7&nbsp;million at December&nbsp;31, 2002, 2003, and 2004,
respectively and is included under revenue from affiliates on
the statement of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2004, the Company entered into the following agreements with
ARL and its subsidiaries:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>Railcar Management Agreements with ARI&nbsp;First LLC and ARI
    Third LLC</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Under this agreement, the Company provided ARI&nbsp;First and
    ARI&nbsp;Third with marketing, leasing, administration,
    maintenance, record keeping and insurance services for railcars
    owned by ARI&nbsp;First and ARI&nbsp;Third. In exchange for
    these services ARI&nbsp;First and ARI&nbsp;Third paid the
    Company a management fee which totaled $1.2&nbsp;million for the
    year ended December&nbsp;31, 2004 which is included under
    revenue from affiliates on the statement of operations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-20</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV style="margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>ACF Administration Agreement</B></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    The ACF&nbsp;Administration agreement was entered into with ACF
    and ARL. Under the agreement, ACF agreed to provide certain
    management services which were required under the railcar
    management agreement wit ARI&nbsp;First and ARI&nbsp;Third
    described above. Fees paid to ACF under this agreement were
    equal to the fees the Company charged to ARI&nbsp;First and
    Third under the railcar management agreement and totaled
    $1.2&nbsp;million for the year ended December&nbsp;31, 2004
    which is included under revenue from affiliates on the statement
    of operations.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
These two arrangements were terminated on June&nbsp;30, 2005,
when ARI assigned its management agreements for ARI First LLC
and ARI Third LLC to ARL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Cost of railcar manufacturing for the years ended
December&nbsp;31, 2003 and 2004 includes $3.0&nbsp;million and
$19.9&nbsp;million, respectively, in railcar products produced
by Ohio Castings, which is partially owned by Castings, as
described in Note&nbsp;1. Expenses of $0.4&nbsp;million and
$3.2&nbsp;million paid to Castings under a supply agreement is
included in the cost of railcar manufacturing for the years
ended December&nbsp;31, 2003 and 2004, respectively. ARI also
has been charged $0.2&nbsp;million in the year ending
December&nbsp;31, 2003 relating to certain costs incurred by
Castings in the establishment of Ohio Castings. Inventory at
December&nbsp;31, 2003 and 2004 includes approximately
$0.3&nbsp;million and $5.3&nbsp;million, respectively, of
purchases from Ohio Castings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In September 2003, Castings loaned Ohio Castings
$3.0&nbsp;million under a promissory note which was due January
2004. The note was renegotiated for $2.2&nbsp;million and bears
interest at 4.0% with payments made in quarterly installments
with the last payment due in November 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI&#146;s employees participate in ACF&#146;s noncontributory,
defined benefit pension plans and other postretirement health
care and life insurance plans. As part of ARI&#146;s
recapitalization, ACF retained the liabilities for unfunded
pension and other postretirement liabilities and workers
compensation liabilities as of October&nbsp;1, 1994 for
employees who transferred from ACF to ARI at that date and for
environmental liabilities as of that date. Although ACF is
responsible for any costs associated with the liabilities at the
recapitalization date, related expenses which have accrued since
the recapitalization have been reflected in ARI&#146;s financial
statements in order to reflect the full cost of doing business.
Expenses that ACF pays relating to pre-recapitalization
liabilities are recorded as capital contributions and appear as
additional paid-in capital on ARI&#146;s balance sheet. ARI
recorded total expenses relating to benefits and environmental
liabilities of $2.8&nbsp;million, $2.8&nbsp;million and
$4.0&nbsp;million in the years ended December&nbsp;31, 2002,
2003 and 2004, respectively. Included in these total expenses
were $0.7&nbsp;million, $0.6&nbsp;million and $1.4&nbsp;million
in 2002, 2003 and 2004, respectively, which related to
pre-recapitalization liabilities retained by ACF and are
reflected as additional paid-in capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In October 1998, ARI advanced $57.2&nbsp;million to ACF under a
promissory note secured by the stock of an affiliate.
$14.9&nbsp;million of the note was assigned to an affiliate,
with the remaining $42.3&nbsp;million of the note repaid in
October 2004. The Company recorded interest income on this note
of $2.8&nbsp;million, $2.5&nbsp;million and $1.8&nbsp;million in
the years ended December&nbsp;31, 2002, 2003 and 2004,
respectively. Accrued interest was $0.4&nbsp;million as of
December&nbsp;31, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2001, ARI entered into a derivative instrument in the form of
an interest rate swap contract with an underlying initial
notional amount of $49.0&nbsp;million, terminating in February
2005. Concurrent with the execution of this swap agreement, ARI
assigned its rights and obligations under this contract to ACF.
ARI includes the fair value of the contract as a liability on
its balance sheet, with an equal amount included in amounts due
from ACF to reflect the assignment of the contract. The fair
value of the contract was $2.7&nbsp;million, $1.5&nbsp;million
and $0.1&nbsp;million at December&nbsp;31, 2002, 2003 and 2004,
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-21</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
respectively. Interest expense is not reflected in ARI&#146;s
results of operations due to ACF&#146;s assumption of the
contract.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ACF and ACF&nbsp;Holding have guaranteed the Company&#146;s
obligations under the industrial revenue bonds as described in
Note&nbsp;6. In addition, ACF and ACF&nbsp;Holding provided
guarantee&#146;s under the senior secured credit facility and
the subordinated note, also described in Note&nbsp;6. The senior
secured credit facility and the subordinated note were both
repaid in July 2004.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During 2004, ARI advanced $165.0&nbsp;million to Mr.&nbsp;Icahn
under a secured note due in 2007 and bearing interest at prime
plus
1<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%.
Accrued interest was paid in full as of December&nbsp;31, 2004.
Interest income on the note was $2.0&nbsp;million for the year
ended December&nbsp;31, 2004. As further discussed in
Note&nbsp;17, ARI transferred its interest in the note
receivable to an affiliate on January&nbsp;26, 2005.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During 2004, ARL advanced $130.0&nbsp;million to ARI under a
note due in 2007 and bearing interest at prime plus
1<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">2</FONT>%.
Accrued interest was paid in full as of December&nbsp;31, 2004.
Interest expense on the note was $1.5&nbsp;million for the year
ended December&nbsp;31, 2004. As further discussed in
Note&nbsp;17, this note was fully satisfied on January&nbsp;26,
2005.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On December&nbsp;17, 2004, ARI borrowed $7.0&nbsp;million under
a note payable to Arnos Corp., an affiliate. The note bears
interest at prime plus
1<FONT style="font-size: 70%"><SUP>3</SUP></FONT>/<FONT style="font-size: 60%">4</FONT>%
and is payable on demand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have been advised that affiliates of Mr.&nbsp;Icahn are
currently negotiating with the Foundation for a Greater
Opportunity, or the Foundation, our other significant beneficial
stockholder, to enter into an agreement to acquire all of our
common stock held by the Foundation. The consummation of this
acquisition of our common stock would require the approval of
applicable authorities of the State of New York. If the parties
obtain this approval, we have been advised that the parties
expect that the purchase would be completed in the first three
months of 2006. As a result of these contemplated arrangements,
we expect that Mr.&nbsp;Icahn will continue to control a
majority of the voting power of our capital stock following the
offering. As a result, Mr.&nbsp;Icahn is, and will be, able to
exert substantial influence over us, elect our directors and
control most matters requiring board or shareholder approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;11&#151;Pension Plans</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI is the sponsor of two defined benefit plans that cover
certain executives and employees at certain of its manufacturing
facilities. ARI uses a measurement date of October&nbsp;1 for
all of its employee benefit plans. The plan&#146;s assets are
held by independent trustees and consist primarily of equity and
fixed income securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Costs of benefits relating to current service for those
employees to whom the Company is responsible to provide benefits
are expensed currently. Pension expense for the year ended
December&nbsp;31, 2004 includes a $0.1&nbsp;million curtailment
gain caused by the elimination of future benefit accruals for
service credit for salaried employees as of April&nbsp;1, 2004
and a reduction in service hours for hourly employees at one
plant location. The changes in benefit obligation, change in
plan assets, funded status and
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-22</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
weighted average assumptions as of December&nbsp;31, 2003 and
2004, and components of net periodic benefit cost for the years
ended December&nbsp;31, 2002, 2003 and 2004 is as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Years Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Change in benefit obligation</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation, beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,148</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Plan Amendments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actuarial loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation, end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,378</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Change in plan assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets, beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,377</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,574</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Actual return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>59</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(92</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Employer contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>148</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>308</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefits paid</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(10</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Fair value of plan assets, end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,776</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="9">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Funded status</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Benefit obligation in excess of plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,574</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,602</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized prior service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Unrecognized net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,783</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(49</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>174</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="75%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Amounts recognized in the balance sheets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued benefit liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,145</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,450</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid pension</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>848</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other comprehensive income</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,102</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net amount recognized</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(614</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(500</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accumulated benefit obligation for all defined benefit
pension plans was $3.1&nbsp;million and $3.4&nbsp;million at
December&nbsp;31, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-23</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="70%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="12" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Components of net periodic benefit cost</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Service cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>188</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(58</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>92</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred asset gain</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(182</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(90</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(236</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of unrecognized prior service cost from plan
    amendments</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailment gain</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Amortization of net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net periodic benefit cost</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>84</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Additional information</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Years Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in minimum liability (pre-tax)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>302</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Weighted-average assumptions used to determine benefit
obligations at December&nbsp;31
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Years Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Weighted-average assumptions used to determine net periodic
benefit cost for years ended
</DIV>

<DIV align="left" style="font-size: 10pt;">
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December&nbsp;31
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>Years Ended December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2002</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="12" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Discount rate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expected long-term return on plan assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.50</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Rate of compensation increase</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5.00</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>N/A</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-24</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>The Company&#146;s pension plan weighted-average asset
allocations by asset category at</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
<B>December&nbsp;31 are as follows:</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="79%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Years Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Asset Category</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equity securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>51</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>68</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt securities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>49</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>100</TD>
    <TD align="left" valign="bottom" nowrap>%</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The objective of the pension plan investment policy is to grow
assets in relation to liabilities, while prudently managing the
risk of a decrease in the pension plan&#146;s assets. The
pension plan management committee has established a target
investment mix with upper and lower limits for investments in
equities, fixed-income and other appropriate investments. Assets
will be re-allocated among asset classes from time-to-time to
maintain the target investment mix. The committee has
established a target investment mix of 65% equities and 35%
fixed-income for the plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The expected return on plan assets is based on our asset
allocation mix and our historical return, taking into account
current and expected market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company&#146;s policy with respect to funding the qualified
plans is to fund at least the minimum required by the Employee
Retirement Income Security Act of 1974, as amended, and not more
than the maximum amount deductible for tax purposes. ARI does
not currently have minimum funding requirements, as set forth in
employee benefit and tax laws. All contributions made to the
funded pension plans for 2003 and 2004 were voluntary and were
made with cash generated from operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company also maintains qualified defined contribution plans
which provide benefits to their employees based on employee
contributions, years of service, and employee earnings with
discretionary contributions allowed. Expenses related to these
plans were $0.5&nbsp;million, $0.5&nbsp;million, and
$0.7&nbsp;million for the years ended December&nbsp;31, 2002,
2003, and 2004, respectively. Selected ARI salaried employees
participated in the ACF Industries, Inc. Savings and Investment
Plan, and the expense is included above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following benefit payments, which reflect expected future
service, as appropriate, are expected to be paid:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 3pt; ">

<TR style="font-size: 1pt;">
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>As of 12/31/04</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>23</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>106</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>139</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010-2014</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>791</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI is currently a member of a controlled group that includes
ACF, an entity in which Mr.&nbsp;Icahn has an indirect ownership
of at least 80%. ACF is the sponsor of several pension plans
that are underfunded, as of December&nbsp;31, 2004, by a total
of approximately $24.1&nbsp;million on an ongoing actuarial
basis and $172.4&nbsp;million if those plans were terminated, as
most recently reported by the plans&#146; actuaries. The
liabilities could increase or decrease, depending on a number of
factors, including future changes in promised benefits,
investment returns and the assumptions used to calculate the
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-25</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
liability. As members of the controlled group, ARI would be
jointly and severally liable for any failure of ACF to pay the
unfunded liabilities upon a termination of the ACF pension
plans. Upon completion of this offering, ARI believes that it
should no longer be a member of the ACF controlled group. As a
result, ARI should no longer be subject to ACF&#146;s pension
liabilities, unless it were determined that ARI was otherwise a
member of the ACF controlled group or that a principal purpose
of the offering or other transactions that resulted in
ARI&#146;s ceasing to be a member of the ACF controlled group
was to evade pension liabilities and the termination date of the
underfunded plan was within five years after the offering or
other transactions. If such a determination were made and upheld
by a court, ARI could remain jointly and severally liable for
pension plan obligations of ACF, which could have a material
adverse effect on ARI&#146;s financial condition and results of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI employees are participants in the ACF Retirement Plan and
the ACF Shippers Hourly Plan, both of which are sponsored by
ACF. At October 1, 2003 and 2004, these plans had actuarial
liabilities in excess of assets. Presented below are the assets
and liabilities of those plans, and the liabilities attributed
to ARI participants.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2003</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ACF</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shipper&#146;s</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retirement Plan</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hourly Plan</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Projected benefit obligation(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>110.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.2</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assets at fair value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underfunded status</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(49.0</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>(a)&nbsp;&nbsp;&#151;&nbsp;Amount attributed to ARI
    participants</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><I>$</I></TD>
    <TD align="right" valign="bottom" nowrap><I>9.1</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><I>$</I></TD>
    <TD align="right" valign="bottom" nowrap><I>1.9</I></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#151;&nbsp;Percentage of total
    liabilities</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>8</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>17</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>2004</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>ACF</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Shipper&#146;s</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Retirement Plan</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Hourly Plan</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in millions)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Projected benefit obligation(a)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>107.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assets at fair value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>62.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8.0</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underfunded status</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(44.7</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3.5</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <I>(a)&nbsp;&nbsp;&#151;&nbsp;Amount attributed to ARI
    participants</I></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><I>$</I></TD>
    <TD align="right" valign="bottom" nowrap><I>8.8</I></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom"><I>$</I></TD>
    <TD align="right" valign="bottom" nowrap><I>2.0</I></TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#151;&nbsp;Percentage of total
    liabilities</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>8</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap><I>18</I></TD>
    <TD align="left" valign="bottom" nowrap><I>%</I></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;12&#151;Commitments and Contingencies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, future minimum rental payments
required under noncancellable operating leases for property and
equipment leased by the Company with lease terms longer than one
year are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; ">

<TR style="font-size: 1pt;">
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(in&nbsp;</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,355</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,696</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,656</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>168</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010 and after</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-26</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company leases certain facilities from an entity owned by
its Chief Executive Officer, certain affiliates of ARI and third
parties. Total rent expense on leases were approximately
$5.4&nbsp;million, $5.8&nbsp;million and $6.6&nbsp;million for
the years ended December&nbsp;31, 2002, 2003 and 2004,
respectively. Expenses to related parties included in the
amounts above were $0.8&nbsp;million, annually for the years
ended December&nbsp;31, 2002, 2003 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with Trans World Airlines, Inc.&#146;s (TWA) 1992
bankruptcy proceedings under Chapter 11 of the Bankruptcy Code,
the Pension Benefit Guarantee Corporation (&#147;PBGC&#148;)
asserted that ACF as well as the other entities in which Mr.
Icahn had a controlling interest were obligated along with TWA
to satisfy any underfunding of TWA&#146;s defined benefit plan.
Subsequently, and in response to a petition of another member of
the Icahn control group, the PBGC terminated the TWA pension
plan and obligated an affiliate of ARI, Highcrest Investors Corp
(Highcrest) to make eight annual payments of $30&nbsp;million
each commencing on July&nbsp;1, 2002 and totaling
$240&nbsp;million (termination payments). As of
December&nbsp;31, 2004, Highcrest had made termination payments
totaling $130&nbsp;million and still owed $110&nbsp;million on
this obligation. The obligation to make termination payments is
non-recourse except to the common stock of ACF Holding (another
member of the control group). While ARI is a controlled entity
of Mr. Icahn, management believes this obligation will have no
adverse effect on the future liquidity, results of operations,
or financial position of ARI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is subject to comprehensive federal, state, local
and international environmental laws and regulations relating to
the release or discharge of materials into the environment, the
management, use, processing, handling, storage, transport or
disposal of hazardous materials and wastes, or otherwise
relating to the protection of human health and the environment.
These laws and regulations not only expose ARI to liability for
the environmental condition of its current or formerly owned or
operated facilities, and its own negligent acts, but also may
expose ARI to liability for the conduct of others or for
ARI&#146;s actions that were in compliance with all applicable
laws at the time these actions were taken. In addition, these
laws may require significant expenditures to achieve compliance,
and are frequently modified or revised to impose new
obligations. Civil and criminal fines and penalties and other
sanctions may be imposed for non-compliance with these
environmental laws and regulations. ARI&#146;s operations that
involve hazardous materials also raise potential risks of
liability under common law. ARI is involved in investigation and
remediation activities at properties that it now owns or leases
to address historical contamination and potential contamination
by third parties. The Company is also involved with state
agencies in the cleanup of two sites under these laws. These
investigations are at a preliminary stage, and it is impossible
to estimate, with any certainty, the timing and extent of
remedial actions that may be required, and the costs that would
be involved in such remediation. Substantially all of the issues
identified relate to the use of the properties prior to their
transfer to ARI in 1994 by ACF and for which ACF has retained
liability for environmental contamination that may have existed
at the time of transfer to ARI. ACF has also agreed to indemnify
ARI for any cost that might be incurred with those existing
issues. However, if ACF fails to honor its obligations to ARI,
ARI would be responsible for the cost of such remediation. The
Company believes that its operations and facilities are in
substantial compliance with applicable laws and regulations and
that any noncompliance is not likely to have a material adverse
effect on its operations or financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
When it is possible to make a reasonable estimate of the
liability with respect to such a matter, a provision will be
made as appropriate. Actual cost to be incurred in future
periods may vary from these estimates. Based on facts presently
known, ARI does not believe that the outcome of these
proceedings will have a material adverse effect on its future
liquidity, results of operations or financial position.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-27</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against ARI.
Management believes that all such claims, suits, and complaints
arising in the ordinary course of business have been properly
reported and reflected in Company&#146;s financial statements.
The Company believes that the settlement of these claims would
not have a significant effect on the future liquidity, results
of operations or financial position of ARI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI is a party to collective bargaining agreements with labor
unions at its Longview, Texas and North Kansas City, Missouri
repair facilities and at its Longview, Texas steel foundry and
components manufacturing facility. These agreements expire in
January 2008, September 2007, and April 2008, respectively. ARI
is also party to a collective bargaining agreement at our
Milton, Pennsylvania repair facility, which expired on
June&nbsp;19, 2005. At the present time, there are no workers at
Milton, as the site is idled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;13&#151;Mandatorily Redeemable Payment-in-Kind
Preferred Stock, New Preferred Stock and Shareholders&#146;
Equity</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In January 2001, ARI issued to ACF 15,000&nbsp;shares of a new
class of mandatorily redeemable payment-in-kind preferred stock
(&#147;PIK Preferred Stock&#148;) in exchange for
$15.0&nbsp;million in cash. In November 2001, ACF sold these
15,000&nbsp;shares to an affiliated entity, Vegas Financial
Corp. (&#147;Vegas&#148;) for $15.0&nbsp;million plus accrued
dividends of $1.6&nbsp;million. The PIK Preferred Stock is
redeemable within 30&nbsp;days after the full repayment of
amounts outstanding under the senior secured credit facilities,
but no earlier than February&nbsp;1, 2006. The PIK Preferred
Stock provides for cumulative dividends at 12.5%&nbsp;per year
on the liquidation price of $1,000&nbsp;per share, payable in
the form of additional shares of PIK Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2001, 2002 and 2003, ARI issued additional shares of PIK
Preferred Stock to Vegas in exchange for cash. In August 2001,
ARI issued to Vegas 30,000&nbsp;shares of PIK Preferred Stock in
exchange for cash of $30.0&nbsp;million. In the second quarter
of 2002, ARI issued 15,000&nbsp;shares of PIK Preferred Stock in
exchange for cash of $15.0&nbsp;million. In the year ended
December&nbsp;31, 2003, ARI issued 10,000&nbsp;shares of PIK
Preferred Stock in exchange for cash of $10.0&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On July&nbsp;20, 2004, ARI&#146;s PIK Preferred Stock was
converted into a new issue of preferred stock (&#147;New
Preferred Stock&#148;). As a result of this conversion, 95,517
shares of PIK Preferred Stock held by Vegas, an entity owned by
Mr. Icahn were converted into New Preferred Stock. Additionally,
ARI issued Vegas 654 shares of New Preferred Stock in
consideration for accrued PIK Preferred dividends at the date of
conversion. Vegas invested an additional $67.5&nbsp;million in
New Preferred Stock in exchange for cash on July&nbsp;20, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On July&nbsp;20, 2004, ACF transferred its ownership in ACF
Lease Administrators, Inc. to ARI in exchange for 2,000 shares
of New Preferred Stock. On the same date, ARI contributed its
ownership in ACF Lease Administrators, Inc. to ARL in exchange
for 2,000 A Units of ARL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On December&nbsp;22, 2004, Shippers Second transferred its
ownership in Shippers Third to ARI in exchange for
32,500&nbsp;shares of ARI New Preferred Stock. On the same date,
ARI contributed its ownership in Shippers Third to ARL in
exchange for 32,500 A Units of ARL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The New Preferred Stock is entitled to cumulative dividends at
the rate of 9.25%&nbsp;per annum, payable solely in cash on a
semi annual basis. Holders of the New Preferred Stock are
entitled to vote on matters submitted to the holders of shares
of common stock based on a percentage of the combined number of
shares of common stock and New Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-28</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI issued 195&nbsp;shares of common stock to Hopper Investments
LLC, an entity controlled by Mr.&nbsp;Icahn, in exchange for
cash of $42.5&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;14&#151;Operating Segment and Sales/ Credit
Concentrations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI operates in two reportable segments; manufacturing and
railcar services. The accounting policies of the segments are
the same as those described in Note&nbsp;2. Performance is
evaluated based on revenue and operating profit. Intersegment
sales and transfers are accounted for as if sales or transfers
were to third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The information in the following table is derived from the
segments&#146; internal financial reports used for corporate
management purposes.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>As of and for the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Manufacturing</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Railcar</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Corporate</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>year ended December&nbsp;31, 2002</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>operations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>services</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#38; all other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Eliminations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Totals</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues from external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>138,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>30,387</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>168,828</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intersegment revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(538</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold&#151;external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>134,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>163,896</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of intersegment sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(438</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(100</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,932</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administration and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,505</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(780</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,314</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(100</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,573</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>96,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>59,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>187,590</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>804</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,816</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,061</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,271</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>As of and for the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Manufacturing</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Railcar</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Corporate</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>year ended December&nbsp;31, 2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>operations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>services</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#38; all other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Eliminations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Totals</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues from external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>188,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>29,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>217,994</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intersegment revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,700</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold&#151;external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>174,629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>29,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>204,391</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of intersegment sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,074</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,613</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(87</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,603</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administration and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,415</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>10,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,433</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,415</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(87</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,263</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>105,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>58,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>196,508</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,301</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,408</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-29</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>As of and for the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Manufacturing</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Railcar</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Corporate</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="left" nowrap><B>year ended December&nbsp;31, 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>operations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>services</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#38; all other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Eliminations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Totals</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues from external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>316,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>38,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>355,056</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intersegment revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,574</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,577</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold&#151;external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>306,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>340,756</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of intersegment sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,834</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(743</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,300</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administration and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,225</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,334</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,899</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(743</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,966</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>34,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>289,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>356,840</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,441</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,955</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,247</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Manufacturing operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenues from affiliates were 38%, 29% and 18% of total revenues
for the years ended December&nbsp;31, 2002, 2003 and 2004,
respectively. Revenues from one significant customer totaled
13%, 32% and 20% of total revenues for the years ended
December&nbsp;31, 2002, 2003 and 2004, respectively. Revenues
from two significant customers were 17%, 35% and 36% for the
years ended December&nbsp;31, 2002, 2003 and 2004, respectively.
Receivables from one significant customer were 2% and 7% of
total accounts receivable at December&nbsp;31, 2003 and 2004,
respectively. Receivables from two significant customers were 2%
and 10% at December&nbsp;31, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Railcar services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenues from affiliates were 8%, 5% and 5% of total revenues
for the years ended December&nbsp;31, 2002, 2003 and 2004,
respectively. Revenues from one significant customer totaled 3%,
1% and 1% of total revenues for the years ended
December&nbsp;31, 2002, 2003 and 2004, respectively. Revenues
from two significant customers were 4%, 1% and 1% for the years
ended December&nbsp;31, 2002, 2003 and 2004, respectively.
Receivables from one significant customer were 8% and 1% of
total accounts receivable at December&nbsp;31, 2003 and 2004,
respectively. Receivables from two significant customers were
10% and 1% at December&nbsp;31, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;15&#151;Selected Quarterly Financial Data
(unaudited)</B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>First</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Second</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Third</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fourth</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>quarter</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="17" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>57,239</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,832</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>861</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) available to common shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>170</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(491</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common shareholders, basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,024</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,775</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,691</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,135</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-30</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>First</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Second</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Third</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Fourth</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>quarter</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>quarter</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="17" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="14" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>79,084</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>79,910</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>95,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>100,725</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>580</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) available to common shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(953</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss attributable to common shareholders, basic and diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,793</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,841</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(2,789</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,897</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;16&#151;Supplemental Cash Flow Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI received interest income of $3.4&nbsp;million,
$3.0&nbsp;million and $4.4&nbsp;million for the years ended
2002, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI paid interest expense of $4.4&nbsp;million,
$3.2&nbsp;million and $1.8&nbsp;million for the years ended
December&nbsp;31, 2002, 2003 and 2004, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI was refunded taxes of $1.7&nbsp;million for the year ended
December&nbsp;31, 2002 and paid taxes of $0.2&nbsp;million for
each year ended December&nbsp;31, 2003 and 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During the year ended December&nbsp;31, 2004, ARI recorded a
non-cash charge to additional paid-in-capital of
$26.7&nbsp;million, representing the excess of the book value of
its investment in ARL over fair market value on the date of the
transfer of the investment in ARL to its affiliates. In
addition, $12.5&nbsp;million representing certain tax benefits
that ARI received as a result of utilizing ARL&#146;s previously
incurred tax losses is also being recorded through additional
paid-in-capital as ARI will receive the benefit of these tax
losses in the future. The net non-cash effect of these
transactions was a charge to additional paid-in-capital of
$14.1&nbsp;million (see Note&nbsp;1).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;17&#151;Subsequent Events</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On January&nbsp;26, 2005, the ARL operating agreement was
amended and an assignment and assumption agreement was executed
whereby ARI transferred its interest in a $165.0&nbsp;million
secured note receivable from Mr.&nbsp;Icahn dated
October&nbsp;28, 2004 to ARL in exchange for 35,000 A Units of
ARL and in satisfaction of its $130.0&nbsp;million note issued
to ARL.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI entered into two supply agreements on January&nbsp;28, 2005
and on June&nbsp;8, 2005 with a supplier for two types of steel
plates. The agreement is for five years and is cancelable by
either party, with proper notice after two years. The agreement
commits ARI to buy the lesser of a fixed volume of steel or 75%
of its production needs from this supplier at prices that
fluctuate with market.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In March 2005, ARI entered into a $50.0&nbsp;million revolving
credit facility secured by receivables and inventory. The notes
bear interest at various rates based on LIBOR and prime. The
term of the credit facility is one year. Debt covenants require
ARI to maintain certain debt-to-earnings and coverage ratios
with which ARI was in compliance. In addition, the revolving
credit facility provides that the payment of dividends triggers
a demand right in favor of ARI&#146;s lenders unless ARI meets
certain financial covenants and provides advance notice of the
dividend to its lenders. Through April&nbsp;26, 2005, ARI had
drawn $30.3&nbsp;million on the revolving credit facility.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In March 2005, ARI acquired certain assets of ACF for
$2.8&nbsp;million. The assets were transferred between entities
under common control and, hence, have been accounted for at
historical cost.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-31</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Years Ended December&nbsp;31, 2002, 2003 and 2004
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In April 2005, construction began on a new paint shop at the
Paragould facility. The project is expected to be completed by
November 2005 at an estimated cost of $13.2&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In August 2005, the company entered into an employment agreement
with its Chief Financial Officer (CFO). The agreement provides
for a bonus that will be earned upon the successful completion
of an Initial Public Offering. Under the terms of the agreement,
the CFO will receive a minimum annual base salary of
$0.25&nbsp;million and a non-prorated cash bonus of at least
$0.15&nbsp;million for the 2005 fiscal year. In addition to the
salary and bonus compensation, the CFO will receive a one-time
special cash bonus of $0.5&nbsp;million on April&nbsp;22, 2007
if, prior to that date, the Company issues common stock to the
public in an offering registered with the Securities and
Exchange Commission (&#147;SEC&#148;) or if the Company is sold
to a third party in a private transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is negotiating the terms of an employment contract
with its Chief Executive Officer (CEO) and expects to execute
this agreement in the fourth quarter of 2005. Significant terms
of this agreement are still being finalized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In August 2005, the company was named a party to a suit in which
the plaintiff alleges the company was responsible for the
malfunction of a valve which was remanufactured in 2004 by a
third party. The company believes it has no responsibility for
this malfunction and has a meritorious defense against any
liability in this case. In any event, it is not possible to
estimate the expected settlement, if any, that any party might
be held accountable for at this time as the case is in its early
stages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company has been named as the defendant in a lawsuit in
which the plaintiff claims that the Company is responsible for
the damage caused by allegedly defective railcars that were
manufactured by the Company. The plaintiffs allege that failures
in certain components caused the contents transported by these
railcars to spill out of the railcars causing property damage,
clean-up costs, monitoring costs, testing costs and other costs
and damages. The Company was recently served with the complaint
for this lawsuit, but Management believes that the Company is
not responsible for the spills and has meritorious defenses
against liability.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-32</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='208'></A>
</DIV>

<!-- link1 "CONDENSED CONSOLIDATED BALANCE SHEETS" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONDENSED CONSOLIDATED BALANCE SHEETS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(in thousands, except share and per share amounts)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 8pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(a)</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Proforma</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,060</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Receivables from affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,867</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>73,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>81,864</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,364</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,837</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>108,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164,193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>164,193</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,977</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,977</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>66,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>75,541</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,178</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Construction in process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,549</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3"><FONT style="font-size: 8pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>152,245</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>58,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>63,690</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88,555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>88,555</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes receivable from affiliates and interest thereon</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>165,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax asset</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt issuance costs and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment in joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,633</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>356,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>262,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>262,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Liabilities and Shareholders&#146; Equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,733</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable, including $3,073 due from affiliates in 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>22,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>56,154</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,524</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,164</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable to affiliate&#151;current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other amounts due to affiliates&#151;current</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>61,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>132,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>215,051</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, net of current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,097</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Note payable to affiliate&#151;noncurrent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>130,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other amounts due to affiliates&#151;noncurrent</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Deferred tax liability</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,853</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Mandatorily redeemable preferred stock, stated value $1,000,
    99,000&nbsp;shares authorized, 1&nbsp;share issued and
    outstanding at December&nbsp;31, 2004 and September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,542</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>221,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>154,489</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>236,544</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Commitments and contingencies</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Shareholders&#146; equity:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New Preferred Stock, $.01&nbsp;par value per share, stated value
    $1,000&nbsp;per share, 500,000&nbsp;shares authorized, 111,685
    and 82,055&nbsp;shares issued and outstanding at
    December&nbsp;31, 2004 and September&nbsp;30, 2005, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>82,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Common stock, $.01&nbsp;par value, 12,000&nbsp;shares
    authorized, 1,195&nbsp;shares issued and outstanding at
    December&nbsp;31, 2004 and September&nbsp;30, 2005, respectively</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Additional paid-in capital</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>40,125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated deficit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,959</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,599</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,599</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accumulated other comprehensive loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,063</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,046</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,046</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,535</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,480</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and shareholders&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>356,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>262,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>262,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I>(a)&nbsp;</I></TD>
    <TD align="left">
    <I>Proforma adjustment includes the reduction of preferred stock
    of $82,055, which will be paid with IPO proceeds. A
    corresponding increase of $82,055 has been included in accrued
    expenses and taxes.</I></TD>
</TR>

</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See notes to the condensed consolidated financial
statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-33</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='209'></A>
</DIV>

<!-- link1 "CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS--UNAUDITED" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS&#151;UNAUDITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(in thousands, except share and per share amounts)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine&nbsp;months ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="11" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Manufacturing operations (including revenues from transactions
    with affiliates of $44,590 and $44,493 in 2004 and 2005,
    respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>226,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>409,208</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Railcar services (including revenues from affiliates of $12,698
    and $16,036 in 2004 and 2005, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,940</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>254,331</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>442,148</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Costs of goods sold:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of manufacturing operations (including costs from
    transactions with affiliates of $40,178 and $41,384 in 2004 and
    2005, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>216,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>377,181</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of railcar services (including costs from transactions with
    affiliates of $9,593 and $12,728 in 2004 and 2005, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,538</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs of goods sold</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404,719</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,429</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administrative and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,543</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest income (includes interest income from affiliates of
    $1,201 and $823 in 2004 and 2005, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,265</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense (including interest expense to affiliates of
    $174 and $1,683 in 2004 and 2005, respectively)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,577</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings(loss) income from joint venture</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(351</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>443</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings before income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,731</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,143</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Income tax expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,611</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Net earnings</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less preferred dividends</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(9,296</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(11,171</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) available to common shareholders</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,423</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,361</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Weighted average shares outstanding&nbsp;&#151;&nbsp;basic and
    diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,195</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss) per common share&nbsp;&#151;&nbsp;basic and
    diluted</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(6,111</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,813</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="4">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See notes to condensed consolidated financial statements</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-34</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='210'></A>
</DIV>

<!-- link1 "CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(in thousands)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,873</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,532</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net earnings to net cash provided by
    (used in) operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,972</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Change in joint venture investment as a result of (earnings) loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(443</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expenses relating to pre-capitalization liabilities retained by
    ACF</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>794</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for deferred income taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,721</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision for losses on accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Curtailment gain</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(59</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in operating assets and liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(13,353</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23,794</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(7,939</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Prepaid expenses and other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(156</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(8,309</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,354</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses and taxes</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,041</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,784</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(644</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>109</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,831</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(6,750</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(16,356</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of common stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Issuance of preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Effect of ARL spin off</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(25,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase (decrease) in amounts due to affiliates</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22,246</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of note receivable from affiliate</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from debt issuance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,294</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Repayment of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(40,204</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,315</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,783</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Increase in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>50,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,258</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,943</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash and cash equivalents at end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>50,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,201</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See notes to condensed consolidated financial statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-35</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<A name='211'></A>
</DIV>

<!-- link1 "NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS" -->

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The condensed consolidated financial statements included herein
have been prepared by American Railcar Industries, Inc. and
subsidiary (collectively the &#147;Company&#148; or
&#147;ARI&#148;), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the
&#147;SEC&#148;). Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United
States of America have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading.
The Condensed Balance Sheet as of December&nbsp;31, 2004 has
been derived from the audited consolidated balance sheets as of
that date. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company&#146;s
latest annual report attached on Form&nbsp;S-1 for the year
ended December&nbsp;31, 2004. In the opinion of management, the
information contained herein reflects all adjustments necessary
to make the results of operations for the interim periods a fair
statement of such operations. Due to the seasonality of the
Company&#146;s business, the results of operations of any
interim period are not necessarily indicative of the results
that may be expected for a fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;1&#151;Description of the Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The condensed consolidated financial statements of the Company
include the accounts of American Railcar Industries, Inc. and
its wholly owned subsidiaries. Through its subsidiary Castings,
LLC (&#147;Castings&#148;), the Company has a one-third
ownership interest in Ohio Castings Company, LLC (&#147;Ohio
Castings&#148;), a limited liability company formed to run two
foundries which cast railcar sideframes and bolsters for use or
sale by the ownership group. All significant intercompany
transactions and balances have been eliminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI manufactures railcars, custom designed railcar parts for
industrial companies, railroads, and other industrial products,
primarily aluminum and special alloy steel castings, for
non-rail customers. ARI also provides railcar maintenance
services for railcar fleets, including that of its affiliate,
American Railcar Leasing, LLC (&#147;ARL&#148;). In addition,
ARI provides fleet management and maintenance services for
railcars owned by selected customers. Such services include
inspecting and supervising the maintenance and repair of such
railcars. The Company&#146;s operations are located in the
United States and Canada. The Company operates a small railcar
repair facility in Sarnia Ontario Canada. Canadian revenues were
0.5% and 0.4% of total company revenues for the nine months
ended September&nbsp;30, 2004 and 2005, respectively. Canadian
assets were 0.4% and 0.3% of total company assets for the nine
months ended September&nbsp;30, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI was recapitalized on October&nbsp;1, 1994 when ACF
Industries LLC (&#147;ACF&#148;), the former holder of
ARI&#146;s common stock, transferred to ARI the old common stock
of ARI along with the assets and liabilities of ACF&#146;s
railcar maintenance and railcar parts manufacturing businesses.
In exchange, ACF received 57,306&nbsp;shares of ARI&#146;s newly
issued mandatorily redeemable preferred stock. New shares of
ARI&#146;s common stock were issued to Carl C. Icahn
(&#147;Mr.&nbsp;Icahn&#148;), Chairman of the Board of ACF, in
exchange for cash of $6.4&nbsp;million. In October 1998, ARI
redeemed 57,305&nbsp;shares of the preferred stock and the
remaining share of preferred stock was transferred to
Mr.&nbsp;Icahn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2003, ACF Industries Holding Corp. (&#147;ACF Holding&#148;),
an affiliate of ARI, formed a wholly-owned subsidiary, Castings.
In June 2005, ARI completed the purchase of Castings from ACF
Holdings. The transaction was effective January&nbsp;1, 2005.
The cost of the acquisition totaled $12.0&nbsp;million, which
represents the fair value of Castings equity interest in Ohio
Castings. The purchase price will be paid in 2005. However as
Castings was owned by an entity with ownership common to ARI,
the investment in subsidiary is recorded at the date of Castings
inception, June, 2003 at book value. The
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-36</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
purchase price is recorded at full value as a payable to the
affiliate and the excess of fair value over cost is presented as
a distribution from equity. Interest is accrued on the note
payable to the affiliate as of January&nbsp;1, 2005 as that is
the date the purchase was agreed to.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On July&nbsp;20, 2004, ARI formed ARL, a wholly owned
subsidiary. ARL&#146;s primary business is the leasing of
railcars. The subsidiary was capitalized through the issuance of
common and preferred stock. ARI&#146;s investment in ARL was
$116.7 and $151.7&nbsp;million at December&nbsp;31, 2004 and
just prior to June&nbsp;30, 2005, respectively. Preferred stock
of ARL was issued to affiliated companies in exchange for
contributions of cash or railcars totaling $102.7 million. In
January 2005, ARI obtained an additional $35&nbsp;million of ARL
common stock resulting in a carrying value of
$151.7&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On June&nbsp;30, 2005, in anticipation of its public offering,
ARI sold its common interest in ARL for $125.0 million to
affiliated companies in return for the preferred stock
investment valued at $116.1 million plus accrued dividends of
$8.9 million that those affiliates held ARI. At
December&nbsp;31, 2004, ARI&#146;s investment in ARL was
$116.7&nbsp;million. This investment was eliminated as of
December&nbsp;31, 2004 in order to present ARI on a stand alone
basis. New preferred stock of $86.5&nbsp;million plus accrued
dividends of $3.5&nbsp;million were eliminated from ARI&#146;s
equity and a charge of $26.7&nbsp;million was recorded to
additional paid in capital to reflect the difference between the
final transfer price of $125&nbsp;million and the ultimate
carrying value of ARI&#146;s investment in ARL of
$151.7&nbsp;million. The 2005 financial statements reflect a
reduction of New Preferred Stock of $29.6&nbsp;million plus
accrued dividends of $5.4&nbsp;million to eliminate the
additional investment of $35&nbsp;million made in that period.
ARI retained no liabilities or other interests in ARL as a
result of this sale. The presentation of ARI&#146;s operations
has been prepared on a standalone basis excluding ARL&#146;s
operations for all periods, and all transactions giving effect
to ARL&#146;s formation have been eliminated from the financial
statements. Any differences related to the amounts originally
capitalized and the amount paid for ARL in the sale have been
recorded through adjustments to shareholder&#146;s equity,
including certain tax benefits that ARI received as a result of
utilizing ARL&#146;s previously incurred tax losses. ARI
recorded a related deferred tax asset of $12.5 million for those
net operating loss carry forwards as ARI has the legal right to
utilize them for tax purposes.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-37</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following table discloses the preferred stock transactions
and the effect on additional paid in capital for the year ended
December&nbsp;31, 2004 and nine months ended September&nbsp;30,
2005 to include all of the transactions including the effect of
the spin off of ARL.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="57%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="9%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Additional</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>New preferred</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>paid in</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>stock</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>capital</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="8" align="right" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="right" nowrap><B>(in thousands</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    January&nbsp;1, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,577</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    New preferred issued for mandatorily redeemable preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>95,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contribution</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>102,654</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>42,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange of common interest in ARL for new preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(86,486</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(26,670</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ARL deferred tax assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,522</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,431</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    December&nbsp;31, 2004</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>111,685</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>41,360</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Exchange of common interest in ARL for new preferred stock</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(29,630</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    ARL tax benefit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,023</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>788</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    September&nbsp;30, 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>82,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>40,125</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;2&#151;Summary of Significant Accounting
Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Significant accounting policies are described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenue recognition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenues from railcar sales are recognized following completion
of manufacturing, inspection, customer acceptance and shipment,
which is when title and risk for any damage or loss with respect
to the railcars passes to the customer. In some cases, paint and
lining work may be outsourced and, as a result, the sale will
not be recorded until the railcars are shipped from the
independent contractor. Revenues from railcar and industrial
parts and components are recorded at the time of product
shipment, in accordance with our contractual terms. Revenue for
railcar maintenance services are recognized upon completion and
shipment of railcars from our plants. The Company does not
bundle railcar service contracts with new car sales. Revenue for
fleet management services are recognized as performed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company records amounts billed to customers for shipping and
handling as part of sales in accordance with EITF&nbsp;00-10,
<I>Accounting for Shipping and Handling Fees and Costs</I>, and
records related costs in cost of sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Debt issuance costs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Debt issuance costs were incurred in connection with ARI&#146;s
issuance of long-term debt, and are amortized over the term of
the related debt, utilizing the effective interest method.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventories are stated at the lower of average cost or market on
a first in, first out basis, and include the cost of materials,
direct labor and manufacturing overhead.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-38</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounts receivable</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company carries its accounts receivable at cost less an
allowance for doubtful accounts. On a periodic basis, the
Company evaluates its account receivable and establishes an
allowance for doubtful accounts, based on a history of past
write-offs and collections and current credit conditions.
Accounts are placed for collection on a limited basis once all
other methods of collection have been exhausted. Once it has
been determined that the customer is no longer in business
and/or refuses to pay, the accounts are written off.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Property, plant and equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Land, buildings, machinery and equipment are carried at cost,
including interest on funds borrowed to finance construction.
Maintenance and repair costs are charged directly to earnings.
Tooling is generally capitalized and amortized over a period of
two to five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Buildings are depreciated over estimated useful lives that range
from 14 to 50&nbsp;years. The estimated useful lives of other
depreciable assets, including equipment, vary from 3 to
25&nbsp;years. Depreciation is calculated on the straight-line
method for financial reporting purposes and on accelerated
methods for tax purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Ohio Castings joint venture</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company uses the equity method to account for its investment
in Ohio Castings owned by its subsidiary, Castings, LLC. Under
the equity method, the Company recognizes its share of the
earnings and losses of the joint venture as they accrue instead
of when they are realized. Advances and distributions are
charged and credited directly to the investment account. Ohio
Castings produces railcar parts that are sold to one of the
joint venture partners. The joint venture partner sells these
parts to outside 3rd&nbsp;parties at current market prices and
to the Company and the other joint venture partner in Ohio
Castings at cost plus a licensing fee. The risk of loss to
Castings, LLC and the Company is limited to its investment in
Ohio Castings and its one third share of its guarantee of Ohio
Castings debt which was approximately $0.1&nbsp;million at
September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The cost of railcar manufacturing for the nine months ended
September&nbsp;30, 2004 and 2005 included $14.3&nbsp;million and
$19.0&nbsp;million, respectively, in products produced by Ohio
Castings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The carrying amount of the investment in Ohio Castings by
Castings&nbsp;LLC was $5.3&nbsp;million and $6.2&nbsp;million at
December&nbsp;31, 2004 and September&nbsp;30, 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-39</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Summary combined unaudited financial information for Ohio
Castings as of and for the years ended December&nbsp;31, 2004
and nine months ended September&nbsp;30, 2005 follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financial Position</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>19,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>18,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant, and equipment, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,436</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>33,436</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>19,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,770</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,858</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,449</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Member&#146;s equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,987</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Summary consolidated results of operations for the nine months
ended September&nbsp;30, 2004 and 2005.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September 30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September 30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>53,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>88,324</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(991</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,115</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings&nbsp;(loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(1,053</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,327</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Impairment of long-lived assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of
assets may not be recoverable. The criteria for determining
impairment for such long-lived assets to be held and used is
determined by comparing the carrying value of these long-lived
assets to be held and used to management&#146;s best estimate of
future undiscounted cash flows expected to result from the use
of the assets. If the assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the
assets. The estimated fair value of the assets is measured by
estimating the present value of the future discounted cash flows
to be generated. There were no events or changes in
circumstances that indicate that the carrying value of assets
may not be recoverable, as such, no impairment losses have been
recorded in the year ended December&nbsp;31, 2004 or for the
nine month period ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Pension plans and other postretirement benefits</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain ARI employees participate in noncontributory, defined
benefit pension plans sponsored by a related party. Benefits for
the salaried employees are based on salary and years of service,
while those for hourly employees are based on negotiated rates
and years of service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI also participates in defined contribution retirement plans,
health care and life insurance plans sponsored by a related
party covering certain employees. Benefit costs are accrued
during the years the employees render service.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-40</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial reporting basis and the tax
basis of ARI&#146;s assets and liabilities at enacted tax rates
expected to be in effect when such amounts are recovered or
settled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Statements of cash flows</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
For the purpose of the consolidated statements of cash flows,
ARI considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash
equivalents. Until October 2004, ACF received the majority of
ARI&#146;s cash receipts and disbursed ARI&#146;s cash on behalf
of ARI, and maintained an intercompany receivable/payable which
bore interest at ACF&#146;s internal cost of funds in accordance
with an administration agreement between ARI and ACF, which is
described in Note&nbsp;9. Since October 2004, ARI maintains its
own cash balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Earnings per share</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Basic earnings per share are calculated as net earnings
attributable to common shareholders divided by the
weighted-average number of common shares outstanding during the
respective period. Diluted earnings per share are calculated by
dividing net earnings attributable to common shareholders by the
weighted-average number of shares outstanding plus dilutive
potential common shares outstanding during the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fair value of financial instruments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The carrying amounts of cash and cash equivalents, accounts
receivable, amounts due to/from affiliates and accounts payable
approximate fair values because of the short-term maturity of
these instruments. The fair value of long-term debt is discussed
in Note&nbsp;5. The fair value of the note receivable from Ohio
Castings and Mr.&nbsp;Icahn, which is carried at face amount
plus accrued interest, could not reasonably be estimated due to
the lack of market for similar instruments. Fair value estimates
are made at a specific point in time, based on relevant market
information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with
precision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Foreign currency translation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Balance sheet amounts from our Canadian operation are translated
at the exchange rates in effect at the end of the period, and
operations statement amounts are translated at the average rates
of exchange prevailing during the year. Currency translation
adjustments are included in Shareholders&#146; Equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Comprehensive income (loss)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Comprehensive income (loss) is defined as the change in equity
of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources.
Comprehensive income (loss) consists of net earnings (loss),
foreign currency translation adjustment and the Company&#146;s
minimum pension liability adjustment, which is shown net of tax.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-41</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 21pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Use of estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Management of ARI has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with
accounting principles generally accepted in the United States of
America. Significant items subject to estimates and assumptions
include, deferred taxes, pension obligations, workers
compensation, valuation allowances for accounts receivable and
inventory obsolescence and the reserve for warranty claims.
Actual results could differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Retained earnings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As ARI and ACF are entities under common control, accounting
principles generally accepted in the United States of America
require that ARI&#146;s initial carrying value of assets
transferred to it from ACF and the sale of Castings be equal to
ACF&#146;s historical net book value at the time of transfer.
The excess of the fair value paid over the net book value of
assets and liabilities transferred to ARI is reflected as a
distribution of retained earnings due to common control and has
the effect of reducing shareholders&#146; equity by
$24.1&nbsp;million at December&nbsp;31, 2004 and
September&nbsp;30, 2005. Of that amount, $19.2&nbsp;million was
recorded at the formation of ARI, and $4.9&nbsp;million was
recorded in 2003 from the acquisition of Castings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Recent accounting pronouncements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In December 2004, the FASB revised SFAS No.&nbsp;123,
Share-Based Payment, which establishes the accounting for
transactions in which an entity exchanges its equity instruments
or certain liabilities based upon the entity&#146;s equity
instruments for goods or services. The revision to SFAS
No.&nbsp;123 generally requires that publicly traded companies
measure the cost of employee services received in exchange for
an award of equity instruments based on the fair value of the
award on the grant date. That cost will be recognized over the
period during which an employee is required to provide service
in exchange for the award, which is usually the vesting period.
Management expects that the revised provisions of SFAS
No.&nbsp;123 will be effective for the Company after the Initial
Public Offering. Management has not yet evaluated the impact of
the revisions to SFAS No.&nbsp;123 on the Company&#146;s
financial statements. After the offering, the Company will
comply with 123R and expense stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In March 2005, the FASB issued FIN&nbsp;47 as an interpretation
of FASB Statement&nbsp;143, <I>Accounting for Asset Retirement
Obligations </I>(FASB 143). This interpretation clarifies that
the term conditional asset retirement obligation as used in FASB
143 and refers to a legal obligation to perform an asset
retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not
be within the control of the entity. The obligation to perform
the asset retirement activity is unconditional even though
uncertainty exists about the timing and/or method of settlement.
Accordingly, an entity is required to recognize a liability for
the fair value of a conditional asset retirement obligation if
the fair value of the liability can be reasonably estimated.
This interpretation also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of
an asset retirement obligation. FIN&nbsp;47 is effective no
later than the end of fiscal years ending after
December&nbsp;15, 2005. We believe that the adoption of
FIN&nbsp;47 will not result in a material change in our
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On June&nbsp;1, 2005, the FASB issued Statement No.&nbsp;154,
<I>Accounting Changes and Error Corrections, a replacement of
APB Opinion No.&nbsp;20 and FASB Statement No.&nbsp;3
(SFAS&nbsp;154)</I>. The Statement applies to all voluntary
changes in accounting principle, and changes the requirements
for accounting for and
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-42</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
reporting of a change in accounting principle. We will adopt
SFAS&nbsp;154 at December&nbsp;31, 2005 and do not anticipate
any material change to our operating results as a result of this
adoption.
</DIV>

<DIV align="left" style="font-size: 10pt;">
$19.2&nbsp;million was recorded at the formation of ARI, and
$4.9&nbsp;million was recorded in 2003 from the acquisition of
Castings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;3&#151;Accounts Receivable</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The allowance for doubtful accounts consists of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>510</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Bad debt expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts written off</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(81</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(23</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Recoveries</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>560</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;4&#151;Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventories consist of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Raw materials</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>39,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>37,072</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Work-in-process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>25,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>34,253</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Finished products</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,072</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>76,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>84,397</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,533</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total inventories, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>73,925</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>81,864</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventory reserves consist of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="right" nowrap><B>September 30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Beginning Balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,310</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,679</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Provision</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>559</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>309</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Write-off</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(190</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(455</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Ending balance</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,533</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-43</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;5&#151;Long-Term Debt</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Long-term debt consists of the following:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>December&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revolving line of credit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>31,294</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Industrial revenue bonds guaranteed by ACF and ACF Holding, with
    effective interest rates ranging from 6.75% to 8.5%, principal
    amounts due through the year 2011</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,340</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>196</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,851</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>39,830</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current portion of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,733</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term debt, net of current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,097</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On March&nbsp;10, 2005, ARI entered into a $50.0&nbsp;million
revolving credit facility secured by receivables and inventory.
The note bears interest at various rates based on LIBOR or
prime. As of September&nbsp;30, 2005, the interest rate on the
borrowings under the revolving credit facility was 6.5% and was
based on the U.S.&nbsp;prime rate at that time. The term of the
credit facility is one year. Debt covenants require ARI to
maintain certain debt-to-earnings and coverage ratios with which
ARI was in compliance at September&nbsp;30, 2005. In addition,
the revolving credit facility provides that the payment of
dividends triggers a demand right in favor of ARI&#146;s lenders
unless ARI meets certain financial covenants and provides
advance notice of the dividend to its lenders.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The fair value of long-term debt was approximately
$9.9&nbsp;million and $39.8&nbsp;million at December&nbsp;31,
2004 and September&nbsp;30, 2005, respectively, as calculated by
discounting cash flows through maturity using ARI&#146;s current
rate of borrowing for similar liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;6&#151;Warranties</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company records a liability for an estimate of costs that it
expects to incur under its basic limited warranty when
manufacturing revenue is recognized. Factors affecting the
Company&#146;s warranty liability include the number of units
sold and historical and anticipated rates of claims and costs
per claim. The Company periodically assesses the adequacy of its
warranty liability based on changes in these factors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Changes in the Company&#146;s warranty reserve are as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="73%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Nine Months Ended</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>September&nbsp;30,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="9" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability, beginning of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,630</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Expense for new warranties issued</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>278</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Warranty claims</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(67</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(471</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Liability, end of period</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,528</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,437</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-44</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;7&#151;Stock options</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 1994, the company entered into an agreement with
Mr.&nbsp;Unger, currently its chief executive officer, which
provided that Mr.&nbsp;Unger shall be granted an option to
purchase 2.0% of the outstanding common shares of ARI at a price
equal to 2.0% of the common equity contribution by
Carl&nbsp;C.&nbsp;Icahn (ARI&#146;s chairman of the board and a
principal stockholder) at the formation of ARI. The agreement
provided that this option shall be exercisable at the time of
ARI&#146;s initial public offering, and should ARI be sold to
parties other than in a public offering, Mr.&nbsp;Unger shall
receive 2.0% of the sales price net of the preferred interest
established at the formation of ARI and net of the contribution
for common stock. The agreement further provided that the above
options and or rights shall remain in effect as long as
Mr.&nbsp;Unger is employed by ARI. Compensation expense under
this arrangement would be recognized when the contingency is met
at the effective date of a public offering or the completion of
a sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In November 2005, ARI entered into a new agreement with
Mr.&nbsp;Unger. Upon the closing of an initial public offering
of ARI common stock, this new agreement will supersede the 1994
agreement and the 1994 agreement will terminate. The new
agreement provides for the issuance of $6&nbsp;million of common
shares to be issued at the IPO price on the IPO date. These
shares will vest 40% upon issuance, with the remaining 60% to
vest one year after issuance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;8&#151;Related Party Transactions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As part of the 1994 recapitalization described in Note&nbsp;1,
ACF has retained certain liabilities existing as of the
recapitalization date, including employee benefits, workers
compensation, litigation, environmental and others. If ACF were
unable to honor or meet these obligations, ARI would be
responsible for such liabilities. In the opinion of management,
ACF has the present ability to meet these obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the 1994 ACF asset transfer, the Company
entered into the following administrative and operating
agreements with ACF, effective as of October&nbsp;1, 1994:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> Manufacturing services agreement</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Under the manufacturing services agreement, ACF agreed to
    manufacture and distribute, at the Company&#146;s instruction,
    various products using certain assets that the Company acquired
    pursuant to the 1994 ACF asset transfer agreement. In
    consideration for these services, the Company agreed to pay ACF
    for the direct costs they incurred which totaled
    $20.0&nbsp;million and $56.2&nbsp;million for the nine month
    period ended September&nbsp;30, 2004 and 2005, respectively. The
    agreement automatically renews unless written notice is provided
    by the Company.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> Administration Agreement</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Under this agreement, ACF agreed to provide the Company with
    office facilities and administrative services, primarily
    information technology services. In exchange for the facilities
    services, the Company agreed to pay ACF based on agreed upon
    cost allocations. Charges for these services represent a portion
    of actual direct and overhead expenses incurred by ACF, with
    direct expenses being charged based on relative time commitments
    of managerial personnel and overhead based on relative numbers
    of employees. Management believes that these allocation methods
    are reasonable for the relevant costs. Amounts incurred under
    this agreement totaled $0.6&nbsp;million and $0.4&nbsp;million
    for the nine month period ended September&nbsp;30, 2004 and
    2005, respectively. The facility lease amounts, included in the
    amounts incurred, have been included in the total lease expense
    discussion within this footnote. The Agreement was terminated on
    April&nbsp;1, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-45</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> Railcar Servicing Agreement</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Under this agreement, the Company agreed to provide ACF with
    railcar repair and maintenance services, fleet management
    services and consulting services on safety and environmental
    matters for railcars owned or managed by ACF and leased or held
    for lease by ACF. ACF agreed to compensate the Company based on
    agreed upon rates. Revenue recorded under this arrangement
    totaled $12.7&nbsp;million for the nine month period ended
    September&nbsp;30, 2004 and is included under revenue from
    affiliates on the statement of earnings. No amounts were
    recorded during the nine month period ended September&nbsp;30,
    2005. The Agreement was terminated on April&nbsp;1, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> Supply Agreement</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Under this agreement, we agreed to manufacture and sell to ACF
    specified components at cost plus mark-up or on terms not less
    favorable than the terms on which the Company sold the same
    products to third parties. Revenue recorded under this
    arrangement totaled $0.1&nbsp;million and $0.3&nbsp;million for
    the nine month period ended September&nbsp;30, 2005 and 2004 and
    is included under revenue from affiliates on the statement of
    earnings. The Agreement was terminated on April&nbsp;1, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ACF and ACF Holding have guaranteed the Company&#146;s
obligations under the industrial revenue bonds as described in
note&nbsp;5.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of December&nbsp;31, 2004, amounts due to affiliates included
$22.2&nbsp;million to ACF and ARL.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of September&nbsp;30, 2005, amounts due from affiliates
included $1.8&nbsp;million from ACF, $7.1&nbsp;million from ARL,
$0.8&nbsp;million from Mr.&nbsp;Icahn, and $0.2&nbsp;million
from Ohio Castings. As of September&nbsp;30, 2005, amounts due
to affiliates included $2.1&nbsp;million to ACF,
$0.6&nbsp;million to ACF Holding for interest on the Castings
note described below, and $0.4&nbsp;million for interest on the
Arnos note described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI&#146;s employees participate in ACF&#146;s noncontributory,
defined benefit pension plans and other postretirement health
care and life insurance plans. As part of ARI&#146;s
recapitalization, ACF retained the liabilities for unfunded
pension and other postretirement liabilities and workers
compensation liabilities as of October&nbsp;1, 1994 for
employees who transferred from ACF to ARI at that date and for
environmental liabilities as of that date. Although ACF is
responsible for any costs associated with the liabilities at the
recapitalization date, related expenses which have accrued since
the recapitalization have been reflected in ARI&#146;s financial
statements in order to reflect the full cost of doing business.
Expenses that ACF pays relating to pre-recapitalization
liabilities are recorded as capital contributions and appear as
additional paid-in capital on ARI&#146;s balance sheet.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
During 2004, ARI advanced $165.0&nbsp;million to Mr.&nbsp;Icahn
under a secured note due in 2007 and bearing interest at prime
plus 1.75%. During 2004, ARL advanced $130.0&nbsp;million to ARI
under a note due in 2007 and bearing interest at prime plus
1<FONT style="font-size: 70%"><SUP>1</SUP></FONT>/<FONT style="font-size: 60%">2</FONT>%.
On January&nbsp;26, 2005, an assignment and assumption agreement
was executed whereby ARI transferred its interest in a
$165.0&nbsp;million note receivable from Mr.&nbsp;Icahn dated
October&nbsp;28, 2004 to ARL in exchange for 35,000 Units of
common ownership and in satisfaction of a $130.0&nbsp;million
note issued to ARL.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company leases certain facilities and equipment from an
entity owned by an officer of the Company, certain affiliates of
ARI and third parties. Total rent expense on these leases were
approximately $4.8&nbsp;million and $5.3&nbsp;million for the
nine month period ended September&nbsp;30, 2004 and 2005,
respectively. Expenses to related parties included in the
amounts above were $0.6&nbsp;million and $0.3&nbsp;million for
the nine month period ended September&nbsp;30, 2004 and 2005,
respectively.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-46</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Castings has a note receivable of $2.2&nbsp;million from Ohio
Castings due November, 2008. The note bears interest at 4%.
Principle and interest is payable quarterly starting
November&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI entered into a note payable with ACF Holding, an affiliate,
for $12.0&nbsp;million effective January&nbsp;1, 2005 in
connection with the purchase of Castings (Note&nbsp;1). The note
bears interest at prime (6.75% at September&nbsp;30, 2005) plus
0.5% and is due on demand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI entered into a note payable with Arnos Corp., an affiliate,
for $7.0 million in December 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2005, the Company entered into the following agreements with
ARL and its subsidiaries:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> ARL Railcar Services Agreement</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Under this agreement, ARL provided the Company with railcar
    services which the Company was Required to provide to ARI First
    and ARI Third under the railcar management agreement. The
    Company paid ARL an amount equal to the amounts paid to the
    Company by ARI First and ARI Third under the railcar management
    agreement which totaled $2.0&nbsp;million for the nine month
    period ended September&nbsp;30, 2005 and it is included under
    cost to affiliates on the statement of earnings. This agreement
    was terminated on July&nbsp;1, 2005.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> ARL Railcar Servicing Agreement</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Under this agreement, the Company agreed to provide ARL with
    railcar repair and maintenance services, fleet management
    services and consulting services on safety and environmental
    matters for railcars owned or managed by ARL and leased or held
    for lease by ARL. ARL agreed to compensate the Company based on
    agreed upon rates. Revenue of $16.0&nbsp;million for the nine
    month period ended September&nbsp;30, 2005 was recorded under
    this arrangement which is included under revenue from affiliates
    on the statement of earnings. The agreement extends through
    June&nbsp;30, 2006 and is automatically renewable unless either
    party provides at least six months prior notice of termination.
    Termination by the Company would result in a termination fee of
    $0.5&nbsp;million.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B> ARL Services Agreement</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    Under this agreement, ARL agreed to provide the Company certain
    information technology services, rent and building services and
    limited administrative services. The rent and building services
    includes the use of certain facilities owned by Mr.&nbsp;Unger
    which is further described in note&nbsp;12. Under the agreement,
    the Company agreed to provide purchasing and engineering
    services to ARL. Consideration exchanged between the
    Company&#146;s is based on agreed upon fixed annual fee&#146;s.
    Total fees paid to ARL were $1.1&nbsp;million for the nine month
    period ended September&nbsp;30, 2005. Amounts billed to ARL
    totaled $0.1&nbsp;million for the nine month period ended
    September&nbsp;30, 2005. These balances are included in revenues
    and costs from affiliates on the statement of earnings. Either
    party may terminate any of these services, and the associated
    costs for these services, on at least six months prior notice at
    any time prior to the termination of the agreement on
    December&nbsp;31, 2007.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In April 2005, the Company entered into a consulting agreement
with ACF in which both parties agreed to provide labor
litigation, labor relations support and consultation, and labor
contract interpretation and negation services to one another. In
addition, the Company has agreed to provide ACF with engineering
and consultation advice. Fees paid to one another are based on
agreed upon rates. No services were rendered and no amounts were
paid during the nine month period ended September&nbsp;30, 2005.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-47</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI has been advised that in December 2005 an affiliate of
Mr.&nbsp;Icahn entered into an agreement with the Foundation for
a Greater Opportunity, or the Foundation, ARI&#146;s other
significant beneficial stockholder, to acquire all of ARI&#146;s
common stock held by the Foundation. The consummation of this
acquisition would require the approval of applicable authorities
of the State of New York. If the parties obtain this approval,
ARI has been advised that the parties expect that the purchase
would be completed in the first three months of 2006. Pending
the completion of this purchase, and for so long as the purchase
agreement has not been terminated, the Foundation has granted
the purchaser an irrevocable proxy to vote all the shares of ARI
common stock held by the Foundation. As a result of these
contemplated arrangements, ARI expects that Mr.&nbsp;Icahn will
continue to control a majority of the voting power of ARI&#146;s
capital stock following the offering. As a result,
Mr.&nbsp;Icahn is, and will be, able to exert substantial
influence over ARI, elect ARI&#146;s directors and control most
matters requiring board or shareholder approval.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;9&#151;Commitments and contingencies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is currently a member of a controlled group that
includes ACF, an entity in which Mr.&nbsp;Icahn has an indirect
ownership of at least 80%. ACF is the sponsor of several pension
plans that are underfunded, as of December&nbsp;31, 2004, by a
total of approximately $24.1&nbsp;million on an ongoing
actuarial basis and $172.4&nbsp;million if those plans were
terminated, as most recently reported by the plans&#146;
actuaries. The liabilities could increase or decrease, depending
on a number of factors, including future changes in promised
benefits, investment returns and the assumptions used to
calculate the liability. As a member of the controlled group,
ARI would be jointly and severally liable for any failure of ACF
to pay the unfunded liabilities upon a termination of the ACF
pension plans. Upon completion of this offering, ARI believes
that it should no longer be a member of the ACF controlled
group. As a result, ARI should no longer be subject to
ACF&#146;s pension liabilities, unless it were determined that
ARI was otherwise a member of the ACF controlled group or that a
principal purpose of the offering or other transactions that
resulted in ARI&#146;s ceasing to be a member of the ACF
controlled group was to evade pension liabilities and the
termination date of the underfunded plan was within five years
after the offering or other transactions. If such a
determination were made and upheld by a court, ARI could remain
jointly and severally liable for pension plan obligations of
ACF, which could have a material adverse effect on ARI&#146;s
financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with Trans World Airlines, Inc.&#146;s (TWA) 1992
bankruptcy proceedings under Chapter&nbsp;11 of the Bankruptcy
Code, the Pension Benefit Guarantee Corporation
(&#147;PBGC&#148;) asserted that ACF as well as the other
entities in which Mr.&nbsp;Icahn had a controlling interest were
obligated along with TWA to satisfy any underfunding of
TWA&#146;s defined benefit plan. Subsequently, and in response
to a petition of another member of the Icahn control group, PBGC
terminated the TWA pension plan and obligated an affiliate of
ARI, Highcrest Investors Corp. (Highcrest) to make eight annual
payments of $30&nbsp;million each commencing on July&nbsp;1,
2002 and totaling $240&nbsp;million (termination payments). As
of December&nbsp;31, 2004, Highcrest had made termination
payments totaling $130 million and still owed $110&nbsp;million
on this obligation. The obligation to make termination payments
is non-recourse except to the common stock of ACF Holding
(another member of the control group). While ARI is a controlled
entity of Mr.&nbsp;Icahn, management believes this obligation
will have no adverse effect to the future liquidity, results of
operations, or financial position of ARI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is subject to comprehensive federal, state, local
and international environmental laws and regulations relating to
the release or discharge of materials into the environment, the
management, use, processing, handling, storage, transport or
disposal of hazardous materials and wastes, or otherwise
relating to the protection of human health and the environment.
These laws and regulations
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-48</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
not only expose ARI to liability for the environmental condition
of its current or formerly owned or operated facilities, and its
own negligent acts, but also may expose ARI to liability for the
conduct of others or for ARI&#146;s actions that were in
compliance with all applicable laws at the time these actions
were taken. In addition, these laws may require significant
expenditures to achieve compliance, and are frequently modified
or revised to impose new obligations. Civil and criminal fines
and penalties and other sanctions may be imposed for
non-compliance with these environmental laws and regulations.
ARI&#146;s operations that involve hazardous materials also
raise potential risks of liability under common law. ARI is
involved in investigation and remediation activities at
properties that it now owns or leases to address historical
contamination and potential contamination by third parties. The
Company is also involved with state agencies in the cleanup of
two sites under these laws. These investigations are at a
preliminary stage, and it is impossible to estimate, with any
certainty, the timing and extent of remedial actions that may be
required, and the costs that would be involved in such
remediation. Substantially all of the issues identified relate
to the use of the properties prior to their transfer to ARI in
1994 by ACF and for which ACF has retained liability for
environmental contamination that may have existed at the time of
transfer to ARI. ACF has also agreed to indemnify ARI for any
cost that might be incurred with those existing issues. However,
if ACF fails to honor its obligations to ARI, ARI would be
responsible for the cost of such remediation. The Company
believes that its operations and facilities are in substantial
compliance with applicable laws and regulations and that any
noncompliance is not likely to have a material adverse effect on
its operations or financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
When it is possible to make a reasonable estimate of the
liability with respect to such a matter, a provision will be
made as appropriate. Actual cost to be incurred in future
periods may vary from these estimates. Based on facts presently
known, ARI does not believe that the outcome of these
proceedings will have a material adverse effect on its future
liquidity, results of operations or financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against ARI.
In the opinion of management, all such claims, suits, and
complaints arising in the ordinary course of business are
without merit or would not have a significant effect on the
future liquidity, results of operations or financial position of
ARI if disposed of unfavorably.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI is a party to collective bargaining agreements with labor
unions at its Longview, Texas and North Kansas City, Missouri
repair facilities and at its Longview, Texas steel foundry and
components manufacturing facility. These agreements expire in
January 2008, September 2007, and April 2008, respectively. We
are also party to a collective bargaining agreement at our
Milton, Pennsylvania repair facility, which expired on June 19,
2005. At the present time, there are no workers at Milton, as
the site is idled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company was named a party to a suit in which the plaintiff
alleges the Company was responsible for the malfunction of a
valve which was remanufactured in 2004 by a third party. The
Company believes it has no responsibility for this malfunction
and has a meritorious defense against any liability in this
case. In any event, it is not possible to estimate the expected
settlement, if any, that any party might be held accountable for
at this time as the case is in its early stages.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI entered two supply agreements on January&nbsp;28, 2005 and
on June&nbsp;8, 2005 with a supplier for two types of steel
plates. The agreement is for five years and is cancelable by
either party, with proper notice after two years. The agreement
commits ARI to buy 75% of its production needs from this
supplier at prices that fluctuate with market.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-49</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In August 2005, the company entered into employment agreement
with its Chief Financial Officer (CFO). The agreement provides
for a bonus that will be earned upon the successful completion
of an Initial Public Offering. Under the terms of the agreement,
the CFO will receive a minimum annual base salary of
$0.25&nbsp;million and a non-prorated cash bonus of at least
$0.15 million for the 2005 fiscal year. In addition to the
salary and bonus compensation, the CFO will receive a one-time
special cash bonus of $0.5 million on April&nbsp;22, 2007 if,
prior to that date, the Company issues common stock to the
public in an offering registered with the SEC or if the Company
is sold to a third party in a private transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company has been named as the defendant in a lawsuit in
which the plaintiff claims that the Company is responsible for
the damage caused by allegedly defective railcars that were
manufactured by the Company. The plaintiffs allege that failures
in certain components caused the contents transported by these
railcars to spill out of the railcars causing property damage,
clean-up costs, monitoring costs, testing costs and other costs
and damages. The Company was recently served with the complaint
for this lawsuit, but Management believes that the Company is
not responsible for the spills and has meritorious defenses
against liability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;10&#151;New Preferred Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The New Preferred Stock is entitled to cumulative dividends at
the rate of 9.25%&nbsp;per annum, payable solely in cash on a
semi annual basis. Holders of the New Preferred Stock are
entitled to vote on matters submitted to the holders of shares
of common stock based on a percentage of the combined number of
shares of common stock and New Preferred Stock. Dividends
declared on the New Preferred Stock for the nine months ended
September&nbsp;30, 2005 were $9.3&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;11&#151;Operating Segment and Sales/ Credit
Concentrations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI operates in two reportable segments; manufacturing and
railcar services. The accounting policies of the segments are
the same as those described in the summary of significant
accounting policies in Note&nbsp;2. Performance is evaluated
based on revenue and operating profit. Intersegment sales and
transfers are accounted for as if sales or transfers were to
third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The information in the following table is derived from the
segments&#146; internal financial reports used for corporate
management purposes.
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="37%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>As of and for the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Manufacturing</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Railcar</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Corporate</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>nine months ended September&nbsp;30, 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Services</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#38; All Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Eliminations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Totals</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues from external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>226,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>27,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>254,331</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intersegment revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,862</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold&nbsp;&#151; external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>216,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>24,585</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>240,612</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of intersegment sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,238</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(624</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,719</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administration and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,543</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>7,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(3,241</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(624</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,176</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>133,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>135,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>300,764</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,868</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation&nbsp;&#38; amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,774</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-50</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 18pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>As of and for the</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Manufacturing</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Railcar</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Corporate</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2" align="center" nowrap><B>nine months ended September&nbsp;30, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Operations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Services</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>&#38; All Other</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Eliminations</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Totals</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="21" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="18" align="center" nowrap><B>(in thousands)</B></TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues from external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>409,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>442,148</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Intersegment revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,577</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of goods sold&nbsp;&#151; external customers</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>377,181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>27,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>404,719</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of intersegment sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,069</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Gross profit</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>32,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(508</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>37,429</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administration and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,417</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Earnings (loss) from operations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>28,021</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>4,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(5,898</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(508</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>26,012</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>175,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>31,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>54,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>262,024</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital expenditures</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>193</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16,356</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation&nbsp;&#38; amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,372</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>147</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,972</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Manufacturing operations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenues from affiliates were 20% and 11% of total manufacturing
revenues for the nine months ended September&nbsp;30, 2004 and
2005, respectively. Revenues from five significant customers
totaled 18%, 17%, 15%, 11% and 11% of total manufacturing
revenues for the nine months ended September&nbsp;30, 2005.
Revenues from three significant customers totaled 23%, 21% and
19% of total manufacturing revenues for the nine months ended
September&nbsp;30, 2004. Receivables from these customers
totaled 26% and 40% of total receivables at September&nbsp;30,
2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Railcar services</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Revenues from affiliates were 46% and 49% of total railcar
services revenues for the nine months ended September&nbsp;30,
2004 and 2005, respectively. No customer accounted for more than
5% of railcar services revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;12&#151;Supplemental Cash Flow Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company received interest income of approximately
$2.1&nbsp;million and $1.3&nbsp;million for the nine months
ended September&nbsp;30, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI paid interest expense of $2.2&nbsp;million and
$3.6&nbsp;million for the nine months ended September&nbsp;30,
2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI paid taxes of $1.5&nbsp;million and $0.3&nbsp;million for
the nine months ended September&nbsp;30, 2004 and 2005,
respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In January 2005, ARI exchanged the $165.0&nbsp;million secured
note with Mr.&nbsp;Icahn to ARL in satisfaction of the
$130.0&nbsp;million note owed to ARL plus $35.0&nbsp;million of
common interest in ARL.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;13&#151;Subsequent Events</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We entered into two vendor supply contracts with minimum volume
commitments in October 2005, with suppliers of materials used at
our railcar production facilities. The agreements have terms of
two and three years respectively. We have agreed to purchase a
combined total of $67.6&nbsp;million from these two suppliers
over the next three years. In 2006, 2007 and 2008 we expect to
purchase $16.0&nbsp;million, $27.1&nbsp;million and
$24.5&nbsp;million respectively under these agreements.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-51</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In November 2005, ARI began discussions with ACF to release ARI
from all employee benefit reimbursement obligations under the
1994 Asset Transfer Agreement. The final settlement of all
obligations will be based on the actuarial valuation of
liabilities at December&nbsp;1, 2005, which is in process, and
the market value of assets at the time of settlement.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
When this transaction is completed, it is contemplated that ACF
will release ARI from all employee benefit reimbursement
obligations under the 1994 Asset Transfer Agreement in exchange
for ARI assuming sponsorship and all obligations of the
Shipper&#146;s Car Line Pension Plan, including obligations
related to ACF participants in the Plan, and a cash payment to
ACF of approximately $9.2&nbsp;million to settle all of its
obligations related to ARI employees included in the ACF
Retirement Plan. The Shipper&#146;s Car Line Pension Plan has an
unfunded liability of $4.0&nbsp;million, which will become the
obligation of ARI. ACF will continue to be responsible for the
ACF Retirement Plan and be responsible for all obligations of
that plan including obligations related to ARI employees who are
in the Plan. The ACF Retirement Plan was curtailed in April 2004.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The assets, liabilities and unfunded liability of the
Shipper&#146;s Car Line Plan based on 2004 actuarial valuations
are as follows:
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="80%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Projected benefit obligation</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top" nowrap>12.4 million</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Assets at fair value</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>8.4 million</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Underfunded status</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4.0 million</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Shipper&#146;s Car Line Plan assets consist mainly of equity
and debt securities.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In addition to the agreement related to pension plans, ARI will
assume sponsorship of a Retiree Medical and Retiree Life
Insurance plan for retirees of ARI and for active ARI employees
that will receive this benefit in the future. The post
retirement liability related to this obligation is estimated to
be $3.9&nbsp;million based on the 2005 APBO valuation. ACF will
pay ARI approximately $2.9&nbsp;million in exchange for assuming
the portion of this liability that relates to years prior to
1994. The 2006 projected expense and cash spending estimates
related to these benefits were $0.2&nbsp;million and
$0.3&nbsp;million, respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The total amount of the obligations to be assumed by ARI is
estimated to be $14.2&nbsp;million. ARI has previously accrued
an estimated liability related to this settlement of
$3.8&nbsp;million. ARI will record an increase in the estimated
liability of $10.4&nbsp;million and a loss on the settlement of
the same amount. The net cash payment to ACF related to this
transaction, and included in the numbers above, will be
approximately $6.3&nbsp;million ($9.2&nbsp;million less $2.9
million).
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
ARI intends to reincorporate from Missouri to Delaware in
connection with its initial public offering. To accomplish this
reincorporation, it is contemplated that, immediately prior to
the closing of the offering, ARI will merge into its wholly
owned subsidiary, American Railcar Industries, Inc., a Delaware
corporation incorporated on November&nbsp;16, 2005 by ARI for
this purpose. The subsidiary will survive the merger and will be
named American Railcar Industries, Inc.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-52</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>American Railcar Industries, Inc. and Subsidiaries</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
For the Nine Months Ended September&nbsp;30, 2004 and 2005
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 30pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 36pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Board of Directors <BR>
 Ohio Castings Company, LLC
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We have audited the accompanying consolidated balance sheets of
Ohio Castings Company, LLC and subsidiaries (the
&#147;Company&#148;) as of August&nbsp;31, 2005, 2004 and 2003,
and the related consolidated statements of operations,
members&#146; equity and cash flows for the year ended
August&nbsp;31, 2005 and 2004, and the period from inception
(June&nbsp;20, 2003) to August&nbsp;31, 2003. These financial
statements are the responsibility of the Company&#146;s
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America as
established by the Auditing Standards Board of the American
Institute of Certified Public Accountants. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company&#146;s internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Ohio Castings Company, LLC as of
August&nbsp;31, 2005, 2004 and 2003, and the consolidated
results of their operations and their cash flows for the year
ended August&nbsp;31, 2005, 2004 and the period from inception
(June&nbsp;20, 2003) to August 31, 2003, in conformity with
accounting principles generally accepted in the United States of
America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
/s/ Grant Thornton LLP
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Chicago, Illinois <BR>
 December&nbsp;1, 2005
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-53</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED BALANCE SHEETS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(Dollars in thousands)
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="62%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap><B>August 31,</B></TD><TD></TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Assets</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current assets:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,026</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>10,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,522</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,827</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other Assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>393</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>112</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>759</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>8,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,134</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>800</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Property, plant and equipment:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,178</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,192</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Machinery and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>12,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,866</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,058</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less accumulated depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,846</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="3"><FONT style="font-size: 10pt">&nbsp;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,212</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,482</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt issuance costs, net</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>214</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,630</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Liabilities and Members&#146; Equity</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of long-term debt, net of debt discount of $14
    in 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Current portion of capital leases</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>7,246</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,046</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,969</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total current liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>13,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,931</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term liabilities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term debt, net of current portion, net of debt discount of
    $51 in 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,838</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Long-term portion of capital leases, net of current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>14,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>11,838</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>28,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>26,769</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,861</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total liabilities and members&#146; equity</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,330</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>32,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>33,630</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See accompanying notes to the consolidated financial
statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-54</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENTS OF OPERATIONS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(Dollars in thousands)
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="53%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period From</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(June 20,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003) to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Years Ended August&nbsp;31,</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>August&nbsp;31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="14" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Revenues</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>55,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>109,801</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Costs and expenses:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cost of sales</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>54,974</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>101,518</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Selling, administrative and other</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,698</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Interest expense</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>643</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total costs and expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>5,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>60,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>107,859</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,414</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See accompanying notes to the consolidated financial
statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-55</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B>
</DIV>

<DIV align="left" style="font-size: 10pt;">
(Dollars in thousands)
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Period From</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>Inception</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>(June 20,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003) to</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap><B>Years Ended August&nbsp;31</B></TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>August 31,</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="6" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings (loss)</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>(4,414</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Adjustments to reconcile net earnings (loss)&nbsp;to net cash
    provided by (used in) operating activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Depreciation and amortization</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,032</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Changes in operating assets and liabilities, net of effects of
    acquisitions:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts receivable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,808</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(5,994</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,280</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(408</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,033</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(552</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Other assets</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(393</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(647</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounts payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,369</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(604</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>858</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash provided by (used in) operating activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,802</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(3,325</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,309</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Acquisitions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,664</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(12,000</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Purchases of property, plant and equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(17</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,424</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,828</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash used in investing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,681</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(14,424</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(2,828</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Financing activities:</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Proceeds from notes payable</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(655</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,492</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Payments of capital lease obligations</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(22</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(20</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Debt issuance costs</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(278</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net change in restricted cash</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(935</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>135</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Investment from members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net cash (used in) provided by financing activities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>18,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(1,377</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Decrease in cash and cash equivalents</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>104</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash at beginning of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,922</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Cash at end of year</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,026</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See accompanying notes to the consolidated financial
statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-56</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>CONSOLIDATED STATEMENTS OF MEMBERS&#146; EQUITY</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Period from Inception (June&nbsp;20, 2003) to August&nbsp;31,
2003 and the
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Years Ended August&nbsp;31, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
(Dollars in thousands)
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance at inception (June&nbsp;20, 2003)</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,298</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>35</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance, August&nbsp;31, 2003</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,333</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net loss</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(4,414</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Capital contributions</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance, August&nbsp;31, 2004</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,919</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Net earnings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,942</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    <B>Balance, August&nbsp;31, 2005</B></DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>6,861</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>See accompanying notes to consolidated financial
statements.</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-57</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Period from Inception (June&nbsp;20, 2003) to August&nbsp;31,
2003 and the
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Years Ended August&nbsp;31, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;1&#151;Basis of Presentation</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The accompanying consolidated financial statements of Ohio
Castings Company, LLC and Subsidiaries (&#147;Ohio
Castings&#148; or the &#147;Company&#148;) have been prepared in
accordance with accounting principles generally accepted in the
United States of America, applied on a consistent basis
throughout the periods covered.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The consolidated financial statements include the accounts of
Ohio Castings and its subsidiaries, Alliance Castings Company,
LLC (&#147;Alliance Castings&#148;) and Chicago Castings
Company, LLC (&#147;Chicago Castings&#148;). All significant
intercompany accounts and transactions have been eliminated.
Amounts presented in thousands unless otherwise noted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;2&#151;Description of the Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Ohio Castings was formed on June&nbsp;20, 2003 to acquire and
operate two steel foundries. The members of Ohio Castings, each
with a one-third ownership, are Gunderson Specialty Products,
LLC (&#147;Gunderson&#148;), an Oregon company and wholly-owned
subsidiary of Gunderson, Inc., an Oregon corporation; Castings,
LLC (&#147;Castings&#148;), a Delaware company and wholly-owned
subsidiary of American Railcar Industries, Inc.
(&#147;ARI&#148;), a Missouri corporation and ASF-Keystone, Inc.
(&#147;ASF&#148;), a Delaware corporation and wholly-owned
subsidiary of Amsted Industries, a Delaware corporation
(collectively, the &#147;members&#148;). ARI acquired its
ownership interest from ACF Industries Holding Corporation
(&#147;ACF&#148;), an affiliate of ARI, in 2005. The members
share equally in the profits and losses of Ohio Castings. The
steel foundries are operated for the purpose of casting railcar
sideframes and bolsters for use or sale by the Ohio Castings
members.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Formation and Capital Contributions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Chicago Castings was formed in June, 2003 and capitalized
through contributions of $6,298 by the members. Alliance
Castings was formed in September, 2003 and capitalized through
contributions of $3,000 by the members.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Acquisitions</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On June&nbsp;20, 2003, Chicago Castings purchased certain assets
from the Meridian Rail Products Corporation
(&#147;Meridian&#148;) foundry business located in Cicero,
Illinois. The effects of the transaction on the consolidated
balance sheet as of June&nbsp;20, 2003, were as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="89%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Inventory</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>1,834</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accrued liabilities</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(170</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
On September&nbsp;30, 2003, Alliance Castings purchased real and
personal property from Amsted Industries, Inc. and ASF for use
in the operation of a foundry in Alliance, Ohio. Total
consideration paid was $12,000; no liabilities were assumed in
the transaction. The effects of the acquisition on the
consolidated balance sheet as of September&nbsp;30, 2003, were
as follows:
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="89%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Land</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>270</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Buildings</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,178</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Equipment</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>9,552</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-58</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Period from Inception (June&nbsp;20, 2003) to August&nbsp;31,
2003 and the
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Years Ended August&nbsp;31, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Both transactions were accounted for using the purchase method
of accounting and the purchase price was allocated to the assets
acquired based upon relative fair values.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;3&#151;Summary of Significant Accounting
Policies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Significant accounting policies are described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Revenue Recognition</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sales are recorded when the product is shipped to the customer
and title is transferred. All shipments are made FOB shipping
point.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Debt Issuance Costs</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Debt issuance costs are incurred in connection with Ohio
Castings issuance of long-term debt as described in Note&nbsp;5,
and are amortized over the term of the related debt, utilizing
the straight-line method. Amortization expense of $24 and $40
was recognized for the year ended August&nbsp;31, 2004, and
2005, respectively. Accumulated amortization totaled $24 and $54
at August&nbsp;31, 2004 and 2005, respectively. There was no
amortization expense or accumulated amortization as of and for
the period from inception (June&nbsp;20, 2003) to
August&nbsp;31, 2003.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventories are recorded using the first-in first-out
(&#147;FIFO&#148;) method and are stated at the lower of cost or
market. Inventory includes the cost of materials, direct labor
and manufacturing overhead.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Accounts Receivable</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company carries its accounts receivable at cost, less an
allowance for doubtful accounts. On a periodic basis, the
Company evaluates its account receivable and establishes an
allowance for doubtful accounts, based on a history of past
write-offs, collections and current credit conditions. Accounts
are placed for collection on a limited basis once all other
methods of collection have been exhausted. Once it has been
determined that the customer is no longer in business and/or
refuses to pay, the accounts are written off. At August&nbsp;31,
2005, an allowance of $85 is recorded against receivables. No
allowance was recorded at August&nbsp;31, 2003 and 2004. No
amounts were written off during the period from inception
(June&nbsp;20, 2003) to August&nbsp;31, 2003 and the years ended
August&nbsp;31, 2004 and 2005, respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Property, Plant and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Land, buildings, machinery and equipment are carried at cost.
Maintenance and repair costs are charged directly to earnings.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Buildings are depreciated over estimated useful lives that range
from 14 to 50&nbsp;years. The estimated useful lives of
machinery and equipment, vary from 3 to 25&nbsp;years.
Depreciation is calculated on the straight-line method for
financial reporting purposes and on accelerated methods for tax
purposes. Depreciation expense of $3, $854 and $992 was
recognized for the period from inception (June&nbsp;20, 2003) to
August&nbsp;31, 2003 and for the years ended August&nbsp;31,
2004 and 2005, respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-59</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Period from Inception (June&nbsp;20, 2003) to August&nbsp;31,
2003 and the
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Years Ended August&nbsp;31, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Impairment of Long-Lived Assets</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In the event that facts and circumstances indicate the carrying
amount of assets held for use may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the
asset would be compared to the asset&#146;s carrying amount. If
the carrying amount of an asset is less than the future
undiscounted cash flows expected to be generated by the asset,
the impairment to be recognized is measured by the amount by
which the carrying amount of the asset exceeds the fair value of
the asset. No impairment of long-lived assets was determined for
the period from inception (June&nbsp;20, 2003) to
August&nbsp;31, 2003 and for the years ended August&nbsp;31,
2004 and 2005, respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Income Taxes</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Ohio Castings is organized as a limited liability company and is
not subject to Federal income taxes. The Company&#146;s taxable
income is reported in the tax returns of the members.
Accordingly, no liability or provision for Federal income taxes
is included in the accompanying consolidated financial
statements as of and for the periods ending August&nbsp;31,
2003, 2004 and 2005.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Fair Value of Financial Instruments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The carrying amounts of cash, accounts receivable and accounts
payable approximate fair values because of the short-term
maturity of these instruments. The fair value of long-term debt
is discussed in Note&nbsp;5. Fair value estimates are made at a
specific point in time, based on relevant market information
about the financial instrument. These estimates are subjective
in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Restricted Cash</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Alliance Castings is required to maintain a cash balance in an
escrow account equal to 10% of the outstanding principal on the
enterprise bond described in Note&nbsp;5. Alliance Castings is
entitled to interest earned on the escrow balance which totaled
$4 and $17 for the years ended August&nbsp;31, 2004 and 2005,
respectively. There were no restricted cash balances or interest
recorded as of and for the period ended August&nbsp;31, 2003.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Use of Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Management of Ohio Castings has made a number of estimates and
assumptions relating to the reporting of assets, liabilities,
revenues and expenses, and the disclosure of contingent assets
and liabilities to prepare these financial statements in
conformity with accounting principles generally accepted in the
United States of America. Significant items subject to estimates
and assumptions include property, plant and equipment, inventory
reserves and workers&#146; compensation. Actual results could
differ from those estimates.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-60</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Period from Inception (June&nbsp;20, 2003) to August&nbsp;31,
2003 and the
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Years Ended August&nbsp;31, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;4&#151;Inventories</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Inventories consist of the following at August 31 (in thousands):
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="67%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2003</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="13" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Raw materials</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>433</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Work in process</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>4,781</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Finished products</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>677</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,459</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less reserves</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(390</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(295</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>(846</TD>
    <TD align="left" valign="bottom" nowrap>)</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total inventories</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>2,242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,275</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>5,827</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;5&#151;Long-Term Debt</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Long-term debt consists of the following at August 31 (in
thousands):
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center" nowrap><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2004</B></TD><TD></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="center" nowrap><B>2005</B></TD><TD></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="12" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD><TD></TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Enterprise bonds to the Director of Development of the State of
    Ohio due on December&nbsp;1, 2010, at 3.90% interest payable in
    quarterly installments to a trustee pursuant to a payment
    schedule. The bonds are guaranteed by the members</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>9,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>8,000</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Term note payable to the State of Ohio, to be comprised of two
    separate disbursements of $1,000 at 1% interest (modified from
    3% in January 2005), with interest-only payments until
    disbursement of the second installment and monthly payments of
    principal and interest thereafter, reported net of debt discount
    of $65 in 2005</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>935</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Notes payable to the members, payable in quarterly principal and
    interest payments at 4% interest due November 2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>6,603</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>17,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>15,538</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Less current portion of debt</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total long-term debt, net of current portion</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>14,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>11,838</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Aggregate maturities of long-term debt over the next five years,
as of August&nbsp;31, 2005, are as follows (in thousands):
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="82%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,700</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,591</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>3,653</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>2,233</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>1,801</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Thereafter</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>560</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In association with the Enterprise bonds, the Company paid $15
and $20 in administration and trustee fees for the years ended
August&nbsp;31, 2004 and 2005. The fees vary with costs incurred
by the trustee and changes in the outstanding principle of the
bonds. The administration fee equaled .10% and .125% at
August&nbsp;31, 2004 and 2005, respectively. The trustee fee
equaled .01% and .16% at
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-61</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Period from Inception (June&nbsp;20, 2003) to August&nbsp;31,
2003 and the
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Years Ended August&nbsp;31, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
August&nbsp;31, 2004 and 2005, respectively. The bonds are
secured by substantially all of the assets of the Company and
subject to mandatory redemption by the state at any time. A
number of non-financial covenants under the agreement have been
met for the periods ended August&nbsp;31, 2004 and 2005.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In connection with the term note, the Company shall receive two
disbursements of $1,000 from the State of Ohio. The first
installment was received in May 2004. The second installment is
expected to be received in December 2005, following the
completion of qualified capital expenditures.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company had no outstanding debt as of and for the period
ended August&nbsp;31, 2003. Accordingly, no interest expense or
fees associated with the aforementioned debt were recorded in
the financial statements for the period ended August&nbsp;31,
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;6&#151;Capital Leases</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company leases certain machinery and equipment for use in
the businesses. These leases have been accounted for as capital
leases and mature in 2006. Scheduled future minimum lease
payments required under the capital leases are $16 at
August&nbsp;31, 2005, which are due in 2006. Machinery and
equipment include assets under capitalized leases of $58, $39
and $18 at August&nbsp;31, 2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;7&#151;Related-Party Transactions</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The majority of the Company&#146;s products are sold to one of
the members through supply agreements. The supply agreements
have an original term of 5&nbsp;years and expire in 2008. The
other members have supply agreements in place with this member
to purchase a defined percentage of the products produced by
Ohio Castings. These agreements also have a term of 5&nbsp;years
and expire in 2008. A balance of $4,614, $8,688 and $10,534 is
due from this member as of August&nbsp;31, 2003, 2004 and 2005,
respectively, which has been classified as accounts receivables.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Alliance Castings purchases a majority of its scrap steel used
in production from an affiliate of one of the members of Ohio
Castings. A balance of $1,203 and $662 is due to this affiliate
as of August&nbsp;31, 2004 and 2005, respectively. No amounts
were due at August&nbsp;31, 2003. The balance is included in
accounts payable.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;8&#151;Commitments and Contingencies</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
As of August&nbsp;31, 2005, future minimum rental payments
required under non-cancelable operating leases for property and
equipment leased by Ohio Castings, with lease terms longer than
one year are as follows (in thousands):
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="87%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2006</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>241</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2007</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>67</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2008</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>55</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2009</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>46</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    2010</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>44</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Rent expense on the related leases was $62, $394, and $445 for
the period from inception (June&nbsp;20, 2003) to
August&nbsp;31, 2003 and the years ended August&nbsp;31, 2004
and 2005, respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> F-62</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
<B>Ohio Castings Company, LLC and Subsidiaries</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Period from Inception (June&nbsp;20, 2003) to August&nbsp;31,
2003 and the
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt;">
Years Ended August&nbsp;31, 2004 and 2005
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
A monthly rental agreement was negotiated between Chicago
Castings and Meridian for the rental of the real property at the
Cicero foundry. Rent expense under this agreement was $25, $600,
and $600 for the period from inception (June&nbsp;20, 2003) to
August&nbsp;31, 2003 and the years ending August&nbsp;31, 2004
and 2005, respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Chicago Castings currently purchases general utilities and waste
removal under negotiated service contracts from unrelated third
parties. The contracts are generally under a twelve-month
period, with a right to renewal. Under the terms of the
contracts, the cost is based on market price, and charged based
on consumption.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company is involved in certain matters of litigation,
substantially all of which have arisen in the ordinary course of
business. It is the opinion of management that these matters are
either adequately covered by insurance or that the resulting
liability, if any, from these actions and other pending claims
will not materially affect the Company&#146;s financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;9&#151;Business and Credit Concentrations</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company has an exclusive supply arrangement with one of the
members whereby 100% of the castings produced by the Company are
sold to the member, as described in Note&nbsp;7.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;10&#151;Employee Benefit Plan</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company maintains defined contribution plans which cover all
employees. Participants under 50&nbsp;years old may elect to
defer up to $13 of eligible compensation. Participants
50&nbsp;years or older may elect to defer up to $15 of eligible
compensation. Participants are fully vested in all contributions
made to the plan. Employer contributions are made to the plan
based on number of hours worked for employees covered by a
collective bargaining agreement and as a percentage of annual
salary for all other employees. Contributions of $121 and $350
were made for the years ending August&nbsp;31, 2004 and 2005,
respectively. No amounts were contributed for the period from
inception (June&nbsp;20, 2003) to August&nbsp;31, 2003.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Note&nbsp;11&#151;Supplemental Cash Flow Data</B>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company incurred interest expense of $496 and $630 for the
years ended August&nbsp;31, 2004 and 2005, respectively.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
In 2003, the Company entered into $62 in capital lease
agreements to finance the purchase of equipment.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The Company amortized $13 of the debt discount relating to the
term loan in 2005.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> F-63</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV align="center"><img src="y10848s1y1084812.gif" alt="Back cover art">
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 9pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<IMG src="y10848s1y1084806.gif" alt="(ARI LOGO)">
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 15pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2006 (the 25th day after the date of this prospectus), all
dealers that effect transactions in our common stock, whether or
not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers&#146;
obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Part&nbsp;II
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
<B>INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;13.</B></TD>
    <TD>
    <B>Other expenses of issuance and distribution.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following are the estimated expenses to be incurred in
connection with the issuance and distribution of the securities
registered under this Registration Statement, other than
underwriting discounts and commissions. All amounts shown are
estimates except the Securities and Exchange Commission
registration fee, the National Association of Securities
Dealers, Inc. filing fee and the Nasdaq National Market listing
fee. The following expenses will be borne solely by the
registrant.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="3%">&nbsp;</TD>
    <TD width="84%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    SEC Registration Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>17,655</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    NASD Filing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>15,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Nasdaq Listing Fee</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Transfer Agent Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>3,500</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Costs of Printing and Engraving</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Legal Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Accounting Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Director and Officer Liability Insurance Premium</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Blue Sky Fees and Expenses</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Miscellaneous</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">&nbsp;</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 1pt solid #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

<TR valign="bottom" bgcolor="#cceeff">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    <DIV style="margin-left: 10px; text-indent: -10px">
    Total</DIV>
    </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom">$</TD>
    <TD align="right" valign="bottom" nowrap>*</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 1px">
    <TD colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" style="border-top: 3pt double #000000;">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 15%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 9pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><I>*</I></TD>
    <TD align="left">
    <I>To be provided by amendment.</I></TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;14.</B></TD>
    <TD>
    <B>Indemnification of directors and officers.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Sections&nbsp;145(a) and (b)&nbsp;of The Delaware General
Corporation Law, or the DGCL, provide that a corporation may
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. The indemnity may
include expenses, including attorneys&#146; fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful, except that, in the case of an action or
suit by or in the right of the corporation, the corporation may
not indemnify such persons against judgments and fines and no
person shall be indemnified as to any claim, issue or matter as
to which such person shall have been adjudged to be liable to
the corporation, unless and only to the extent that the court in
which the action or suit was brought determines upon application
that, despite the adjudication of liability and in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses that the
court deems proper.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Section&nbsp;145(c) of the DGCL provides that, our certificate
of incorporation, to the extent a director, officer, employee or
agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in Section&nbsp;145(a) and (b)&nbsp;of the DGCL, or in
defense of any claim, issue or matter therein, he shall be
indemnified against expenses, including attorney&#146;s fees,
actually and reasonably incurred by him in connection with the
action, suit or proceeding.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> II-1</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part&nbsp;II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our bylaws will generally provide that the corporation shall
indemnify each person (other than a party plaintiff suing on his
or her own behalf or in the right of the corporation) who at any
time is serving or has served as a director or officer of the
corporation against any claim, liability or expense incurred as
a result of such service (or as a result of any other service on
behalf of or at the request of the corporation) to the maximum
extent permitted by law. This indemnification includes, but is
not limited to, indemnification of any such person (other than a
party plaintiff suing on his or her behalf or in the right of
the corporation), who was or is a party or is threatened to be
made a party, to any threatened, pending or completed action,
suit or proceeding (including, but not limited to, an action by
or in the right of the corporation) by reason of such service
against expenses (including, without limitation, costs of
investigation and attorneys&#146; fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him or her in connection with such action, suit or proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our bylaws will further generally provide that the corporation
may indemnify any person (other than a party plaintiff suing on
his or her own behalf or in the right of the corporation) who at
any time is serving or has served as an employee or agent of the
corporation against any claim, liability or expense incurred as
a result of such service (or as a result of any other service on
behalf of or at the request of the corporation) to the maximum
extent permitted by law or to such lesser extent as the
corporation, in its discretion, may deem appropriate. Without
limiting the generality of the foregoing, the corporation may
indemnify any such person (other than a party plaintiff suing on
his or her own behalf or in the right of the corporation), who
was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding
(including, but not limited to, an action by or in the right of
the corporation) by reason of such service, against expenses
(including, without limitation, costs of investigation and
attorneys&#146; fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Our bylaws will also provide that the corporation may purchase
and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any
such capacity, or arising out of such person&#146;s status as
such, whether or not the corporation would have the power to
indemnify such person against liability under the
indemnification provisions of the corporation&#146;s bylaws. The
corporation has obtained director and officer liability
insurance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The foregoing represents a summary of the general effect of the
indemnification and insurance provisions of the DGCL, the
certificate of incorporation, the bylaws and such agreements.
Additional information regarding indemnification of directors
and officers can be found in Section&nbsp;145 of the DGCL, the
certificate of incorporation and the bylaws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
or persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed that in the opinion
of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and
is therefore unenforceable.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;15.</B></TD>
    <TD>
    <B>Recent sales of unregistered securities.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
The following information is furnished with regard to all
securities issued by us since July&nbsp;15, 2002 that were not
registered under the Securities Act.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Prior to the closing of this offering and in connection with our
merger, we plan to effect
a &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for-one split of our
common stock. All references to numbers of shares and prices of
capital stock give effect to the stock split. All of the
securities issued in the following transactions were sold in
reliance
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> II-2</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part&nbsp;II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
upon the exemptions from registration set forth in
Sections&nbsp;3(a)(9) and 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering. There were
no underwriters employed in connection with any of the
transactions set forth in this Item&nbsp;15.
</DIV>

<DIV style="margin-top: 3pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="5%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)</TD>
    <TD align="left">
    In June 2003 Vegas Financial Corp., a company beneficially owned
    and controlled by Carl C. Icahn, our principal beneficial
    stockholder and the chairman of our board of directors, invested
    $10.0&nbsp;million for 10,000&nbsp;shares of our payment-in-kind
    preferred stock, which we refer to as our PIK preferred stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)</TD>
    <TD align="left">
    During the period July&nbsp;15, 2002 through December 2003, we
    issued to Vegas Financial Corp., the sole owner of our PIK
    preferred stock, 8,531.65&nbsp;shares of PIK preferred stock as
    a dividend on the PIK preferred stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(3)</TD>
    <TD align="left">
    In July 2004, Vegas Financial Corp. converted all of its PIK
    preferred stock, consisting of 95,517.04&nbsp;shares of PIK
    preferred stock and representing all of the shares of PIK
    preferred stock then outstanding and dividend accrued thereon,
    into 96,171&nbsp;shares of our new preferred stock. The PIK
    preferred stock was valued at the liquidation preference of
    95.6&nbsp;million plus accrued and unpaid dividends of
    0.7&nbsp;million on such PIK preferred stock converted. At that
    time Vegas Financial Corp. also invested $67.5&nbsp;million for
    an additional 67,500&nbsp;shares of our new preferred stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(4)</TD>
    <TD align="left">
    In July 2004, Hopper Investments LLC, a company beneficially
    owned and controlled by Mr.&nbsp;Icahn, invested
    $42.5&nbsp;million for 195&nbsp;shares of our common stock.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(5)</TD>
    <TD align="left">
    In July 2004, we issued ACF Industries, Incorporated
    2,000&nbsp;shares of our new preferred stock in exchange for ACF
    Industries, Incorporated transferring certain assets to us. The
    assets were valued at $2 million equaling the liquidation
    preference for the new preferred stock issued. The assets so
    transferred to us were subsequently transferred to American
    Railcar Leasing, LLC.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(6)</TD>
    <TD align="left">
    In December 2004, we issued 32,500&nbsp;shares of our new
    preferred stock to Shippers Second LLC, a subsidiary of ACF
    Industries, Incorporated, in exchange for Shippers Second
    transferring certain assets to us. The assets were valued at
    $32.5 million equalling the liquidation preference for the new
    preferred stock issued. The assets so transferred to us were
    subsequently transferred to American Railcar Leasing LLC.</TD>
</TR>

<TR>
    <TD style="font-size: 3pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(7)</TD>
    <TD align="left">
    In July 2004, American Railcar Leasing LLC issued 40,000 B-units
    of American Railcar Leasing LLC to ACF Industries, Incorporated
    and its subsidiaries in consideration of the transfer of assets
    to American Railcar Leasing LLC. The B-units of American Railcar
    Leasing LLC were convertible into shares of our new preferred
    stock. On June&nbsp;30, 2005, the terms of the B-Units were
    modified, among other things, to eliminate this conversion
    feature. We did not issue any shares of our capital stock in
    connection with these transactions.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;16.</B></TD>
    <TD>
    <B>Exhibits and financial statement schedules.</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(a)</TD>
    <TD align="left">
    Exhibits</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
See Exhibit&nbsp;Index at the end of this registration statement.
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>(b)</TD>
    <TD align="left">
    Financial Statement Schedules</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
No financial statement schedules of the registrant are included
in Part&nbsp;II of the Registration Statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions, are
inapplicable or not material, or the information called for
thereby is otherwise included in the financial statements and
therefore has been omitted.
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> II-3</B>
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Part&nbsp;II</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD><B>Item&nbsp;17.</B></TD>
    <TD>
    <B>Undertakings.</B></TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(a)&nbsp;The undersigned registrant hereby undertakes to provide
to the Underwriters at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt
delivery to each purchaser.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(b)&nbsp;Insofar as indemnification by the registrant for
liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item&nbsp;14 of this
Registration Statement or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered hereunder, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
(c)&nbsp;The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="3%"></TD>
    <TD width="5%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(1)</TD>
    <TD align="left">
    For purposes of determining any liability under the Securities
    Act, the information omitted from the form of prospectus filed
    as part of this Registration Statement in reliance upon
    Rule&nbsp;430A and contained in the form of prospectus filed by
    the registrant pursuant to Rule&nbsp;424(b)(1) or (4)&nbsp;or
    497(h) under the Securities Act shall be deemed to be part of
    this Registration Statement as of the time it was declared
    effective.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>(2)</TD>
    <TD align="left">
    For the purpose of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered therein, and the
    offering of such securities at the time shall be deemed to be
    the initial <I>bona fide </I>offering thereof.</TD>
</TR>

</TABLE>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> II-4</B>
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Signatures
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the requirements of the Securities Act of 1933 (as
amended, the &#147;Securities Act&#148;), American Railcar
Industries, Inc. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Charles, State of Missouri, on
December&nbsp;12, 2005.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV style="margin-top: 24pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <B>American Railcar Industries, Inc.</B></TD>
</TR>

</TABLE>

<DIV style="margin-top: 48pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;"></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD>By:&nbsp;</TD>
    <TD align="left">
    /s/ James J. Unger</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 3pt;">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt" align="left">&nbsp;</DIV></TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Name:&nbsp;James J. Unger</TD>
</TR>

<TR valign="top"  style="font-size: 10pt;">
    <TD>&nbsp;</TD>
    <TD align="left">
    Title:&nbsp;&nbsp;&nbsp;President and Chief Executive Officer</TD>
</TR>

</TABLE>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="38%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>


<TR style="font-size: 8pt;">
    <TD colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Date</B></TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="7" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ James J. Unger<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Name:
    James J. Unger</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    President and Chief Executive Officer (principal executive
    officer) and Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    December&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ William P. Benac<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Name:
    William P. Benac</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Chief Financial Officer (principal financial officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    December&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Michael E. Vaughn<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Name:
    Michael E. Vaughn</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Controller (principal accounting officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    December&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Vincent J. Intrieri<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Name:
    Vincent J. Intrieri</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    December&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Jon F. Weber<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Name:
    Jon F. Weber</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    December&nbsp;12, 2005</TD>
</TR>

<TR>
    <TD colspan="7">&nbsp;</TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    /s/ Keith Meister<BR>
    <DIV style="border-top: 1pt solid #000000; font-size: 1pt; margin-top: 2pt;">&nbsp;</DIV>Name:
    Keith Meister</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Director</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">
    December&nbsp;12, 2005</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="right" style="font-size: 8pt;">
<B> II-5</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">

</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 16pt; margin-top: 18pt; margin-left: 0; margin-right: 0; margin-bottom: 0; color: #000000; background: #ffffff;">
Exhibit index
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 6pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description of Exhibit</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Underwriting Agreement by and among UBS Securities LLC,
    Bear, Stearns&nbsp;&#38; Co. Inc. and American Railcar
    Industries, Inc.**</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>2</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Agreement and Plan of Merger between American Railcar
    Industries, Inc. (Missouri) and American Railcar Industries,
    Inc. (Delaware)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Certificate of Incorporation of American Railcar Industries,
    Inc. (Delaware)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bylaws of American Railcar Industries, Inc. (Delaware)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>3</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Certificate of Ownership and Merger of American Railcar
    Industries, Inc. (Missouri) and American Railcar Industries,
    Inc. (Delaware)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Specimen Common Stock Certificate of American Railcar
    Industries, Inc. (Delaware)*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>4</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Registration Rights Agreement*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>5</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Opinion of Brown Rudnick Berlack Israels LLP**</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Asset Transfer Agreement dated as of October&nbsp;1, 1994 by and
    among ACF Industries, Incorporated, American Railcar Industries,
    Inc. and Carl C. Icahn*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    License Agreement dated as of October&nbsp;1, 1994 by and
    between ACF Industries, Incorporated and American Railcar
    Industries, Inc. as Licensee*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    License Agreement dated as of October&nbsp;1, 1994 by and
    between American Railcar Industries, Inc. and ACF Industries,
    Incorporated as Licensee*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Manufacturing Services Agreement dated as of October&nbsp;1,
    1994 between ACF Industries, Incorporated and American Railcar
    Industries, Inc., as ratified and amended on June&nbsp;30, 2005*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.5</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Railcar Servicing Agreement dated as of
    June&nbsp;30, 2005 between American Railcar Industries, Inc. and
    American Railcar Leasing LLC*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.6</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Business Consultation Agreement for Human Resources Consultation
    between ACF Industries LLC and American Railcar Industries, Inc.
    dated April&nbsp;1, 2005*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.7</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Business Consultation Agreement for Engineering Services between
    ACF Industries LLC and American Railcar Industries, Inc. dated
    April&nbsp;1, 2005*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.8</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Guaranty of the Master Lease Agreement dated September&nbsp;30,
    1999 between The CIT Group, Inc./ Equipment Financing, Inc. and
    American Railcar Industries, Inc., as amended by ACF Industries,
    Incorporated for the benefit of American Railcar Industries,
    Inc.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement dated as of July&nbsp;1, 1996 between The
    Industrial Development Authority of the City of Jackson,
    Missouri and American Railcar Industries, Inc.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9.A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bond Guaranty Agreement dated as of July&nbsp;1, 1996 by and
    among American Railcar Industries, Inc., ACF Industries,
    Incorporated and Fleet National Bank, as Trustee*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.9.B</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Deed of Trust and Security Agreement dated as of July&nbsp;1,
    1996 from American Railcar Industries, Inc. to E. Sid
    Douglas,&nbsp;III, as Mortgage Trustee and The Industrial
    Development Authority of The City of Jackson, Missouri as Issuer
    and Secured Party*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan Agreement dated as of June&nbsp;1, 1995 between The
    Industrial Development Authority of The City of Kennett,
    Missouri and American Railcar Industries, Inc.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10.A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bond Guaranty Agreement dated as of June&nbsp;1, 1995 by and
    among American Railcar Industries, Inc., ACF Industries,
    Incorporated and Fleet National Bank, as Trustee*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.10.B</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Deed of Trust and Security Agreement dated as of June&nbsp;1,
    1995 from American Railcar Industries, Inc. to E. Sid
    Douglas,&nbsp;III as Mortgage Trustee and The Industrial
    Development Authority of the City of Kennett, Missouri as Issuer
    and Secured Party*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Lease Agreement dated as of April&nbsp;1, 1995 between the City
    of Paragould, Arkansas as Lessor and American Railcar
    Industries, Inc. as Lessee*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.11.A</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Bond Guaranty Agreement by and among American Railcar
    Industries, Inc. and ACF Industries, Incorporated and Fleet
    National Bank, as Trustee*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.12</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Amended and Restated Services Agreement dated as of
    June&nbsp;30, 2005 between American Railcar Leasing LLC and
    American Railcar Industries, Inc.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.13</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Indenture of Lease between St. Charles Properties and ACF
    Industries, Incorporated for the property located at Clark and
    Second Streets, St. Charles, MO, dated March&nbsp;1, 2001
    together with the Assignment and Assumption of Lease dated
    April&nbsp;1, 2005 among ACF Industries LLC (as successor to ACF
    Industries, Incorporated), American Railcar Industries, Inc. and
    St. Charles Properties*</TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left" style="font-size: 8pt;">
<B> II-6</B>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV align="left" style="font-size: 10pt;">
<B>Exhibit index</B>
</DIV>

<DIV align="left" style="font-size: 3pt;">
<DIV style="width: 100%; border-top: 1.0pt solid black; font-size: 1pt">&nbsp;</DIV>
</DIV>

<DIV align="left"><FONT size="1">

</FONT></DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0" style="font-size: 10pt; margin-top: 12pt; ">

<TR style="font-size: 1pt;">
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="80%">&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 8pt;">
    <TD colspan="3" align="center" nowrap><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="center" nowrap><B>Description of Exhibit</B></TD>
</TR>


<TR valign="bottom" style="font-size: 1px">
    <TD colspan="5" align="center" nowrap style="border-top: 1pt solid #000000;">&nbsp;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.14</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Promissory Note by American Railcar Industries, Inc. in favor of
    Arnos Corp. dated as of December&nbsp;17, 2004*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.15</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Exchange and Redemption&nbsp;Agreement dated as of June&nbsp;30,
    2005 among American Railcar Industries, Inc., Hopper
    Investments, LLC, Highcrest Investors Corp., Buffalo Investors
    Corp. and American Railcar Leasing, LLC*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.16</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Loan and Security Agreement dated as of March&nbsp;10, 2005
    among American Railcar Industries, Inc. as Borrower, the lenders
    from time to time party thereto, and North Fork Business Capital
    Corporation, as Agent*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.17</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Corbitt Equipment Acquisition Agreement*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.18</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Multi-Year Purchase and Sale Agreement dated as of July&nbsp;29,
    2005 between American Railcar Industries, Inc. and The CIT
    Group/ Equipment Financing, Inc.*&#134;</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.19</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    American Railcar Industries, Inc. 2005 Equity Incentive Plan*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.20</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated as of July&nbsp;20, 2005 between
    American Railcar Industries,&nbsp;Inc. and William&nbsp;P. Benac*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.21</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Promissory Note by American Railcar Industries, Inc. in favor of
    ACF Industries Holding Corp. dated as of January&nbsp;1, 2005*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.22</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Assignment and Assumption, Novation and Release dated as of
    June&nbsp;30, 2005 by and between ACF Industries Holding, Inc.,
    American Railcar Industries, Inc., Gunderson Specialty Products,
    Inc., Gunderson, Inc., Castings, LLC, ASF-Keystone, Inc., Amsted
    Industries Incorporation and Ohio Castings Company, LLC*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.23</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Interest Transfer Agreement dated as of June&nbsp;30, 2005 by
    and between ACF Industries Holding, Inc. and American Railcar
    Industries, Inc.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.24</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Redemption Agreement between American Railcar
    Industries, Inc. and Vegas Financial Corp. *</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.25</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Ohio Castings Company, LLC Amended and Restated Limited
    Liability Company Agreement, dated as of June&nbsp;20, 2003*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.26</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement between American Railcar Industries, Inc.
    and James&nbsp;J. Unger, dated as of November&nbsp;18, 2005*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.27</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Letter Agreement between American Railcar Industries, Inc. and
    James&nbsp;J. Unger, dated as of November&nbsp;18, 2005*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.28</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Form of Option Agreement*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.29</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    American Railcar Industries, Inc. 2005 Executive Incentive Plan*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>10</TD>
    <TD align="left" valign="top" nowrap>.30</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Employment Agreement dated as of December&nbsp;1, 2005 between
    American Railcar Industries, Inc. and James A. Cowan*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>21</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Subsidiaries of American Railcar Industries, Inc.*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Grant Thornton LLP*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Grant Thornton LLP*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of KPMG LLP*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.3</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Brown Rudnick Berlack Israels LLP (included in
    Exhibit&nbsp;5.1)**</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>23</TD>
    <TD align="left" valign="top" nowrap>.4</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of Global Insight *</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>24</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Powers of Attorney*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.1</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of James M. Laisure*</TD>
</TR>

<TR>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>99</TD>
    <TD align="left" valign="top" nowrap>.2</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">
    Consent of James C. Pontious*</TD>
</TR>

</TABLE>
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    <TD><I>*</I></TD>
    <TD align="left">
    <I>Filed herewith.</I></TD>
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    <TD><I>**</I></TD>
    <TD align="left">
    <I>To be filed by amendment.</I></TD>
</TR>

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    <TD><I>&#134;</I></TD>
    <TD align="left">
    <I>Confidential treatment has been requested for the redacted
    portions of this agreement. A complete copy of this agreement,
    including the redacted portions, has been filed separately with
    the Securities and Exchange Commission.</I></TD>
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<B> II-7</B>
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[{"type": "S-1", "sequence": "1", "filename": "y10848s1sv1.htm", "description": "FORM S-1", "secsgml_size_bytes": 2043969}]
{"company-data": {"conformed-name": "American Railcar Industries, Inc./DE", "cik": "0001344596", "irs-number": "431481791", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-130284", "film-number": "051259672"}, "business-address": {"street1": "100 CLARK STREET", "city": "ST. CHARLES", "state": "MO", "zip": "63301", "phone": "636-940-6000"}, "mail-address": {"street1": "100 CLARK STREET", "city": "ST. CHARLES", "state": "MO", "zip": "63301"}}
S-1
Table of Contents
As filed with the Securities and Exchange Commission on
December 13, 2005
Registration
No. 333-
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
American Railcar Industries, Inc.
(Exact name of Registrant as specified in its charter)
Delaware
3743
43-1481791
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. employer
identification number)
100 Clark Street
St. Charles, MO 63301
(636) 940-6000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
James J. Unger
President and Chief Executive Officer
American Railcar Industries, Inc.
100 Clark Street
St. Charles, MO 63301
(636) 940-6000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies To:
Philip J. Flink, Esquire
Samuel P. Williams, Esquire
BROWN RUDNICK BERLACK ISRAELS LLP
One Financial Center
Boston, MA 02111
(617) 856-8200
Lisa L. Jacobs, Esquire
SHEARMAN & STERLING LLP
599 Lexington Avenue
New York, NY 10022
(212) 848-4000
Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the effectiveness of
this registration statement.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act of 1933, please check the
following
box.
o
If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box.
o
CALCULATION OF REGISTRATION FEE
Proposed maximum aggregate
Amount of
Title of each class of securities to be registered
offering price(a)(b)
registration fee(c)
Common Stock, par value $0.01 per share
$150,000,000
$17,655
(a)
Includes shares of Common Stock to cover over-allotments, if any.
(b)
Estimated solely for the purpose of calculating the registration
    fee in accordance with Rule 457(o) promulgated under the
    Securities Act, as amended.
(c)
A registration fee in the amount of $17,655 was previously paid
    by American Railcar Industries, Inc., a Missouri corporation
    ("American Railcar Industries Missouri") in connection
    with the filing of a Registration Statement on Form S-1
    (Registration No. 333-128177) on September 8, 2005.
    The Registrant is a wholly owned subsidiary of American Railcar
    Industries Missouri. Pursuant to Rule 457(p) under the
    Securities Act, the filing fee of $17,655 previously paid by
    American Railcar Industries Missouri is to be offset against the
    filing fee of $17,655 required for the filing of this
    Registration Statement. As a result, no filing fee is due in
    connection with this filing.
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
Table of Contents
The
information in this preliminary prospectus is not complete and
may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange
Commission is effective. This preliminary prospectus is not an
offer to sell these securities and we are not soliciting offers
to buy these securities in any jurisdiction where the offer or
sale is not
permitted.
PRELIMINARY PROSPECTUS
Subject to Completion
December 13, 2005
Shares
American Railcar Industries,
Inc.
Common Stock
This is our initial public offering of our common stock. No
public market currently exists for our common stock. We are
offering                      shares
of common stock by this prospectus. We expect the public
offering price to be between
$          and
$           per
share.
We expect to apply to have our common stock approved for
quotation on the Nasdaq National Market under the trading symbol
"ARII."
Investing in our common stock involves a high degree of risk.
Before buying any shares, you should carefully read the
discussion of material risks of investing in our common stock in
"Risk factors" beginning on page 14 of this
prospectus.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
Per Share
Total
Public offering price
$
$
Underwriting discounts and commissions
$
$
Proceeds, before expenses, to us
$
$
The underwriters may also purchase up to an
additional                      shares
of our common stock at the public offering price, less the
underwriting discounts and commissions, to cover
over-allotments, if any, within 30 days from the date of
this prospectus.
The underwriters are offering the common stock as set forth
under "Underwriting." Delivery of the shares will be
made on or
about                     ,
2005.
UBS Investment Bank
Bear, Stearns & Co. Inc.
BB&T
Capital Markets
CIBC
    World Markets
Morgan
    Keegan & Company, Inc.
The date of this prospectus
is                     ,
2005.
Table of Contents
You should rely only on the information contained in this
prospectus. We have not, and the underwriters have not,
authorized anyone to provide you with additional information or
information different from that contained in this prospectus. We
are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of shares
of our common stock.
TABLE OF CONTENTS
Prospectus summary
1
Risk factors
14
Special note regarding forward-looking
    statements
37
Use of proceeds
39
Dividend policy and restrictions
41
Capitalization
42
Dilution
43
Selected consolidated financial data
44
Management's discussion and analysis
    of financial condition and results of operations
47
Industry
77
Business
84
Management
104
Certain relationships and related party
    transactions
117
Principal stockholders
132
Description of capital stock
135
Shares eligible for future sale
139
Material U.S. income tax
    considerations for non-U.S. holders
141
Underwriting
145
Legal matters
149
Experts
149
Where you can find more information
149
Index to financial statements
F-1
EX-2.1: FORM OF AGREEMENT AND PLAN OF MERGER
EX-3.1: CERTIFICATE OF INCORPORATION
EX-3.2: BYLAWS
EX-3.3: FORM OF CERTIFICATE OF OWNERSHIP AND MERGER
EX-4.1: SPECIMEN COMMON STOCK CERTIFICATE
EX-4.2: FORM OF REGISTRATION RIGHTS AGREEMENT
EX-10.1: ASSET TRANSFER AGREEMENT
EX-10.2: LICENSE AGREEMENT
EX-10.3: LICENSE AGREEMENT
EX-10.4: MANUFACTURING SERVICES AGREEMENT
EX-10.5: AMENDED AND RESTATED SERVICING AGREEMENT
EX-10.6: BUSINESS CONSULATION AGREEMENT
EX-10.7: BUSINESS CONSULATION AGREEMENT
EX-10.8: GUARANTY OF THE MASTER LEASE AGREEMENT
EX-10.9: LOAN AGREEMENT
EX-10.9.A: BOND GUARANTY AGREEMENT
EX-10.9.B: DEED OF TRUST AND SECURITY AGREEMENT
EX-10.10: LOAN AGREEMENT
EX-10.10.A: BOND GUARANTY AGREEMENT
EX-10.10.B: DEED OF TRUST AND SECURITY AGREEMENT
EX-10.11: LEASE AGREEMENT
EX-10.11.A: BOND GUARANTY AGREEMENT
EX-10.12: AMENDED AND RESTATED SERVICES AGREEMENT
EX-10.13: INDENTURE
EX-10.14: PROMISSORY NOTE
EX-10.15: EXCHANGE AND REDEMPTION AGREEMENT
EX-10.16: LOAN AND SECURITY AGREEMENT
EX-10.17: CORBITT EQUIPMENT ACQUISITION AGREEMENT
EX-10.18: MULTI-YEAR PURCHASE AND SALE AGREEMENT
EX-10.19: 2005 EQUITY INCENTIVE PLAN
EX-10.20: EMPLOYMENT AGREEMENT WITH WILLIAM P. BENAC
EX-10.21: PROMISSORY NOTE
EX-10.22: ASSIGNMENT AND ASSUMPTION, NOVATION AND RELEASE
EX-10.23: INTEREST TRANSFER AGREEMENT
EX-10.24: FORM OF REDEMPTION AGREEMENT
EX-10.25: OHIO CASTINGS COMPANY, LLC AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
EX-10.26: EMPLOYMENT AGREEMENT WITH JAMES J. UNGER
EX-10.27: LETTER AGREEMENT
EX-10.28: FORM OF OPTION AGREEMENT
EX-10.29: 2005 EXECUTIVE INCENTIVE PLAN
EX-10.30: EMPLOYMENT AGREEMENT WITH JAMES A. COWAN
EX-21.1: SUBSIDIARIES
EX-23.1: CONSENT OF GRANT THORNTON LLP
EX-23.2: CONSENT OF GRANT THORNTON LLP
EX-23.3: CONSENT OF KPMG LLP
EX-23.4: CONSENT OF GLOBAL INSIGHT
EX-24.1: POWER OF ATTORNEY
EX-99.1: CONSENT OF JAMES M. LAISURE
EX-99.2: CONSENT OF JAMES C. PONTIOUS
ARI®, Pressureaide®, Center Flow® and our railcar
logo are our U.S. registered trademarks. Each trademark,
trade name or service mark of any other company appearing in
this prospectus belongs to its respective holder.
The market and industry data and forecasts included in this
prospectus are based upon independent industry sources,
including the Association of American Railroads, the Railway
Supply Institute, Inc., Global Insight and the
U.S. Department of Agriculture. Although we believe that
these independent sources are reliable, we have not
independently verified the accuracy and completeness of this
information, nor have we independently verified the underlying
economic assumptions relied upon in preparing any forecasts. See
"Risk factors—Risks related to our business—The
market and industry data contained in this prospectus, including
estimates and forecasts relating to the growth of the railcar
market, cannot be verified with certainty and may prove to be
inaccurate."
We have been advised by Global Insight that forecasts and
projections included in this prospectus that have been
attributed to Global Insight should not be construed as a
guarantee that the forecasts and projections will, in fact, be
achieved. These forecasts and projections have been prepared on
the basis of certain assumptions, judgments and hypotheses and
accordingly no representation or warranty of any kind is or can
be made with respect to the accuracy or completeness of, and no
representation or warranty shall be inferred from, the forecasts
and projections. The forecasts and projections made by Global
Insight herein are based on assumptions as to future events and,
therefore, are subject to varying degrees of uncertainty.
i
Table of Contents
Prospectus summary
This summary highlights information contained elsewhere in
this prospectus. It is not complete and may not contain all the
information that may be important to you. You should read the
entire prospectus carefully before making an investment
decision, especially the information presented under the heading
"Risk factors" and our consolidated financial
statements and the related notes included elsewhere in this
prospectus.
OUR COMPANY
We are a leading North American manufacturer of covered hopper
and tank railcars. We also repair and refurbish railcars,
provide fleet management services and design and manufacture
certain railcar and industrial components used in the production
of our railcars as well as railcars and non-railcar industrial
products produced by others. We provide our railcar customers
with integrated solutions through a comprehensive set of high
quality products and related services.
Our primary customers include companies that purchase railcars
for lease by third parties, or leasing companies, industrial
companies that use railcars for freight transport, or shippers,
and Class I railroads. In servicing this customer base, we
believe our integrated railcar repair and refurbishment and
fleet management services and our railcar components
manufacturing business help us further penetrate the general
railcar manufacturing market. These products and services
provide us with significant cross-selling opportunities and
insights into our customers' railcar needs that we use to
improve our products and services and enhance our reputation for
high quality. Although we build, service and manage railcars
through an integrated, complementary set of products and
services, we have chosen not to offer railcar leasing services
so that we do not compete with our leasing company customers,
which represent a significant source of our revenues.
For the year ended December 31, 2004, we generated total
revenues of $355.1 million and net earnings of
$1.9 million. For the nine months ended September 30,
2005, we generated total revenues of $442.1 million and net
earnings of $14.5 million. As of September 30, 2005,
our total railcar backlog was 15,567 railcars, compared to a
total backlog of 5,653 railcars as of September 30, 2004.
The reported backlog as of September 30, 2005 includes
9,000 railcars relating to the CIT Group's minimum
purchase obligations under its agreement with us based upon an
assumed product mix consistent with CIT's orders for
railcars. This agreement is described below under
"Management's discussion and analysis of financial
conditions and results of operations — Backlog."
OUR HISTORY
Since our formation in 1988, we have grown our business from
being a small provider of railcar components and maintenance
services to one of North America's leading integrated
providers of railcars, railcar components, railcar maintenance
services and fleet management services. In October 1994, we
acquired railcar components manufacturing and railcar
maintenance assets from ACF Industries, Incorporated (now known
as ACF Industries LLC), or ACF, a company controlled by
Carl C. Icahn, our principal beneficial stockholder and the
chairman of our board of directors. Through this acquisition, we
also hired members of ACF's management, many of whom,
including our president, remain a significant part of our
current management team. These executives brought with them
established relationships with important customers and suppliers
and extensive industry knowledge, as ACF and its predecessor
companies have roots in the railcar manufacturing industry that
trace back to 1873. Led by this management team, we entered the
railcar manufacturing business through the construction of new
manufacturing facilities.
In October 1995, we produced our first railcar at our Paragould,
Arkansas manufacturing facility. We primarily manufacture
covered hopper railcars at our Paragould facility, but we have
the ability to manufacture many other types of railcars at this
facility. The Paragould facility initially had two railcar
manufacturing lines. We added painting and lining capabilities
to this facility in 1999 and a third
1
Table of Contents
manufacturing line in December 2004. We are currently
constructing additional painting and lining capabilities at our
Paragould facility to increase efficiency, which we expect to
open at the end of 2005. Our Paragould facility also features
component manufacturing capabilities.
In January 2000, we produced our first railcar at our Marmaduke,
Arkansas manufacturing facility. We manufacture tank railcars at
this facility. The design of this facility enables us to
manufacture many different types of tank railcars at the same
time.
Since 1994, we have significantly expanded our components
manufacturing and railcar services operations. Our operations
now include three railcar assembly, sub-assembly and fabrication
facilities, three railcar and industrial component manufacturing
facilities, six railcar repair plants and four mobile repair
units. Our services business has grown to include online access
by customers, remote fleet management, expanded painting, lining
and cleaning offerings, regulatory consulting and engineering
support. Additionally, members of our management team helped
found and develop, and continue to operate, a joint venture,
Ohio Castings Company, LLC, which we refer to as Ohio Castings,
in which we own a one-third interest and that manufactures and
sells sideframes, bolsters, couplers and yokes for distribution
to third parties and to us. We believe that our involvement in
this joint venture helps us maintain our levels of production at
competitive prices, despite industry-wide shortages of these
potentially capacity constraining components.
OUR INDUSTRY
Overview.
Demand for railcars reflects their importance
to the North American economy in moving goods and raw materials.
In periods of rising economic activity, fleet utilization
typically increases, driving an increase in demand for new
railcars, which also increases backlog for new railcars.
Conversely, during economic slowdowns, fleet utilization
typically declines, resulting in reduced demand, deliveries and
backlog for new railcars. According to Global Insight's
Freight Car Outlook Third Quarter 2005, orders for new railcars
are expected to be strong with deliveries projected to
average 59,400 railcars per year from 2005 through 2010.
This compares to deliveries of 17,714 railcars in 2002, 32,184
railcars in 2003 and 46,871 railcars in 2004, as reported by
Railway Supply Institute, or RSI. RSI reported that at the end
of 2004, the total backlog for the railcar manufacturing
industry reached 58,677 railcars. This growth trend has
continued through the first nine months of 2005, with 54,134 new
railcars ordered and 50,682 railcars delivered, with total
backlog increasing to 60,986 railcars.
We believe the main characteristics and trends affecting the
North American railcar industry are:
4
the cyclical nature of the railcar
    market;
4
the replacement demand for the
    aging North American railcar fleet;
4
the shift in the customer base
    from railroads to leasing companies and shippers; and
4
the consolidation of railcar
    manufacturers.
Covered hopper railcars.
North American demand for
covered hopper railcars has shown renewed strength due to
increased shipments of a variety of products including plastics,
chemicals and food. We believe there will be strong demand for
covered hopper railcars in the North American market over the
next several years. Global Insight's Freight Car Outlook
Third Quarter 2005 forecasts a significant increase in
deliveries of covered hopper railcars, from 3,801 in 2003 and
5,602 in 2004 to 14,927 in 2005 and 16,926 in 2006, with
deliveries averaging approximately 15,800 railcars per year from
2007 through 2010. We believe the main characteristics and
trends affecting the North American covered hopper railcar
market are:
4
the health of the
    U.S. economy;
4
increases in production of a
    number of consumer and business durable goods;
2
Table of Contents
4
increases in domestic and
    international demand for U.S. agricultural products;
4
increases in demand for corn used
    in ethanol production; and
4
the need to replace aging covered
    hopper railcars.
Tank railcars.
Tank railcars are in higher demand in
North America as manufacturing activity and the need for liquids
and gases used in manufacturing increases. The manufacturing of
tank railcars is highly regulated and their production requires
a specially trained workforce and dedicated manufacturing
facilities. As a result, the tank railcar market is difficult to
enter and competition is concentrated. We believe the demand for
tank railcars in the North American market will continue to be
strong and stable over the next several years. Global
Insight's Freight Car Outlook Third-Quarter 2005 projects
an increase in tank railcar deliveries, from 8,176 in 2003 and
8,939 in 2004, to 11,069 in 2005 and 11,075 in 2006, with
deliveries averaging approximately 9,900 tank railcars per year
from 2007 through 2010. We believe the main characteristics and
trends affecting the North American tank railcar market are:
4
increases in manufacturing
    activity and the resulting demand for higher volumes of
    chemicals and gases;
4
increases in demand for
    petrochemicals, ethanol, edible and lubricating oils and liquid
    food products; and
4
the need to replace aging tank
    railcars.
These trends affecting the railcar industry and the covered
hopper and tank railcar markets are discussed in the section
entitled "Industry."
OUR BUSINESS STRENGTHS AND COMPETITIVE ADVANTAGES
We believe that the following key business strengths and
competitive advantages will contribute to our growth:
4
Leading railcar manufacturer
    with focus on the covered hopper and tank railcar
    markets.
We are a
    leading North American manufacturer of covered hopper and tank
    railcars. Over the last three years, we believe we have produced
    an estimated 33% of the covered hopper railcars and an estimated
    16% of the tank railcars delivered in North America. Based on a
    report by the Association of American Railroads, these represent
    the two largest segments of the North American railcar industry,
    with covered hopper railcars representing approximately 30% and
    tank railcars representing approximately 19% of the total North
    American railcar fleet, based on the number of railcars in
    service. We believe our railcars are differentiated by their
    superior quality, innovation and reliability.
4
Modern non-union, low-cost
    railcar manufacturing facilities in strategic
    locations.
Unlike
    many of our competitors, we manufacture all of our railcars in
    modern facilities built in the last ten years. We designed these
    facilities to provide manufacturing flexibility and allow for
    the production of a variety of railcar sizes and types. We
    strategically located these facilities in close proximity to our
    main customers and suppliers. This reduces freight time and
    costs for the components we purchase and the time for delivery
    of completed railcars. Over the past several years, we increased
    our production capacity and efficiency and reduced our costs per
    railcar through a number of targeted operational and design
    improvements, which has also reduced the amount of raw materials
    necessary for production of railcars. Currently none of our over
    1,100 employees at our Paragould and Marmaduke railcar
    manufacturing facilities are represented by a union. However,
    employees of three of our repair facilities and one of our
    component manufacturing facilities, representing 16% of our
    total workforce as of September 30, 2005, are represented
    by a union.
3
Table of Contents
4
Preferred access to
    components through in-house production, a joint venture and
    strategic sourcing
    arrangements.
We
    produce many of the components necessary to our railcar
    manufacturing business ourselves and we own a one-third interest
    in, and our management team operates, our Ohio Castings joint
    venture, from which we obtain certain other components. We
    believe our in-house production capabilities and our involvement
    in this joint venture help us maintain access to components at
    competitive prices, despite industry-wide shortages of these
    potentially capacity constraining components. We also have
    developed and actively maintain strategic sourcing arrangements
    and strong relationships with our suppliers. These arrangements
    and relationships help ensure our continued access to critical
    components and raw materials that we use to produce railcars,
    including steel, wheels, and heavy castings. We believe our
    attention to strengthening our supply chain helps us maintain
    operational continuity and high production levels.
4
Integrated railcar repair
    and refurbishment and fleet management services complement
    railcar
    manufacturing.
We
    provide a wide array of complementary products and services to
    the railcar industry. Unlike some other railcar manufacturers,
    we also repair, maintain and provide fleet management services
    for existing railcars, including railcars built by others, and
    manufacture railcar components for third parties and us. We
    believe this diverse product and service offering provides us
    with a competitive advantage relative to other railcar
    manufacturers, primarily in the form of cross- selling
    opportunities. We also believe that our ability to address the
    needs of our customers throughout the lifecycle of a railcar
    enhances our customer relationships and provides us with
    additional growth opportunities and unique insights into
    industry trends.
4
Strong relationships with a
    long-term customer
    base.
We believe
    that our customers value our products and services. Many of our
    major customers have been doing business with us for a number of
    years, including CIT, Dow Chemical Company, GE Capital
    Corporation and Solvay America, Inc. Many of our customers have
    demonstrated a willingness to purchase several different types
    of our products and services over time. We believe we deliver
    high quality products and services to our customers with low
    operating and maintenance costs, while maintaining what we
    believe are low levels of warranty claims.
4
Strong management team with
    long-standing industry
    experience.
We have
    an experienced senior operations management team that has an
    average of over 25 years of experience in the railcar and
    related manufacturing industries. Our senior operations
    management team, including our president, James J. Unger, has
    been with us since we began manufacturing railcars. This team
    conceived and built our Paragould and Marmaduke railcar
    manufacturing facilities and has been responsible for growing
    our revenues from $80.9 million in 1994 to
    $355.1 million in 2004.
OUR STRATEGY
The key elements of our business strategy are as follows:
4
Maintain and expand presence
    in covered hopper and tank railcar
    markets.
We intend
    to maintain and expand our presence in the covered hopper and
    tank railcar markets by continuing to deliver high quality and
    innovative products. We believe our excellent customer
    relationships have enabled us to identify market demands that we
    then target through our product development and marketing
    efforts. We intend to continue the close collaboration between
    our customers and our engineering, marketing, operations and
    management personnel to meet demand and, where appropriate, to
    selectively expand production capacity.
4
Continue to improve
    operating
    efficiencies.
We
    intend to build on the success of our production initiatives at
    our Paragould and Marmaduke railcar manufacturing facilities and
    plan to continue to identify opportunities to enhance operating
    efficiencies across these and our other manufacturing
    facilities. These opportunities include our continued
    streamlining of our manufacturing processes and our quality
    control initiatives. We also intend to continue the efforts
4
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of our design cost reduction team, formed in 2003, which has
    already significantly reduced our railcar production costs
    through standardization of components used in our railcars,
    implemented design changes to reduce the amount of raw material
    required for our railcars, and improved manufacturing techniques
    that reduce our labor requirements. These efforts should allow
    us to reduce our costs and maintain competitive prices.
4
Continue to grow railcar service and fleet management
    businesses and increase sales of railcar and industrial
    components.
As the existing North American railcar fleet
    continues to age, we anticipate increased demand for maintenance
    and repair services and railcar components used in the
    maintenance and repair of railcars. Additionally, we expect
    growing demand for our fleet management services as ownership of
    railcars continues to shift away from the railroads and toward
    the shippers and leasing companies, which often outsource their
    fleet management activities to third-party service providers
    such as us. We intend to capitalize on these trends and we
    believe we are well positioned to provide increased services
    through our strategically located network of railcar repair and
    service facilities.
4
Leverage manufacturing expertise to selectively expand
    product portfolio.
We may seek to expand our product
    portfolio to other selected types of railcars. Our management
    designed and constructed our Paragould manufacturing facility to
    be able to produce most railcar types, and we believe our
    adaptive production lines and flexible employees are able to
    shift production among various railcar types with minimal
    interruption to our operations. In addition, as the existing
    fleet of North American railcars is aging, expansion of our
    product portfolio into new railcar types will allow us to grow
    our business by capturing a portion of the natural replacement
    demand for existing railcar types. Our ability to produce other
    types of railcars positions us to respond to customer requests
    for production outside of our traditional markets and provides
    us additional manufacturing flexibility in the event the covered
    hopper or tank railcar markets weaken.
4
Selectively pursue strategic external growth
    opportunities.
By significantly reducing our debt
    through this offering and with the establishment of a public
    market for our common stock, we believe we will have increased
    financial flexibility to supplement internal growth with select
    acquisitions, alliances or joint ventures. We also believe our
    in-house fabrication of railcar components and our Ohio Castings
    joint venture provide us with competitive advantages and we
    intend to enhance these advantages by selectively acquiring or
    establishing strategic relationships with railcar component
    manufacturers and suppliers of critical raw materials. While we
    have in the past engaged in preliminary discussions with certain
    parties regarding potential strategic acquisitions, alliances or
    joint ventures, as of the date of this prospectus, we are not
    currently engaged in any such discussions and do not have any
    commitments to enter into any acquisition, alliance or joint
    venture. We may also seek to expand our railcar components
    business into international markets on an opportunistic basis.
THE TRANSACTIONS
We intend to use the proceeds of this offering to:
4
repay outstanding borrowings under
    our existing revolving credit facility and amend and restate our
    revolving credit facility;
4
repay the notes payable that we
    issued to ACF Industries Holding Corp. in connection with the
    acquisition of our joint venture interest in Ohio Castings, and
    that we issued to Arnos Corp., both of which are entities
    controlled by Carl C. Icahn, our principal beneficial
    stockholder and the chairman of our board of directors;
4
redeem all of our industrial
    revenue bonds;
5
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4
redeem all of the outstanding
    shares of our preferred stock, all of which are held by Carl C.
    Icahn and his affiliates; and
4
pay fees and expenses related to
    this offering and the transactions identified above.
For more information, see "Use of proceeds."
Our outstanding shares of preferred stock include our
mandatorily redeemable preferred stock and our new preferred
stock. See "Description of capital stock."
Concurrently with this offering, we expect to issue to our
president and chief executive officer, James J. Unger, the
number of shares of our common stock obtained by dividing
$6.0 million by the public offering price set forth on the
cover page of this prospectus. See
"Management—Executive compensation—Employment
agreements." Concurrently with this offering, we also
intend to amend and restate provisions of our existing revolving
credit facility to increase its size to $75 million and
extend its term to three years from the closing of this
offering, pursuant to a commitment letter we have obtained from
North Fork Business Capital Corporation and our other lenders.
See "Management's discussion and analysis of financial
condition and results of operations— Liquidity and capital
reserves—Outstanding debt—Revolving credit
facility" for a description of our existing revolving
credit facility and the expected terms of our new revolving
credit facility. Immediately prior to the closing of this
offering, our parent company will merge with and into us
pursuant to which all of the outstanding shares of our parent
company's capital stock will be exchanged for shares of our
capital stock in the manner described below in
"—Corporate Information." We refer to this
offering, the application of the proceeds of this offering as
described above, the issuance of shares of our common stock to
James J. Unger, the amendment and restatement of our
revolving credit facility and the merger described below
collectively as the "Transactions."
OUR RELATIONSHIP WITH CARL C. ICAHN AND ENTITIES AFFILIATED
WITH CARL C. ICAHN
Overview.
Carl C. Icahn is our principal beneficial
stockholder and is the chairman of our board of directors. Since
our formation, we have entered into agreements relating to the
acquisition of assets from and disposition of assets to entities
controlled by Mr. Icahn, the provision of goods and
services to us by entities controlled by Mr. Icahn, the
provision of goods and services by us to entities affiliated
with Mr. Icahn and other matters involving entities
controlled by Mr. Icahn. We receive substantial benefit
from these agreements and we expect that in the future we will
continue to conduct business with entities affiliated with or
controlled by Mr. Icahn. In 2002, 2003, 2004 and the first
nine months of 2005, our revenues from affiliates of
Mr. Icahn accounted for 45%, 34%, 24% and 14% of our total
revenues, respectively. In addition, we receive other benefits
from our affiliation with Mr. Icahn and companies
controlled by Mr. Icahn, such as financial and advisory
support, sales support and our participation in buying groups
and other arrangements with entities controlled by
Mr. Icahn. Until recently, most of our capital needs have
been provided by entities controlled by Mr. Icahn.
Application of the net proceeds of this offering.
We
intend to use the net proceeds of this offering to, among other
things, repay
$           million
of indebtedness that we owe to entities controlled by
Mr. Icahn. We also intend to use
$           million
of the net proceeds of this offering to redeem all of our new
preferred stock, all of which is held by Mr. Icahn and his
affiliates, including all accumulated and unpaid dividends due
on our preferred stock. For more information, see "Use of
proceeds."
Mr. Icahn's holdings of our common stock.
We
have been advised that in December 2005, Modal LLC, a
company controlled by Mr. Icahn, entered into a stock
purchase agreement with the Foundation for a Greater
Opportunity, or the Foundation, our other significant beneficial
stockholder, to acquire all of our common stock held by the
Foundation. The consummation of this acquisition of our common
stock requires the completion of this offering and the approval
of applicable authorities of the State of New York. If the
parties obtain this approval, we have been advised that the
parties expect that the purchase would be completed in the first
three months of 2006. Pending the closing of this purchase, and
for so long as the stock purchase agreement has not been
terminated, the
6
Table of Contents
Foundation has granted Modal LLC an irrevocable proxy to vote
all of the shares of our common stock held by the Foundation.
The stock purchase agreement may be terminated by either party
if the purchase does not occur by May 2006. As a result of these
contemplated arrangements, we expect that Mr. Icahn will
control
approximately           %
of the voting power of our capital stock following the offering.
As a result, Mr. Icahn is, and will be, able to exert
substantial influence over us, elect our directors and control
most matters requiring board or shareholder approval. If,
following this offering, Mr. Icahn does not acquire all of
the shares of our common stock held by the Foundation, following
the termination of the irrevocable proxy granted to Modal LLC,
Mr. Icahn will continue to beneficially
own           %
of our common stock and will still be able to exert substantial
influence over us. See "Principal stockholders— Icahn
agreement to purchase Foundation shares."
For information about the risks associated with our
relationships with Carl C. Icahn and entities affiliated
with Carl C. Icahn, see "Risk factors—Risks
related to our business—After this offering, companies
affiliated with Carl C. Icahn will continue to be important
suppliers and customers," "Risk factors—Risks
related to our business—Services being provided to us by
ARL, an entity controlled by Carl C. Icahn, may not be
sufficient to meet our needs, which may require us to incur
additional costs," "Risk factors—Risks related to
our business—After this offering, we may have reduced
access to resources of, and benefits provided by, entities
affiliated with Carl C. Icahn," "Risk
factors—Risks related to our business—We could be
liable for liabilities associated with pension plans sponsored
by companies controlled by Carl C. Icahn," "Risk
factors—Risks related to the purchase of our common stock
in this offering—Our stock price may decline due to sales
of shares by Carl C. Icahn and other stockholders,"
"Risk factors—Risks related to the purchase of our
common stock in this offering—Carl C. Icahn will continue
to exert significant influence over us," "Risk
factors—Risks related to the purchase of our common stock
in this offering—Mr. Icahn's interests may
conflict with the interest of our stockholders," "Risk
factors—Risks related to the purchase of our common stock
in this offering—Upon the closing of this offering we may
be a "controlled company" within the meaning of the
Nasdaq National Market rules and you will not have the same
protections afforded to shareholders of companies that are not
"controlled companies" and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements." Also, see "Certain relationships and
related party transactions—Transactions with Carl C. Icahn
and entities affiliated with Carl C. Icahn" for more
information about our affiliation with Mr. Icahn and entities
affiliated with Mr. Icahn.
CORPORATE INFORMATION
American Railcar Industries, Inc., a Delaware corporation formed
on November 16, 2005 (referred to as American Railcar
Industries Delaware), will be the issuer of the common stock
offered hereby. American Railcar Industries Delaware is a wholly
owned subsidiary of American Railcar Industries, Inc., a
Missouri corporation (referred to as American Railcar Industries
Missouri). Immediately prior to the closing of this offering,
American Railcar Industries Missouri will merge with and into
American Railcar Industries Delaware, with American Railcar
Industries Delaware being the surviving corporation. As a part
of this merger American Railcar Industries Missouri will
exchange all of its shares of common stock for shares of
American Railcar Industries Delaware's common stock on a
one-for-          basis.
In addition, American Railcar Industries Missouri will also
exchange all of its new preferred stock for shares of American
Railcar Industries Delaware's new preferred stock on a
one-for-one basis. We refer to the merger of American Railcar
Industries Missouri with and into American Railcar Industries
Delaware and these share exchanges collectively as the merger.
The surviving corporation of the merger will be incorporated in
Delaware and will be named American Railcar Industries, Inc. In
this prospectus, references to "our company,"
"we," "us" and "our," except where
the context otherwise indicates, refer to American Railcar
Industries Delaware and its consolidated subsidiaries and its
predecessors, assuming the merger has occurred. The address of
our principal executive offices is 100 Clark Street, St.
Charles, Missouri, 63301. Our telephone number is
(636) 940-6000. Our website address is
www.americanrailcar.com. Information contained in or connected
to our website is not part of this prospectus.
7
Table of Contents
The offering
Unless otherwise indicated, all of the information in this
prospectus assumes the underwriters do not exercise their
over-allotment option to purchase additional shares of our
common stock. Please see "Description of capital
stock" for a summary of the terms of our common stock.
Common stock offered by us
shares.
Common stock outstanding after this offering
shares.
Common stock subject to the over-allotment option
shares.
Use of proceeds
We expect to receive net proceeds from the offering of
    approximately
    $                     million,
    after deducting underwriting discounts and commissions and
    estimated expenses of this offering payable by us, assuming an
    initial offering price of
    $          per
    share, which represents the midpoint of the range on the cover
    of this prospectus.
We intend to use the net proceeds from this offering to repay
    amounts outstanding under our revolving credit facility, repay
    notes due to our affiliates, redeem all of our industrial
    revenue bonds, redeem all shares of our outstanding preferred
    stock, all of which are held by affiliates of Mr. Icahn,
    and pay the fees and expenses related to the Transactions. See
    "Use of proceeds."
Dividend policy
Although our board of directors has never declared or paid any
    cash dividends on our common stock, following this offering we
    intend to pay cash dividends on our common stock. Payment of
    dividends will be at the discretion of our board of directors
    and will depend upon our operating results, strategic plans,
    capital requirements, financial condition, provisions of our
    borrowing arrangements, applicable law and other factors our
    board of directors considers relevant. As of the date of this
    prospectus, our board of directors has not determined the amount
    of any specific dividend, if any. See "Risk
    factors—Risks related to the purchase of our common stock
    in this offering—Payments of cash dividends on our common
    stock may be made only at the discretion of our board of
    directors and Delaware law may restrict, and the agreements
    governing our revolving credit facility contain provisions that
    limit, our ability to pay dividends" and "Dividend
    policy and restrictions."
Proposed Nasdaq symbol
ARII.
Risk factors
You should carefully read and consider the information set forth
    under the caption "Risk factors" beginning on
    page 14 and all other information set forth in this
    prospectus before investing in our common stock.
8
Table of Contents
Unless otherwise indicated, all of the information in this
prospectus relating to the number of shares of common stock to
be outstanding after this offering:
Ø
gives effect to the merger immediately prior to the closing of
    this offering;
Ø
gives effect to the issuance of the number of shares of our
    common stock obtained by dividing $6.0 million by the
    public offering price set forth on the cover page of this
    prospectus to our president and chief executive officer,
    James J. Unger, see "Management—Executive
    compensation—Employment agreements"; and
Ø
excludes shares of our common stock that will be available for
    future issuance under stock options granted under our 2005
    Equity Incentive Plan, none of which will be exercisable upon
    the completion of this offering. See
    "Management—Executive compensation—Equity
    incentive plan."
9
Table of Contents
Summary consolidated financial data
The following table sets forth our summary consolidated
financial data for the periods presented. The consolidated
statements of operations and cash flow data for the years ended
December 31, 2002, 2003 and 2004 and the consolidated
balance sheet data as of December 31, 2003 and 2004 are
derived from our audited consolidated financial statements and
related notes included elsewhere in this prospectus. The
consolidated statements of operations and cash flow data for the
years ended December 31, 2000 and 2001 and the consolidated
balance sheet data as of December 31, 2000, 2001 and 2002
are derived from our historical consolidated financial
statements not included in this prospectus. The consolidated
statements of operations and cash flow data for the nine months
ended September 30, 2004 and 2005 and the consolidated
balance sheet data as of September 30, 2005 have been
derived from unaudited consolidated financial statements and
related notes included elsewhere in this prospectus and reflect
all adjustments (consisting only of normal, recurring
adjustments) which are, in the opinion of management, necessary
for a fair presentation of our financial position, the results
of operations and cash flows for the periods presented.
Operating results for the nine months ended September 30,
2005 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2005 or any other
future period.
You should read this information together with
"Capitalization," "Management's discussion
and analysis of financial condition and results of
operations" and our consolidated financial statements and
the related notes thereto included elsewhere in this prospectus.
10
Table of Contents
Summary Consolidated Financial Data
Nine months ended
Years ended December 31,
September 30,
2000
2001
2002
2003
2004
2004
2005
(unaudited)
(in thousands, except share data and number of railcars)
Consolidated statement of operations data:
Revenues
Manufacturing operations(1)
$
200,691
$
181,438
$
138,441
$
188,119
$
316,432
$
226,759
$
409,208
Railcar services(2)
38,093
32,703
30,387
29,875
38,624
27,572
32,940
Total revenues
238,784
214,141
168,828
217,994
355,056
254,331
442,148
Cost of goods sold
Cost of manufacturing operations(3)
187,375
169,952
134,363
174,629
306,283
216,027
377,181
Cost of railcar services(4)
37,111
33,255
29,533
29,762
34,473
24,585
27,538
Total cost of goods sold
224,486
203,207
163,896
204,391
340,756
240,612
404,719
Gross profit
14,298
10,934
4,932
13,603
14,300
13,719
37,429
Selling, administrative and other
8,693
9,219
9,505
10,340
10,334
8,543
11,417
Operating earnings (loss)
5,605
1,715
(4,573
)
3,263
3,966
5,176
26,012
Interest income(5)
5,777
4,770
3,619
3,161
4,422
2,122
1,265
Interest expense(6)
(13,687
)
(9,525
)
(4,853
)
(3,616
)
(3,667
)
(2,216
)
(3,577
)
Income (loss) from joint venture
—
—
—
(604
)
(609
)
(351
)
443
Earnings (loss) before income tax (benefit) expense
(2,305
)
(3,040
)
(5,807
)
2,204
4,112
4,731
24,143
Income tax (benefit) expense
(713
)
(1,074
)
(1,894
)
1,139
2,191
1,858
9,611
Net earnings (loss)
$
(1,592
)
$
(1,966
)
$
(3,913
)
$
1,065
$
1,921
$
2,873
$
14,532
Less preferred dividends
—
(3,070
)
(7,139
)
(9,690
)
(13,241
)
(9,296
)
(11,171
)
Net earnings (loss) available to common shareholders
$
(1,592
)
$
(5,036
)
$
(11,052
)
$
(8,625
)
$
(11,320
)
$
(6,423
)
$
3,361
Weighted average shares outstanding, basic and diluted(7)
1,000
1,000
1,000
1,000
1,087
1,051
1,195
Net earnings (loss) per common share, basic and diluted(7)
$
(1,592
)
$
(5,036
)
$
(11,052
)
$
(8,625
)
$
(10,414
)
$
(6,111
)
$
2,813
Consolidated balance sheet data (at period end):
Cash and cash equivalents
$
2,342
$
1,476
$
183
$
65
$
6,943
$
50,605
$
26,201
Net working capital
32,096
35,172
16,065
15,084
46,565
83,355
31,197
Net property, plant and equipment
84,897
81,090
75,746
71,230
76,951
73,706
88,555
Total assets
204,764
191,229
187,590
196,508
356,840
300,764
262,024
Total liabilities
170,158
113,596
98,463
190,704
221,817
95,332
154,489
Total shareholders' equity
$
34,606
$
77,633
$
89,127
$
5,804
$
135,023
$
205,432
$
107,535
Consolidated other operating data:
EBITDA(8)
$
12,202
$
8,764
$
1,698
$
9,067
$
9,604
$
9,599
$
31,427
Items decreasing EBITDA(9)
$
8,619
$
1,848
$
193
$
1,256
$
7,922
$
2,586
$
1,265
Capital expenditures
$
8,662
$
2,617
$
1,816
$
2,301
$
11,441
$
6,750
$
16,356
New railcars delivered
2,423
2,312
1,766
2,557
4,384
3,260
4,980
New railcar orders
2,054
1,598
1,861
4,432
9,644
6,626
13,000
New railcar backlog
1,031
317
412
2,287
7,547
5,653
15,567
Estimated backlog value(10)
$
60,417
$
19,864
$
26,906
$
129,850
$
494,107
$
365,097
$
1,132,788
Consolidated cash flow data:
Net cash provided by (used in) operating activities
$
5,217
$
13,434
$
10,611
$
(1,639
)
$
(17,082
)
$
1,946
$
27,831
Net cash used in investing activities
(8,782
)
(2,189
)
(535
)
(2,251
)
(11,037
)
(6,750
)
(16,356
)
Net cash provided by (used in) financing activities
$
5,490
$
(12,111
)
$
(11,369
)
$
3,772
$
34,997
$
55,344
$
7,783
11
Table of Contents
(1)
Includes revenues from transactions with affiliates of
    $52.8 million, $64.8 million, $63.6 million,
    $62.9 million and $64.4 million in 2000, 2001, 2002,
    2003 and 2004, respectively and $44.6 million and
    $44.5 million for the nine months ended September 30,
    2004 and 2005, respectively.
(2)
Includes revenues from transactions with affiliates of
    $16.1 million, $8.6 million, $12.8 million,
    $11.0 million and $19.4 million in 2000, 2001, 2002,
    2003 and 2004, respectively and $12.7 million and
    $16.0 million for the nine months ended September 30,
    2004 and 2005, respectively.
(3)
Including costs from transactions with affiliates of
    $46.6 million, $57.6 million, $55.7 million,
    $54.4 million and $59.1 million in 2000, 2001, 2002,
    2003 and 2004, respectively and $40.2 million and
    $41.4 million for the nine months ended September 30,
    2004 and 2005, respectively.
(4)
Includes costs from transactions with affiliates of
    $12.8 million, $7.2 million, $12.2 million,
    $10.1 million and $15.5 million in 2000, 2001, 2002,
    2003 and 2004, respectively and $9.6 million and
    $12.7 million for the nine months ended September 30,
    2004 and 2005, respectively.
(5)
Includes interest income from affiliates of $5.6 million,
    $4.3 million, $3.4 million, $3.0 million and
    $3.9 million in 2000, 2001, 2002, 2003 and 2004,
    respectively and $1.2 million and $0.8 million for the
    nine months ended September 30, 2004 and 2005, respectively.
(6)
Includes interest expense to affiliates of $0.2 million in
    2001, and $1.5 million in 2004 and $0.2 million and
    $1.7 million for the nine months ended September 30,
    2004 and 2005, respectively.
(7)
Share and per share data have not been restated to give effect
    to the merger.
(8)
EBITDA represents net earnings (loss) before income tax expense
    (benefit), interest (income) expense, net and amortization and
    depreciation of property and equipment. We believe EBITDA is
    useful to investors in evaluating our operating performance
    compared to that of other companies in our industry. In
    addition, our management uses EBITDA to evaluate our operating
    performance. The calculation of EBITDA eliminates the effects of
    financing, income taxes and the accounting effects of capital
    spending. These items may vary for different companies for
    reasons unrelated to the overall operating performance of a
    company's business. EBITDA is not a financial measure
    presented in accordance with U.S. generally accepted
    accounting principles, or U.S. GAAP. Accordingly, when
    analyzing our operating performance, investors should not
    consider EBITDA in isolation or as a substitute for net earnings
    (loss), cash flows from operating activities or other statements
    of operations or statements of cash flow data prepared in
    accordance with U.S. GAAP. Our calculation of EBITDA is not
    necessarily comparable to that of other similarly titled
    measures reported by other companies.
The following is a reconciliation of net earnings (loss) to
EBITDA:
Nine months ended
Years ended December 31,
September 30,
2000
2001
2002
2003
2004
2004
2005
(in thousands)
Net earnings (loss)
$
(1,592
)
$
(1,966
)
$
(3,913
)
$
1,065
$
1,921
$
2,873
$
14,532
Income tax (benefit) expense
(713
)
(1,074
)
(1,894
)
1,139
2,191
1,858
9,611
Interest expense
13,687
9,525
4,853
3,616
3,667
2,216
3,577
Interest income
(5,777
)
(4,770
)
(3,619
)
(3,161
)
(4,422
)
(2,122
)
(1,265
)
Depreciation and amortization
6,597
7,049
6,271
6,408
6,247
4,774
4,972
EBITDA
$
12,202
$
8,764
$
1,698
$
9,067
$
9,604
$
9,599
$
31,427
(9)
Our net earnings (loss) and EBITDA decreased in the periods
    specified below as a result of the following items:
(a)
In 2000 and 2001, we incurred start-up expenses totaling
    $8.6 million and $1.8 million, respectively, in
    connection with our Marmaduke tank railcar manufacturing
    facility. The start-up expenses related to costs associated with
    introducing new tank railcar products, learning new
    manufacturing processes and commencing new operating procedures
    to reach normal productive capacity.
(b)
In 2002 and 2003, we recorded an asset impairment charge of $0.2
    million and $0.8 million respectively to reduce the
    carrying value of buildings and improvements, and equipment
    related to our Milton, Pennsylvania railcar repair plant.
    Inventory value was also reduced by $0.4 million in
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2003 to reflect the lower of cost
    or market value. Due to reduced demand for railcar repairs at
    this location, we elected to idle this facility until business
    conditions warrant its reopening.
(c)
In 2004 and in the nine months ended September 30, 2004 and
    September 30, 2005, we incurred an estimated
    $7.9 million, $4.9 million and $1.5 million,
    respectively, in increased raw materials costs, consisting
    primarily of costs relating to steel and railcar components
    which we were unable to pass on to our customers under our then
    existing fixed-price customer contracts. Since the first quarter
    of 2004, we have renegotiated most of our railcar manufacturing
    contracts to include provisions that adjust the selling prices
    of our railcars to reflect increases or decreases in the costs
    of certain raw materials and components. As a result of this
    change to our railcar manufacturing contracts, we were able to
    pass on to our customers approximately 32% of the increased raw
    material and component costs with respect to the railcars that
    we produced and delivered in 2004. Most of our railcar
    manufacturing contracts covering railcars to be produced after
    September 30, 2005 allow for variable pricing to protect us
    against future changes in the cost of certain raw materials and
    components.
(10)
Estimated backlog reflects the total sales attributable to the
    backlog reported at the end of the particular period as if such
    backlog were converted to actual sales. Estimated backlog does
    not reflect potential price increases or decreases under most of
    our customer contracts that provide for variable pricing based
    on changes in the cost of certain raw materials and railcar
    components or the possibility that contracts may be canceled or
    railcar delivery dates delayed and does not reflect the effects
    of any cancellation or delay of railcar orders that may occur.
    See "Management's discussion and analysis of financial
    condition and results of operations—Backlog."
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Risk factors
Investing in our common stock involves a high degree of risk.
Before you invest in our common stock, you should understand and
carefully consider the risks below, as well as all of the other
information contained in this prospectus and our financial
statements and the related notes included elsewhere in this
prospectus. Any of these risks could materially adversely affect
our business, financial condition, results of operations and the
trading price of our common stock, and you may lose all or part
of your investment.
RISKS RELATED TO OUR BUSINESS
Due in part to the highly cyclical nature of the railcar
industry, we have incurred substantial operating losses in the
past and may experience declines in revenue and substantial
operating losses in the future.
Historically, the North American railcar market has been highly
cyclical and we expect it to continue to be highly cyclical.
During the most recent industry cycle, industry-wide railcar
deliveries declined from a peak of 75,704 in 1998 to a low of
17,714 railcars in 2002. During this downturn, our revenues
dropped from $238.8 million in 2000 to $168.8 million
in 2002 and we incurred losses of $1.6 million,
$2.0 million and $3.9 million in 2000, 2001 and 2002,
respectively. We believe that downturns in the railcar
manufacturing industry will occur in the future and will result
in decreased demand for our products and services. The cycles in
our industry result from many factors that are beyond our
control, including economic conditions in the United States.
Although railcar production has increased since 2002, industry
professionals believe that demand for railcars may have reached
a peak and may not persist if favorable economic and other
conditions are not sustained. Even if a sustained economic
recovery occurs in the United States, demand for our railcars
may not match or exceed expected levels. An economic downturn
may result in increased cancellations of railcar orders which
could have a material adverse effect on our ability to convert
our railcar backlog into revenues. If industry backlog for
railcars declines below certain levels, CIT, one of our
customers which accounts for 71% of our backlog as of
September 30, 2005, will be permitted to cancel some or, in
certain circumstances, all its orders with at least
180 days written notice, which could have a material
adverse effect on our business, financial condition and results
of operations. In addition, an economic downturn in the United
States could result in lower sales volumes, lower prices for
railcars and a loss of profits for us.
A substantial number of the end users of our railcars acquire
railcars through leasing arrangements with our leasing company
customers. Economic conditions that result in higher interest
rates would increase the cost of new leasing arrangements, which
could cause our leasing company customers to purchase fewer
railcars. A reduction in the number of railcars purchased by our
leasing company customers could have a material adverse effect
on our business, financial condition and results of operations.
The cost of the raw materials that we use to manufacture
railcars, particularly steel, are high and these costs are
expected to increase. Any increase in these costs or delivery
delays of these raw materials may materially adversely affect
our business, financial condition and results of operations.
The production of railcars requires substantial amounts of
steel. The cost of steel and all other materials, including
scrap metal, used in the production of our railcars represents
approximately 80% to 85% of our manufacturing costs. Although we
have negotiated variable pricing provisions in most of our
railcar manufacturing contracts that pass certain increases or
decreases in our steel costs on to
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Risk factors
our customers, our business remains subject to risks related to
price increases and periodic delays in the delivery of steel and
other raw materials, all of which are beyond our control. The
price for steel, the primary raw material component of our
railcars, increased sharply in 2004 as a result of strong
worldwide demand and supply limitations caused, in part, by
steel industry consolidation and import trade barriers. Price
levels for steel have increased again in 2005 and we expect
worldwide demand for steel to increase, supplies to be more
limited and prices to continue to increase in 2006. In addition,
the price and availability of other railcar components that are
made of steel have been adversely affected by the increased cost
and limited availability of steel. Any fluctuations in the price
or availability of steel, or any other material used in the
production of our railcars, may have a material adverse effect
on our business, financial condition and results of operations.
In addition, if any of our raw material suppliers were unable to
continue its business or were to seek bankruptcy relief, the
availability or price of the materials we use could be adversely
affected. Deliveries of our raw materials, and the components
made from those raw materials, may also fluctuate depending on
supply and demand for the raw material or governmental
regulation relating to the raw material, including regulation
relating to the importation of the raw material.
We have entered into contracts with most of our railcar
customers that allow for variable pricing to protect us against
future increases in the cost of certain raw materials and
components, including steel. However, in 2004 and in the nine
months ended September 30, 2005, we were unable to pass on
an estimated $7.9 million and $1.5 million,
respectively, in increases in raw material and components costs.
As prices for steel, other raw materials and components
increase, we may not be able to pass on such price increases to
our customers in the future, which could adversely affect our
operating margins and cash flows. Even if we are able to
increase prices, any such price increases may reduce demand for
our railcars. In addition, our customers may not be willing to
accept contractual terms that provide for variable pricing and
our competitors, in an effort to gain market share or otherwise,
have agreed in the past, and may in the future agree, to railcar
supply arrangements that provide for fixed pricing. As a result,
we may lose railcar orders or we may be required to agree to
supply railcars with fixed pricing provisions or be subject to
less favorable contract terms, any of which could have a
material adverse effect on our business, financial condition and
results of operations.
Fluctuations in the supply of components and raw materials we
use in manufacturing railcars could cause production delays or
reductions in the number of railcars we manufacture, which could
materially adversely affect our business, financial condition
and results of operations.
Our railcar manufacturing business depends on the adequate
supply of numerous components, such as railcar wheels, brakes,
tank railcar heads, sideframes, axles, bearings, yokes, bolsters
and other heavy castings, and raw materials, such as normalized
steel plate. Over the last few years many suppliers have been
acquired or ceased operations, which has caused the number of
alternative suppliers of components and raw materials to
decline. The combination of industry consolidation and high
demand has caused recent industry-wide shortages of many
critical components as reliable suppliers are frequently at or
near production capacity. For example, with respect to railcar
wheels, there are only two significant suppliers that continue
to produce the type of component we use in our products. We rely
on one of these suppliers for most of our railcar wheels. Also,
a small percentage of the railcar wheels we use are refurbished
and are obtained from scrapped railcars. Supply of these
refurbished railcar wheels is available in limited quantities
and is unpredictable because the supply of refurbished railcar
wheels depends on the level and type of railcars being scrapped
in any given period. The supply of steel is similarly limited.
While we receive regular steel from three suppliers, we have
entered into agreements this year requiring us to buy the lesser
of a fixed volume or 75% of our steel requirements from one
supplier. In addition, there is currently only one North
American supplier of the types and sizes of normalized steel
plate we use in the production of many of our tank railcars.
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Risk factors
Supply constraints are exacerbated in our industry because,
although multiple suppliers may produce certain components,
railcar manufacturing regulations and the physical capabilities
of manufacturing facilities restrict the types and sizes of
components and raw materials that manufacturers may use. In
addition, we do not carry significant inventories of components
and procure many of our components on a just-in-time basis. With
the recent increased demand for railcars, our remaining
suppliers are facing significant challenges in providing
components and materials on a timely basis to all railcar
manufacturers, including to us. In the event that our suppliers
of railcar components and raw materials were to stop or reduce
the production of railcar components and raw materials that we
use, go out of business, refuse to continue their business
relationships with us or become subject to work stoppages, our
business would be disrupted. Our inability to obtain components
and raw materials in required quantities or of acceptable
quality could result in significant delays or reductions in
railcar shipments. Any of these events would materially and
adversely affect our operating results. Furthermore, our ability
to increase our railcar production to expand our business
depends on our ability to obtain an increased supply of these
railcar components and raw materials.
While we believe that we may, in certain circumstances, secure
alternative sources of these components and materials, we may
incur substantial delays and significant expense in doing so,
the quality and reliability of alternative sources may not be
the same and our operating results may be materially adversely
affected. Alternative suppliers might charge significantly
higher prices for railcar components and materials than we
currently pay. Even if alternative suppliers are available to
us, these suppliers may be unacceptable to our customers because
our customers often specify the components we may use in
railcars manufactured for them. Under such circumstances, the
disruption to our business could have a material adverse impact
on our customer relationships, business, financial condition and
results of operations.
We operate in a highly competitive industry and we may be
unable to compete successfully, which would materially adversely
affect our results of operations.
We face intense competition in all of our markets. In each of
our covered hopper and tank railcar manufacturing businesses, we
have two principal competitors. Both of our principal
competitors in the tank railcar market, Trinity Industries, Inc.
and the Union Tank Car Company, and one of our principal
competitors in the covered hopper railcar market, Trinity
Industries, Inc., have substantially greater resources and
produce substantially more railcars than we do. For example,
according to Trinity Industries, Inc.'s annual report for
the year ended December 31, 2004 and its quarterly report
for the nine months ended September 30, 2005, Trinity
delivered a total of approximately 15,100 and 17,016 railcars,
respectively, during those periods in North America. By
comparison, for the year ended December 31, 2004 and for
the nine months ended September 30, 2005, we delivered a
total of approximately 4,384 and 4,980 railcars, respectively,
during those periods in North America. In addition, some of
these and other railcar manufacturers produce railcars primarily
for use in their own railcar leasing operations, competing
directly with leasing companies, some of which are our largest
customers. Some of our competitors have greater financial and
technological resources than we have. Our competitors may
increase their participation in the railcar markets in which we
compete and other railcar manufacturers that currently do not
manufacture covered hopper or tank railcars may choose to
compete directly with us. Railcar purchasers' sensitivity
to price and strong price competition within the industry have
historically limited our ability to increase prices to obtain
better margins on our railcars. Additionally, as we selectively
seek to manufacture different types of railcars we will be
competing against railcar manufacturers with significantly more
experience than we have with regard to such railcar types. Our
competition for the sale of railcar components includes our
competitors in the railcar manufacturing market as well as a
concentrated group of companies whose primary business focus is
the production of one or more specialty components. We compete
with numerous
16
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Risk factors
companies in our railcar fleet management and railcar repair
services business, ranging from companies with greater resources
than we have to small, local companies.
In all our markets, in addition to price, competition is based
on quality, reputation, reliability of delivery, product
performance, customer service and other factors. In particular,
technological innovation by any of our existing competitors, or
new competitors entering any of the markets in which we do
business, could put us at a competitive disadvantage. We may be
unable to compete successfully or retain our market share in our
established markets. Increased competition for the sales of our
railcars, our fleet management and repair services and our
railcar components could result in price reductions, reduced
margins and loss of market share, which could materially
adversely affect our prospects, business, financial condition
and results of operations.
Equipment failures, delays in deliveries or extensive damage
to our facilities, particularly our railcar manufacturing
facilities in Paragould or Marmaduke, Arkansas, could lead to
production or service curtailments or shutdowns.
We manufacture our railcars at manufacturing facilities in
Paragould and Marmaduke, Arkansas. An interruption in
manufacturing capabilities at either of these facilities, as a
result of equipment failure or other reasons, could reduce or
prevent the production of our railcars. A halt of production at
either facility could severely delay scheduled railcar delivery
dates to our customers and affect our production schedule, which
would delay future production. Any significant delay in
deliveries to our customers could result in the termination of
orders, cause us to lose future sales and negatively affect our
reputation among our customers and in the railcar industry, all
of which would materially adversely affect our business and
results of operations. Additionally, production delays or
interruptions at our Jackson, St. Charles or Kennett,
Missouri components manufacturing facilities or at our Ohio
Castings joint venture, all of which provide key components to
our Paragould and Marmaduke railcar manufacturing facilities,
could contribute to delays of railcar deliveries and order
cancellations. Interruptions at our repair, cleaning and
maintenance facilities, including our mobile repair units, may
also have a material adverse effect on our business. All of our
manufacturing and service facilities are also subject to the
risk of catastrophic loss due to unanticipated events, such as
fires, earthquakes, explosions, floods or weather conditions. We
may experience plant shutdowns or periods of reduced production
as a result of equipment failures, loss of power, gray outs,
delays in deliveries or extensive damage to any of our
facilities, which could have a material adverse effect on our
business, results of operations or financial condition.
We depend upon a small number of customers that represent a
large percentage of our revenues. The loss of any single
customer, or a reduction in sales to any such customer, could
have a material adverse effect on our business, financial
condition and results of operations.
Railcars are typically sold pursuant to large, periodic orders
and, therefore, a limited number of customers typically
represents a significant percentage of our railcar sales in any
given year. Our top ten customers based on revenues represented,
in the aggregate, approximately 77%, 79% and 79% in 2002, 2003
and 2004, respectively, of our total revenues. Moreover, our top
three customers based on revenues represented, in the aggregate,
approximately 65%, 70% and 59% in 2002, 2003 and 2004,
respectively, of our total revenues. In 2004, sales to our top
three customers accounted for approximately 23%, 20% and 16%,
respectively, of our total revenues. In the nine months ended
September 30, 2005, sales to our top three customers
accounted for approximately 17%, 16% and 15%, respectively, of
our total revenues. The loss of any significant portion of our
sales to any major customer, the loss of a single major customer
or a material adverse change in the financial condition of any
one of our major customers could have a material adverse effect
on our business, financial condition and financial results.
17
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Risk factors
If we lose any of our executive officers or key employees, or
Carl C. Icahn, the chairman of our board of directors, our
operations and ability to manage the day-to-day aspects of our
business may be materially adversely affected.
We believe our success depends to a significant degree upon the
continued contributions of our executive officers and key
employees, both individually and as a group. Our future
performance will substantially depend on our ability to retain
and motivate them. If we lose any of our executive officers or
key employees or are unable to recruit qualified personnel, our
ability to manage the day-to-day aspects of our business may be
materially adversely affected. It would be difficult to replace
any of our executive officers or key employees without
materially adversely affecting our business operations because
our executive officers and key employees have many years of
experience with our company and within the railcar industry and
other manufacturing industries and strong personal ties with
many of our important customers and suppliers. Additionally,
Mr. Icahn and his affiliated entities have been key
resources for strategic and management advice, which we have
obtained at no cost. We believe the availability and access to
these resources has provided us with a competitive advantage. If
Mr. Icahn were no longer the chairman of our board of
directors we could lose access to these resources. Furthermore,
if Mr. Icahn were no longer the chairman of our board of
directors, certain other risks we face relating to our customer,
supplier and service relationships with, and competition between
us and Mr. Icahn and affiliates of Mr. Icahn,
described below, may be exacerbated. The loss of the services of
one or more of our executive officers or key employees or the
chairman of our board of directors could have a material adverse
effect on our business, financial condition and results of
operations. We do not currently maintain "key person"
life insurance.
If we face labor shortages or increased labor costs our
growth and results of operations could be materially adversely
affected.
Due to the cyclical nature of the demand for our products, we
have had to reduce and then rebuild our workforce as our
business has gone through downturns followed by upturns in
business activity. Due to the competitive and rural nature of
the labor markets in which we operate, this type of employment
cycle increases our risk of not being able to retain and recruit
the personnel we require in our railcar manufacturing and other
businesses, particularly in periods of economic expansion. Our
Paragould and Marmaduke facilities are located in sparsely
populated communities and we have experienced a high turnover
rate at these locations among newly-hired employees. The
additional painting and lining capabilities that we are adding
to our Paragould facility, which we expect will be completed by
the end of 2005, will require additional employees to operate.
Our inability to recruit, retain and train adequate numbers of
qualified personnel on a timely basis could materially adversely
affect our ability to operate our businesses, our financial
condition and our results of operations.
The variable purchase patterns of our railcar customers and
the timing of completion, delivery and acceptance of customer
orders may cause our revenues and income from operations to vary
substantially each quarter, which could result in significant
fluctuations in our quarterly results.
Most of our individual railcar customers do not make railcar
purchases every year because they do not need to replace or
replenish their railcar fleets on a yearly basis. Many of our
customers place orders for railcars on an as-needed basis,
sometimes only once every few years. As a result, the order
levels for railcars, the mix of railcar types ordered and the
railcars ordered by any particular customer have varied
significantly from quarterly period to quarterly period in the
past and may continue to vary significantly in the future.
Railcar sales comprised approximately 75% of our total revenue
in 2004 and 81% of our total revenue in the nine months ended
September 30, 2005, and our results of
18
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Risk factors
operations in any particular quarterly period may be
significantly affected by the number and type of railcars
manufactured and delivered in any given quarterly period. For
example, our net income increased 156% from the first quarter to
the second quarter of this year while it decreased 207% from the
third quarter to the fourth quarter of fiscal 2004. We record
the sale of a railcar after completion of production of the
railcar, the railcar is accepted by the customer following
inspection, the risk for any damage or loss with respect to the
railcar passes to the customer and title to the railcar
transfers to the customer. This revenue recognition policy
determines when we record the revenues associated with our
railcar sales and, as a result, will cause fluctuations in our
quarterly results. As a result of these fluctuations, we believe
that comparisons of our sales and operating results between
quarterly periods within the same fiscal year and between
quarterly periods within different fiscal years may not be
meaningful and, as such, these comparisons should not be relied
upon as indicators of our future performance.
Our relationships with our partners in our Ohio Castings
joint venture may not be successful, which could materially
adversely affect our business.
Effective on January 1, 2005, we acquired from ACF
Industries Holding Corp., an affiliate of Carl C. Icahn, our
principal beneficial stockholder and the chairman of our board
of directors, its one-third ownership interest in Ohio Castings,
our joint venture with affiliates of Amsted Industries Inc., a
railcar components manufacturing company, and The Greenbrier
Companies, a railcar manufacturer and leasing company. We
acquired this joint venture interest in order to increase our
supply alternatives for heavy castings, which are critical
components for the manufacture of railcars and the supply of
which is constrained. The companies that supply the railcar
industry with heavy castings have been unable to meet the
short-term or long-term demand of railcar manufacturers and, as
such, the production capacity of many railcar manufacturers,
including ours, is restricted by the limited availability of
these components. Although the allocation of castings that we
receive from Ohio Castings does not provide us with all of our
castings requirements, the joint venture does provide us with a
committed source for a critical portion of the castings that we
require for the successful operation of our business. If Ohio
Castings is unable to provide us with our allocation of castings
on a timely basis or at all, our manufacturing costs could
increase and we may have to delay or cancel the production of
ordered railcars, all of which could materially adversely affect
our business, financial condition and results of operations.
The level of our reported railcar backlog may not necessarily
indicate what our future revenues will be and our actual
revenues may fall short of the estimated revenue value
attributed to our railcar backlog.
We define backlog as the number of railcars, and the revenue
value in dollars attributed to these railcars, to which our
customers have committed in writing to purchase from us that
have not yet been recognized as revenues. Our competitors may
not define railcar backlog in the same manner as we do, which
could make comparisons of our railcar backlog with theirs
misleading. In this prospectus, we have disclosed our railcar
backlog for various periods and the estimated revenue value in
dollars that would be attributed to this railcar backlog once
the railcar backlog is converted to actual sales. We consider
railcar backlog to be an indicator of future revenues. However,
our reported railcar backlog may not be converted into revenues
in any particular period, if at all, and the actual revenues
from such sales may not equal our reported estimates of railcar
backlog value. For example, if the price for raw materials, such
as steel, and other components used in the production of our
railcars decreases or increases and we have entered into
applicable variable pricing contracts with a customer or we are
otherwise able to pass on these price changes to a customer, our
actual revenues will differ from the estimated revenue value
attributed to our railcar backlog. In addition, our railcar
manufacturing business relies on third-party suppliers for heavy
castings, wheels and other components and raw
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Risk factors
materials and if these third parties were to stop or reduce
their supply of components or raw materials, our production
would decline and our actual revenues would fall short of the
estimated revenue value attributed to our railcar backlog.
Customer orders may be subject to cancellation, inspection
rights and other customary industry terms, all of which could
affect our recognition of revenue currently reflected in our
September 30, 2005 backlog. If industry backlog for
railcars declines below certain levels, CIT, one of our
customers which accounts for 71% of our September 30, 2005
backlog, will be permitted to cancel some or, in certain
circumstances, all its orders after at least 180 days written
notice, which could have a material adverse effect on our
business, financial condition and results of operations.
Furthermore, delivery dates may be subject to deferral, thereby
delaying the date on which we will deliver the associated
railcars and realize revenues attributable to such railcar
backlog. Therefore, our current level of reported railcar
backlog may not necessarily represent the level of revenues that
we may generate in any future period. Furthermore, any contract
included in our reported railcar backlog that actually generates
revenues may not be profitable.
Our management and auditors have identified three significant
deficiencies in our internal controls as of December 31,
2004, which, if not properly remediated could result in
misstatements in our financial statements in future periods.
Our independent auditors, Grant Thornton LLP, issued a letter to
our board of directors in which they identified three
significant deficiencies in the design and operation of our
internal controls as of December 31, 2004. A significant
deficiency is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that
a misstatement of the financial statements that is more than
inconsequential will not be prevented or detected. A control
deficiency exists when the design or operation of a control does
not allow management or employees, in the normal course of
performing their assigned functions, to prevent or detect
misstatements on a timely basis. The letter specifically noted
the following significant deficiencies:
4
Inventory
    cut-off.
Our
    manufacturing facilities recorded inventory shipped by our
    vendors to us on the date we received the inventory in our
    facilities, rather than on the date of shipment.
4
Construction in
    process.
We
    transferred assets from construction in process to fixed assets
    on a quarterly basis rather than at the time assets are actually
    placed into service. There was insufficient documentation
    authorizing the movement of assets from construction in process
    to fixed assets. Certain assets were still being classified as
    construction in process even though the asset was in service.
4
Fixed asset recording and
    reconciliation.
Our
    fixed asset subsidiary ledgers were not updated in a timely
    manner. Supporting ledgers for depreciation schedules were
    tracked using Microsoft Excel. The schedules were not reconciled
    on a timely basis. The procedures surrounding the compilation of
    the data was manual and subject to error.
In light of the noted significant deficiencies, we have
instituted control improvements that we believe will reduce the
likelihood of similar errors. If the remedial policies and
procedures we have implemented are insufficient to address the
three significant deficiencies or if additional significant
deficiencies or other conditions relating to our internal
controls are discovered in the future, we may fail to meet our
future reporting obligations, our financial statements may
contain misstatements and our operating results may be adversely
affected. Any such failure could also adversely affect the
results of the periodic management evaluations and annual
auditor attestation reports regarding the effectiveness of our
internal controls over financial reporting, which will be
required when the SEC's rules under Section 404 of the
Sarbanes-Oxley Act of 2002 become applicable to us beginning
with the filing of our Annual Report on Form 10-K for the
year ended December 31, 2006. Although we believe we have
addressed our significant deficiencies in internal controls with
the remedial measures
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Risk factors
we have implemented, we cannot guarantee that the measures we
have taken to date or any future measures will remediate the
significant deficiencies identified or that any additional
significant deficiencies will not arise in the future due to a
failure to implement and maintain adequate internal controls
over financial reporting. Internal control deficiencies could
cause investors to lose confidence in the reliability of our
financial statements and other reported financial information,
which in turn could harm our business and negatively impact the
trading price of our common stock.
Once we become a public company, we will need to comply with
the reporting obligations of the Exchange Act and
Section 404 of the Sarbanes-Oxley Act. If we fail to comply
with the reporting obligations of the Exchange Act and
Section 404 of the Sarbanes-Oxley Act, or if we fail to
achieve and maintain adequate internal controls over financial
reporting, our business, results of operations and financial
condition, and investors' confidence in us, could be
materially adversely affected.
As a public company, we will be required to comply with the
periodic reporting obligations of the Exchange Act, including
preparing annual reports, quarterly reports and current reports.
Our failure to prepare and disclose this information in a timely
manner could subject us to penalties under federal securities
laws, expose us to lawsuits and restrict our ability to access
financing. In addition, we will be required under applicable law
and regulations to integrate our systems of internal controls
over financial reporting. We plan to evaluate our existing
internal controls with respect to the standards adopted by the
Public Company Accounting Oversight Board. During the course of
our evaluation, we may identify areas requiring improvement and
may be required to design enhanced processes and controls to
address issues identified through this review. This could result
in significant delays and cost to us and require us to divert
substantial resources, including management time, from other
activities. For example, during the audit of our 2004 fiscal
year, our independent registered public accounting firm issued a
letter to our board of directors noting certain significant
deficiencies, as described above.
We expect to dedicate significant management, financial and
other resources in connection with our compliance with
Section 404 of the Sarbanes-Oxley Act in the second half of
2005. We expect these efforts to include a review of our
existing internal control structure. As a result of this review,
we may either hire or outsource additional personnel to expand
and strengthen our finance function. There have been no external
costs associated with this effort through September 30,
2005, and we cannot be certain at this time that we will be able
to comply with all of our reporting obligations and successfully
complete the procedures, certification and attestation
requirements of Section 404 of the Sarbanes-Oxley Act by
the time that we are required to file our Annual Report on
Form 10-K for the year ended December 31, 2006. If we
fail to achieve and maintain the adequacy of our internal
controls and do not address the deficiencies identified by our
auditors, we may not be able to ensure that we can conclude on
an ongoing basis that we have effective internal controls over
financial reporting in accordance with the Sarbanes-Oxley Act.
Moreover, effective internal controls are necessary for us to
produce reliable financial reports and are important to help
prevent fraud. As a result, our failure to satisfy the
requirements of Section 404 of the Sarbanes-Oxley Act on a
timely basis could result in the loss of investor confidence in
the reliability of our financial statements, which in turn could
harm our business and negatively impact the trading price of our
common stock.
Rapid growth is straining our operations and requiring us to
incur costs to upgrade our infrastructure.
During the last five quarters, we have experienced rapid growth
in our operations, number of our employees and our product
offerings. Our growth places a significant strain on our
management, operations and financial systems and also on our
ability to retain employees. Our future operating results will
depend in part on our ability to continue to implement and
improve our operating and
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financial controls and management information systems. If we
fail to manage our growth effectively, our business, financial
condition and results of operations could be materially
adversely affected.
After this offering, companies affiliated with Carl C. Icahn
will continue to be important suppliers and customers.
We manufacture railcars and railcar components and provide
railcar services for companies affiliated with Carl C. Icahn,
our principal beneficial stockholder and the chairman of our
board of directors. To the extent our relationships with
affiliates of Mr. Icahn change due to the sale of his
interest in us or otherwise, our business, results of operations
and financial condition may be materially adversely affected.
Affiliates of Mr. Icahn have accounted for approximately
45%, 34%, 24% and 14% of our revenues in 2002, 2003, 2004 and
the nine months ended September 30, 2005, respectively.
This revenue is primarily attributable to our sale of railcars.
American Railcar Leasing LLC, or ARL, a railcar leasing company
owned by affiliates of Mr. Icahn, currently purchases all
of its railcars from us. However, we have no long-term
agreements with ARL or any other affiliates of Mr. Icahn to
purchase our railcars, and we cannot assure you that ARL or
other affiliates of Mr. Icahn will continue to do so. ARL
could, in the future, purchase railcars from one of our
competitors. In addition, we have a railcar servicing agreement
with ARL, under which we provide fleet management services for
the entire railcar fleet of ARL and its subsidiaries. These
railcars represented approximately 39% of the railcars for which
we provided fleet management services as of September 30,
2005. This agreement is terminable by either party at the end of
any contract year upon six months prior notice and ARL is not
restricted from using the services of our competitors for its
existing fleet of railcars or any other railcars it may
purchase. A significant change in the nature of the business
relationship with ARL and other affiliates of Mr. Icahn
could have a material adverse effect on our business, financial
condition and results of operations.
We also purchase railcar and industrial components from ACF,
another entity affiliated with Mr. Icahn. ACF has been the
supplier of approximately $19.0 million, $31.3 million
and $56.2 million of our inventory purchases in 2003, 2004
and the nine months ended September 30, 2005, respectively.
Currently, ACF is our sole supplier of tank railcar heads and
one of a limited number of suppliers for other important railcar
components that we use in our manufacturing operations. These
railcar components are manufactured and sold to us under a
supply agreement that is terminable by ACF at the end of any
contract year on six months prior notice. We cannot guarantee
that we would be able to obtain alternative supplies of these
railcar components on a timely basis and on comparable terms if
we were no longer able to purchase these railcar components from
ACF. A failure to obtain component supplies from ACF could
materially adversely affect our business, financial condition
and results of operations.
For more information on these arrangements, see "Certain
relationships and related party transactions."
Services being provided to us by ARL, an entity controlled by
Carl C. Icahn, may not be sufficient to meet our needs, which
may require us to incur additional costs.
We use certain outsourced information technology and
administrative services from ARL, an entity controlled by
Mr. Icahn. We also sublease our headquarters office space
in St. Charles, Missouri from ARL. We cannot assure you that
these services will be provided at the same level as they are
currently being provided or that we will be able to maintain our
sublease on the same terms as currently in effect. These
arrangements may be terminated by ARL or by us upon six months
notice and, if they were terminated, we would be required to
find a third-party provider of these services or begin to
provide them for ourselves and relocate our office headquarters.
As these agreements were negotiated
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with ARL, an entity affiliated with us, the prices and rates
charged to us under these agreements may be lower than the
prices and rates that may be charged by unaffiliated third
parties for similar services and an office sublease or for us to
provide these services on our own. We cannot assure you that, if
these agreements are terminated, we will be able to replace
these services and the sublease in a timely manner or on terms
and conditions, including cost, as favorable as those we are
currently receiving. Additional expenses incurred in replacing
these services and relocation of our office facilities or the
failure to replace these services could materially adversely
affect our business, financial condition and results of
operations.
After this offering, we may have reduced access to resources
of, and benefits provided by, entities affiliated with Carl C.
Icahn.
We have in the past obtained access to significant financial and
other resources from entities affiliated with Carl C. Icahn. For
example, until recently, most of our capital needs have been
satisfied by entities affiliated with Mr. Icahn. In
addition, we believe that our relationship with entities
affiliated with Mr. Icahn have, in many cases, provided us
with a competitive advantage in identifying opportunities for
sales of our products and identifying and attracting partners
for critical supply arrangements. For example, we participate in
product and service purchasing arrangements with entities
controlled by Mr. Icahn, which we believe may provide us
with favorable pricing as a result of larger aggregate purchases
by the Icahn-affiliated buying group. If we were unable to
participate in these buying group arrangements our manufacturing
costs would increase and our results of operations and financial
condition may be materially adversely affected. Also, lease
sales agents of ARL and ACF, in connection with their own
leasing sales activities have, from time to time, referred their
customers or contacts to us if the customer or contact prefers
to purchase rather than lease railcars, which has, in some
cases, led to us selling railcars to these customers or
contacts. ACF and ARL have in the past accepted orders to
purchase railcars for us on our behalf. ARL and ACF have
discontinued accepting orders to sell railcars on our behalf. At
this time there is no formal arrangement under which referral
services are provided and we do not compensate ARL, ACF or any
of their leasing sales agents for any railcar sales that we may
make as a result of these referrals. To the extent that ARL or
ACF discontinue referring potential customers to us, or require
us to compensate them for these referrals, our business, results
of operations and financial condition may be adversely affected.
Lack of acceptance of our new railcar offerings by our
customers could materially adversely affect our business.
Our strategy depends in part on our continued development and
sale of new railcar designs to expand or maintain our market
share in the railcar markets in which we currently compete. The
investment required by us in connection with the development of
new railcar designs is considerable and we usually make
decisions to develop and market new railcars and railcars with
modified designs without firm indications of customer
acceptance. New or modified railcar designs may require
customers to alter their existing business methods or displace
existing equipment in which these customers may have a
substantial capital investment. Additionally, many railcar
purchasers prefer to maintain a standardized fleet of railcars
and railcar purchasers with established railcar fleets are
generally resistant to railcar design changes. Therefore, any
new or modified railcar designs that we develop may not gain
widespread acceptance in the marketplace and any such products
may not be able to compete successfully with existing railcar
designs or new railcar designs that may be introduced by our
competitors.
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Our production of new railcar product lines may not be
initially profitable and may result in financial losses.
Our strategy includes developing new railcars and selectively
expanding beyond the covered hopper and tank railcar markets.
When we begin production of a new railcar product line, we
usually experience higher initial costs of production due to
training and labor and operating inefficiencies associated with
new manufacturing processes. Due to pricing pressures in our
industry, the pricing for new railcars in customer contracts
usually does not reflect the initial additional costs, and our
costs of production may exceed the anticipated revenues until we
are able to gain labor efficiencies. For example, in 2004 and
2005, we used a portion of the railcar production capacity at
our Paragould facility, which we primarily use to manufacture
covered hopper railcars, to manufacture centerbeam platform
railcars. This was the first time we manufactured centerbeam
platform railcars and primarily as a result of initial training
and start-up costs, we incurred a loss on this product. To the
extent that the total costs of production significantly exceed
our anticipated costs of production, we may incur a loss on our
sale of new railcar product lines.
We may pursue acquisitions or joint ventures that involve
inherent risks, any of which may cause us not to realize
anticipated benefits.
Our business strategy includes the potential acquisition of
businesses and entering into joint ventures and other business
combinations that we expect will complement and expand our
business. We may not be able to successfully identify suitable
acquisition or joint venture opportunities or complete any
particular acquisition, combination, joint venture or other
transaction on acceptable terms. Our identification of suitable
acquisition candidates and joint venture opportunities involves
risks inherent in assessing the values, strengths, weaknesses,
risks and profitability of these opportunities including their
effects on our business, diversion of our management's
attention and risks associated with unanticipated problems or
unforeseen liabilities. If we are successful in pursuing future
acquisitions or joint ventures, we may be required to expend
significant funds, incur additional debt or issue additional
securities, which may materially adversely affect our results of
operations and be dilutive to our stockholders. If we spend
significant funds or incur additional debt, our ability to
obtain financing for working capital or other purposes could
decline and we may be more vulnerable to economic downturns and
competitive pressures. In addition, we cannot guarantee that we
will be able to finance additional acquisitions or that we will
realize any anticipated benefits from acquisitions or joint
ventures that we complete. Should we successfully acquire
another business, the process of integrating acquired operations
into our existing operations may result in unforeseen operating
difficulties and may require significant financial resources
that would otherwise be available for the ongoing development or
expansion of our existing business. Our failure to identify
suitable acquisition or joint venture opportunities may restrict
our ability to grow our business.
If we are unable to protect our intellectual property and
prevent its improper use by third parties, our ability to
compete in the market may be harmed.
We rely on patent protection and a combination of copyright,
trade secret and trademark laws to protect our proprietary
technology and prevent others from duplicating our products.
However, these means afford only limited protection and may not
prevent our competitors from duplicating our products or gaining
access to our proprietary information and technology. These
means also may not permit us to gain or maintain a competitive
advantage.
Any of our patents may be challenged, invalidated, circumvented
or rendered unenforceable. We cannot guarantee that we will be
successful should one or more of our patents be challenged for
any reason. If our patent claims are rendered invalid or
unenforceable, or narrowed in scope, the patent coverage
afforded our products could be impaired, which could
significantly impede our ability to
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market our products, negatively affect our competitive position
and materially adversely affect our business and results of
operations.
We cannot assure you that any pending or future patent
applications held by us will result in an issued patent, or that
if patents are issued to us, that such patents will provide
meaningful protection against competitors or against competitive
technologies. The issuance of a patent is not conclusive as to
its validity or its enforceability. The United States federal
courts may invalidate our patents or find them unenforceable.
Competitors may also be able to design around our patents. Our
patents and patent applications cover particular aspects of our
products. Other parties may develop and obtain patent protection
for more effective technologies, designs or methods. If these
developments were to occur, it could have an adverse effect on
our sales. If our intellectual property rights are not
adequately protected, we may not be able to commercialize our
technologies, products or services and our competitors could
commercialize our technologies, which could result in a decrease
in our sales and market share and could materially adversely
affect our business, financial condition and results of
operations.
Our products could infringe the intellectual property rights
of others, which may lead to litigation that could itself be
costly, could result in the payment of substantial damages or
royalties, and could prevent us from using technology that is
essential to our products.
We cannot guarantee you that our products, manufacturing
processes or other methods do not infringe the patents or other
intellectual property rights of third parties. Infringement and
other intellectual property claims and proceedings brought
against us, whether successful or not, could result in
substantial costs and harm our reputation. Such claims and
proceedings can also distract and divert management and key
personnel from other tasks important to the success of our
business. In addition, intellectual property litigation or
claims could force us to do one or more of the following:
4
cease selling or using any of our
    products that incorporate the asserted intellectual property,
    which would adversely affect our revenue;
4
pay substantial damages for past
    use of the asserted intellectual property;
4
obtain a license from the holder
    of the asserted intellectual property, which license may not be
    available on reasonable terms, if at all; and
4
redesign or rename, in the case of
    trademark claims, our products to avoid infringing the
    intellectual property rights of third parties, which may not be
    possible and could be costly and time-consuming if it is
    possible to do.
In the event of an adverse determination in an intellectual
property suit or proceeding, or our failure to license essential
technology, our sales could be harmed and our costs could
increase, which could materially adversely affect our business,
financial condition and results of operations.
We are subject to a variety of environmental laws and
regulations and the cost of complying, or our failure to comply,
with such requirements may have a material adverse effect on our
business, financial condition and results of operations.
We are subject to a variety of federal, state and local
environmental laws and regulations relating to the release or
discharge of materials into the environment, the management,
use, processing, handling, storage, transport or disposal of
hazardous materials, or otherwise relating to the protection of
human health and the environment. These laws and regulations
expose us to liability for the environmental condition of our
current or formerly owned or operated facilities, and also may
expose us to liability for the conduct of others or for our
actions that were in compliance with all applicable laws at the
time these actions were taken. Despite our intention to be in
compliance, we cannot guarantee that we
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will at all times be in compliance with all such requirements.
The cost of complying with environmental requirements may also
increase substantially in future years. If we violate or fail to
comply with these regulations, we could be fined or otherwise
sanctioned by regulators. In addition, these requirements are
complex, change frequently and may become more stringent over
time, which could have a material adverse effect on our
business. We are also required to maintain a variety of
environmental permits. Our failure to maintain and comply with
these permits could result in fines or penalties or other
sanctions and have a material adverse effect on our operations
or results. Future events, such as new environmental regulations
or changes in or modified interpretations of existing laws and
regulations or enforcement policies, or further investigation or
evaluation of the potential health hazards of products or
business activities, may give rise to additional compliance and
other costs that could have a material adverse effect on our
business, financial conditions and operations.
We are involved in investigation and remediation activities at
properties that we now own or lease to address historic
contamination and potential contamination by third parties. We
are also involved with state agencies in the cleanup of two
sites under these laws. These investigations are at a
preliminary stage, and it is impossible to estimate, with any
certainty, the timing and extent of remedial actions that may be
required, and the costs that would be involved in such
remediation. Substantially all of the issues identified relate
to the use of the properties prior to their transfer to us in
1994 by ACF and for which ACF has retained liability and agreed
to indemnify us. However, if ACF fails to honor its obligations
to us, we would be responsible for the cost of such remediation.
We have been advised that ACF estimates that, for the remainder
of 2005, ACF will spend approximately $0.1 million on
environmental investigation and, in 2006 and 2007, respectively,
it will spend approximately $0.2 million on environmental
investigation, relating to contamination that existed at
properties prior to their transfer to us in 1994 and for which
ACF has retained liability and agreed to indemnify us. We
expense all costs associated with environmental investigation
and remediation relating to our properties even if we receive
indemnification from ACF. ACF's indemnification is not
treated as an offset to that expense, but rather as an
additional capital contribution. The discovery of historic
contamination or the release of substances into the environment
at our current or formerly owned or operated facilities could
require ACF or us in the future to incur investigative or
remedial costs or other liabilities that could be material or
that could interfere with the operation of our business. Any
environmental liabilities that we may incur that are not covered
by adequate insurance or indemnification from a party other than
ACF will also increase our costs and have a negative impact on
our profitability. See "Business— Environmental
matters" for more information.
Failure of ACF to honor its indemnification obligations to us
may have a material adverse effect on our business and financial
condition.
In connection with our 1994 acquisition from ACF of assets and
certain properties relating to ACF's railcar components
manufacturing and railcar manufacturing and railcar maintenance
businesses, ACF agreed to retain and indemnify us for certain
liabilities relating to its ownership of those assets and
operation of its business prior to the transfer, including
liabilities relating to employee benefit plans, worker's
compensation, environmental contamination and third-party
litigation. The total of such accrued liabilities was $11.1
million as of December 31, 2004. Additional such
liabilities may accrue in the future. If ACF fails to honor its
indemnification obligations, whether as a result of a dispute
related to the applicability of the indemnification, ACF having
insufficient assets to pay liabilities or otherwise, our
business and financial condition could be materially adversely
affected.
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Changes in assumptions or investment performance of pension
and other postretirement benefit plans that we either sponsor or
participate in could materially adversely affect our financial
condition and results of operations.
We either sponsor or participate in several pension plans,
including two plans that were frozen effective April 1,
2004, and in which our employees are therefore no longer
accruing additional benefits. To the extent we continue to
sponsor or participate in these plans, we will be responsible
for making funding contributions to the plans, including the
frozen pension plans, and may be liable for a share of any
unfunded liabilities that may exist at the time we cease to
participate in the plans or the plans are terminated. Our
liability and resulting costs for these plans may increase or
decrease based upon a number of factors, including actuarial
assumptions used, the discount rate used in calculating the
present value of future liabilities, and investment performance.
An adverse change or result in one or more of these factors
could have a material adverse effect on our financial condition
and results of operations.
We also provide other postretirement benefits to certain of our
employees. Our postretirement benefit obligations and related
expense with respect to these postretirement benefits also
increase or decrease based on several factors, including changes
in health care cost trend rates, and could similarly be
materially adversely affected by adverse changes in these
factors.
We could be liable for liabilities associated with pension
plans sponsored by companies controlled by Carl C. Icahn.
Mr. Icahn, our principal beneficial stockholder and the
chairman of our board of directors, and his affiliates currently
hold over 80% of our outstanding voting securities. Applicable
pension and tax laws make each member of a plan sponsor's
controlled group, generally defined as entities in which there
is at least an 80% common ownership interest, jointly and
severally liable for pension plan obligations sponsored by other
members of the controlled group. These pension obligations
include liability for any unfunded liabilities that may exist at
the time the plans are terminated. We and our subsidiaries are
currently members of a controlled group that includes ACF, an
entity in which Mr. Icahn has an indirect ownership
interest of at least 80%. ACF is the sponsor of several pension
plans that are underfunded, as of December 31, 2004, by a
total of approximately $24.1 million on an ongoing
actuarial basis and $172.4 million if those plans were
terminated, as most recently reported by the plans'
actuaries. These liabilities could increase or decrease,
depending on a number of factors, including future changes in
promised benefits, investment returns and the assumptions used
to calculate the liability. As members of the controlled group,
we would be jointly and severally liable for any failure of ACF
to pay the unfunded liabilities upon a termination of the ACF
pension plans.
Upon completion of this offering, we believe that we should no
longer be a member of the ACF controlled group. As a result, we
should no longer be subject to ACF's pension liabilities,
unless it were determined that we were otherwise a member of the
ACF controlled group or that a principal purpose of the offering
or other transactions that resulted in our ceasing to be a
member of the ACF controlled group was to evade pension
liabilities and the termination date of the underfunded plan was
within five years after the offering or other transactions. If
such a determination were made and upheld by a court, we could
remain jointly and severally liable for pension plan obligations
of ACF, which could have a material adverse effect on our
financial condition and results of operations.
In connection with Trans World Airlines, Inc.'s (or TWA)
1992 bankruptcy proceedings under Chapter 11 of the Bankruptcy
Code, the Pension Benefit Guarantee Corporation (or the PBGC)
asserted that ACF as well as the other entities in which Mr.
Icahn had a controlling interest were obligated along with TWA
to satisfy any underfunding of obligations under TWA's
defined benefit plan. Subsequently, and in response to a
petition of another member of the Icahn control group, the PBGC
terminated the TWA pension plan and obligated an affiliate of
ours, Highcrest Investors Corp (or Highcrest), to make
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eight annual termination payments of $30 million, totaling $240
million. We have been advised that as of December 31, 2004,
Highcrest had made termination payments totaling $130 million
and still owed $110 million of this obligation. The obligation
to make termination payments is non-recourse except to the
common stock of ACF Industries Holding Corp., which is also a
member of the Icahn control group. The authority of the PBGC to
enter into the settlement agreement is currently being
contested. If such a contest were to succeed, we could be
jointly and severally liable with the other members of the Icahn
control group for the termination liability associated with the
TWA pension plan, which may be in excess of the remaining
termination payments.
Our manufacturer's warranties expose us to potentially
significant claims.
We warrant the workmanship and materials of many of our products
under express limited warranties. Accordingly, we may be subject
to significant warranty claims in the future such as multiple
claims based on one defect repeated throughout our mass
production process or claims for which the cost of repairing the
defective component is highly disproportionate to the original
cost of the part. These types of warranty claims could result in
costly product recalls, significant repair costs and damage to
our reputation, which could materially adversely affect our
business, financial condition and results of operations.
Unresolved warranty claims could result in users of our products
bringing legal actions against us. For example, we have been
named as the defendant in a lawsuit in which the plaintiff, OCI
Chemical Company, claims we were responsible for the damage
caused by allegedly defective railcars that were manufactured by
us. OCI Chemical Company alleges that failures in certain
components caused the contents transported by these railcars to
spill out of the railcars causing property damage, clean-up
costs, monitoring costs, testing costs and other costs and
damages.
Increasing insurance claims and expenses could lower
profitability and increase business risk.
The nature of our business subjects us to product liability,
property damage and personal injury claims, especially in
connection with our manufacture and repair of products that
transport hazardous or volatile materials, such as pressure tank
railcars. We maintain reserves and liability insurance coverage
at levels based upon commercial norms in the industries in which
we operate and our historical claims experience. Over the last
several years, insurance carriers have raised premiums for many
companies operating in our industry. Increased premiums may
further increase our insurance expense as coverages expire or
cause us to raise our self-insured retention. If the number or
severity of claims within our self-insured retention increases,
we could suffer costs in excess of our reserves. An unusually
large liability claim or a series of claims based on a failure
repeated throughout our mass production process may exceed our
insurance coverage or result in direct damages if we were unable
or elected not to insure against certain hazards because of high
premiums or other reasons. In addition, the availability of, and
our ability to collect on, insurance coverage is often subject
to factors beyond our control. Moreover, any accident or
incident involving us, even if we are fully insured or not held
to be liable, could negatively affect our reputation among
customers and the public, thereby making it more difficult for
us to compete effectively, and could materially adversely affect
the cost and availability of insurance in the future.
Covenants in our revolving credit facility currently restrict
and, following amendments to our revolving credit facility that
we expect to enter into concurrently with this offering,
covenants in our revolving credit facility will continue to
restrict our discretion in operating our business and provide
for certain minimum financial requirements.
We expect to amend and restate our revolving credit facility
concurrently with this offering. Our amended and restated
revolving credit facility will contain various covenants,
similar to those in our
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existing revolving credit facility, that, among other things,
will require us to satisfy certain financial covenants and will
limit our management's discretion by restricting our
ability to:
4
incur additional debt;
4
redeem our capital stock;
4
enter into certain transactions
    with affiliates;
4
pay dividends and make other
    distributions;
4
make investments and other
    restricted payments; and
4
create liens.
Our failure to comply with any covenants under the amended and
restated revolving credit facility could lead to an event of
default under the agreements governing our indebtedness that we
may have outstanding at the time, permitting our lenders to
accelerate our borrowings and to foreclose on any collateral.
Some of our railcar services and component manufacturing
employees belong to labor unions and strikes or work stoppages
by them or unions formed by some or all of our other employees
in the future could adversely affect our operations.
We are a party to collective bargaining agreements with labor
unions at our Longview, Texas, North Kansas City, Missouri and
our Milton, Pennsylvania repair facilities and at our Longview,
Texas steel foundry and components manufacturing facility. As of
September 30, 2005, the covered employees at these sites
collectively represent approximately 16% of our total workforce.
Disputes with regard to the terms of these agreements or our
potential inability to negotiate acceptable contracts with these
unions in the future could result in, among other things,
strikes, work stoppages or other slowdowns by the affected
workers. We cannot guarantee that our relations with our railcar
services workforce will remain positive. We cannot guarantee
that union organizers will not be successful in future attempts
to organize our railcar manufacturing employees or our other
employees at some of our other facilities. If our workers were
to engage in a strike, work stoppage or other slowdown, or other
employees were to become unionized or the terms and conditions
in future labor agreements were renegotiated, we could
experience a significant disruption of our operations and higher
ongoing labor costs. In addition, we could face higher labor
costs in the future as a result of severance or other charges
associated with layoffs, shutdowns or reductions in the size and
scope of our operations.
The market and industry data contained in this prospectus,
including estimates and forecasts relating to the growth of the
railcar market, cannot be verified with certainty and may prove
to be inaccurate.
This prospectus contains market and industry data obtained
primarily from industry publications of the Association of
American Railroads, the Railway Supply Institute, Global Insight
and information from the U.S. Department of Agriculture.
Industry publications typically indicate that they have derived
the published data from sources believed to be reasonable,
including other railcar manufacturers, but do not guarantee the
accuracy or completeness of the data. While we believe these
publications to be reliable, we have not independently verified
the data or any of the assumptions on which the estimates and
forecasts are based, and the data may prove to be inaccurate.
This data includes estimates and forecasts regarding future
growth in these industries, specifically data related to railcar
production, railcar growth and the historical average age of
active railcars in North America. Forecasts and estimates
regarding future growth of the railcar industry included in
these reports are based on assumptions of the growth and
improvement of certain sectors of the U.S. economy. The
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Risk factors
growth and improvement of these sectors of the U.S. economy
during the period of these forecasts and estimates are not
assured. The failure of these sectors of the U.S. economy
to perform as assumed in these forecasts and estimates would
cause the forecasted expansion of the railcar industry not to
occur or to occur to a lesser extent than predicted. The failure
of the rail industry or the railcar supply industry to continue
to grow as forecasted by the market and industry data included
in this prospectus may have a material adverse effect on our
business and the market price of our common stock. See
additional information on industry data on page (i).
Our failure to comply with regulations imposed by federal and
foreign agencies could negatively affect our financial
results.
Our railcar operations are subject to extensive regulation by
governmental regulatory and industry authorities and by federal
and foreign agencies. These organizations establish rules and
regulations for the railcar industry, including construction
specifications and standards for the design and manufacture of
railcars; mechanical, maintenance and related standards; and
railroad safety. New regulatory rulings and regulations from
these federal or foreign agencies may impact our financial
condition and results of operations. If we fail to comply with
the requirements and regulations of these agencies, we may face
sanctions and penalties that could materially adversely affect
our results of operations.
Further consolidation of the railroad industry may materially
adversely affect our business.
Over the past ten years, there has been a consolidation of
railroad carriers operating in North America. Railroad carriers
are large purchasers of railcars and represent a significant
portion of our historical customer base. With fewer railroad
carriers, each railroad carrier will have proportionately
greater buying power and operating efficiency. This may
intensify competition among railcar manufacturers to retain
customer relationships with the consolidated railroad carriers
and cause our prices to decline. Future consolidation of
railroad carriers may materially adversely affect our sales and
reduce our income from operations.
Reductions in the availability of energy supplies or an
increase in energy costs may increase our operating costs.
We use electricity and natural gas at our manufacturing
facilities and to operate our equipment. Over the past three
years, prices for electricity and natural gas have fluctuated
significantly. An outbreak or escalation of hostilities between
the United States and any foreign power and, in particular, a
prolonged armed conflict in the Middle East, or a natural
disaster such as the recent hurricane and related flooding in
the oil producing region of the Gulf Coast of the United States,
could result in a real or perceived shortage of petroleum and/or
natural gas, which could result in an increase in the cost of
electricity or energy generally. Future limitations on the
availability or consumption of petroleum products and/or an
increase in energy costs, particularly electricity for plant
operations, could have a materially adverse effect upon our
business and results of operations.
We may be required to reduce our inventory carrying values,
which could materially adversely affect our financial condition
and results of operations.
We are required to record our inventories at the lower of cost
or market. In assessing the ultimate realization of inventories,
we are required to make judgments as to future demand
requirements and compare them with the current or committed
inventory levels. We have recorded reductions in inventory
carrying values in recent periods due to the discontinuance of
product lines and changes in market conditions due to changes in
demand requirements. We may be required to reduce inventory
carrying values in the future due to a decline in market
conditions in the railcar business, which could have a material
adverse effect on our financial condition and results of
operations.
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Risk factors
We may be required to reduce the value of our long-lived
assets, which could materially adversely affect our financial
condition and results of operations.
We periodically evaluate the carrying values of our long-lived
assets for potential impairment. The carrying value of a
long-lived asset is considered impaired when the carrying value
is not recoverable through undiscounted future cash flows and
the fair value of the asset is less than the carrying value
reduced by the estimated cost to dispose of the asset. Any
resulting impairment loss related to reductions in the value of
our long-lived assets could materially adversely affect our
financial condition and results of operations.
RISKS RELATED TO THE PURCHASE OF OUR COMMON STOCK IN THIS
OFFERING
As a new investor, you will experience immediate and
substantial dilution.
You will pay a price for each share of our common stock that
exceeds the per share value attributed from our tangible assets
less our total liabilities. Therefore, if we distributed our
consolidated tangible assets after deducting our consolidated
liabilities to our stockholders following this offering, our
stockholders would receive less per share of common stock than
you paid in this offering. After giving effect to the sale of
our shares of common stock in this offering at the assumed
initial public offering price of
$               per
share, which represents the midpoint of the range on the cover
of this prospectus, after deducting the underwriting discount
and estimated offering expenses payable by us and after giving
effect to the Transactions, our net tangible book value would
have been approximately
$               million,
or
$               per
share. Accordingly, if you purchase shares of our common stock
in this offering you will suffer immediate dilution of
$               per
share in net tangible book value. Net tangible book value per
share represents the amount of our total consolidated tangible
assets less our total consolidated liabilities, divided by the
total number of shares of common stock outstanding adjusted for
this offering and the expected use of the proceeds of this
offering, based on an assumed initial offering price of
$               per
share of common stock, which represents the midpoint of the
range on the cover of this prospectus. This dilution is due in
large part to the fact that our earlier investors paid
substantially less than the initial public offering price when
they purchased their shares of our capital stock. You may suffer
additional dilution to the extent outstanding options to
purchase shares of our common stock are exercised. For more
information, see "Dilution."
Our common stock may trade at prices below the initial public
offering price and may be susceptible to declines based on
securities analysts' or industry research and reports.
Prior to this offering, you could not buy or sell our common
stock publicly. We cannot predict the extent to which an active
trading market for our common stock will develop or be sustained
after this offering. The initial public offering price will be
determined by negotiations between us and representatives of the
underwriters based on factors that may not be indicative of
future performance and may not bear any relationship to the
price at which our common stock will trade upon completion of
this offering. You may not be able to resell our common stock at
or above the initial public offering price.
In addition, the trading market for our common stock will be
influenced by the research and reports that industry or
securities analysts publish about us or our business. If one or
more of the analysts who cover us or our industry downgrade our
stock or project a downturn in our industry, our stock price
would likely decline. If one or more of these analysts cease
coverage of our company or fail to regularly publish reports on
us, we could lose visibility in the financial markets, which in
turn could cause our stock price or trading volume to decline.
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Risk factors
The price of our common stock is subject to volatility and
you could lose all or part of your investment.
Various factors, such as general economic changes in the
financial markets, announcements or significant developments
with respect to the railcar industry, actual or anticipated
variations in our or our competitors' quarterly or annual
financial results, the introduction of new products or
technologies by us or our competitors, changes in other
conditions or trends in our industry or in the markets of any of
our significant customers, changes in governmental regulation,
our financial results failing to meet expectations of analysts
or investors, or changes in securities analysts' estimates
of our future performance or of that of our competitors or our
industry, could cause the market price of our common stock to
fluctuate substantially. In addition, our customers'
practice of placing large, periodic orders for products on an as
needed basis makes our quarterly sales and operating results
difficult to predict and could cause our operating results in
some quarters to vary from market expectations and also lead to
volatility in our stock price.
Our stock price may decline due to sales of shares by Carl C.
Icahn and other stockholders.
Sales of substantial amounts of our common stock, or the
perception that these sales may occur, may adversely affect the
price of our common stock and impede our ability to raise
capital through the issuance of equity securities in the future.
There will
be                      shares
of our common stock outstanding immediately after this offering.
Of these
shares,           %
will be beneficially owned by our principal beneficial
stockholder and the chairman of our board of directors, Carl C.
Icahn. These include shares of our common stock,
representing           %
of our shares of common stock outstanding immediately after this
offering, held by the Foundation for Greater Opportunity, which
an affiliate of Mr. Icahn has agreed to purchase pursuant
to a stock purchase agreement entered into in December 2005. The
consummation of this acquisition requires the completion of this
offering and the approval of applicable authorities of the State
of New York. If the parties obtain this approval, we have been
advised that the parties expect that the acquisition would be
completed in the first three months of 2006. Pending the closing
of this acquisition, and for so long as the stock purchase
agreement has not been terminated, the Foundation has granted
the affiliate of Mr. Icahn purchasing the shares owned by
the Foundation an irrevocable proxy to vote all of the shares of
our common stock held by the Foundation. All shares sold in this
offering will be freely transferable without restriction or
further registration under the Securities Act of 1933. All of
our other outstanding shares of common stock are subject to
restrictions applicable to our "affiliates," as that
term is defined in Rule 144 of the Securities Act and
subject to 180-day lock-up agreements. See "Shares eligible
for future sale" and "Underwriting."
We and our executive officers, directors and all our existing
stockholders have entered, and certain individuals who purchase
shares of our common stock in this offering through the directed
share program may enter, into 180-day lock-up agreements with
the underwriters. The lock-up agreements prohibit us and our
executive officers, directors, existing stockholders and certain
individuals who have purchased shares of our common stock
through the directed share program from selling or otherwise
disposing of shares of common stock, except in limited
circumstances. The terms of the lock-up agreements can be
waived, at any time, by UBS Securities LLC and Bear, Stearns
& Co. Inc. in their sole discretion, without prior notice or
announcement, to allow us or our officers, directors, existing
stockholders and certain individuals who have purchased shares
of our common stock through the directed share program to sell
shares of our common stock. If the terms of the lock-up
agreements are waived, shares of our common stock will be
available for sale in the public market, which could reduce the
price of our common stock. See "Shares eligible for future
sale— Lock-up agreements" and Underwriting —
Directed share program."
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Risk factors
Following the expiration of the lock-up period, certain
shareholders under our new registration rights agreement will be
entitled, subject to certain exceptions, to exercise their
demand registration rights to register their shares under the
Securities Act. If this right is exercised, holders of any of
our common stock subject to the registration rights agreement
will be entitled to participate in such registration. In
addition, in our letter agreement with James Unger, we have
agreed to use commercially reasonable efforts to file a
registration statement on Form S-8 with the SEC to cover
the registration
of                      shares
of our common stock (assuming an initial public offering price
of
$          ,
which represents the midpoint of the range on the cover page of
this prospectus). We have agreed to include the balance of
Mr. Unger's shares in any registration statement we
file on behalf of Mr. Icahn with regard to the registration
for sale of our shares held by Mr. Icahn, provided the
contractual restrictions and applicable lock-up period of
Mr. Unger's shares have lapsed. By exercising their
registration rights, and selling a large number of shares, these
holders could cause the price of our common stock to decline. An
estimated                      shares
of common stock will be subject to our registration rights
agreement and Mr. Unger's letter agreement upon
completion of this offering. See "Shares eligible for
future sale," "Certain relationships and related party
transactions— Registration rights,"
"Management— Executive compensation— Employment
agreements" and "Description of capital stock—
Registration rights."
We may require additional capital in the future and sales of
our equity securities to provide this capital may dilute your
ownership in us.
We may need to raise additional funds through public or private
equity financings to:
4
expand and grow our business;
4
develop new products and services;
4
respond to competitive
    pressures; or
4
acquire complementary businesses
    or technologies.
Any additional capital raised through the sale of our equity
securities may dilute your percentage ownership interest in us.
Carl C. Icahn will continue to exert significant influence
over us.
We have been advised that in December 2005 an affiliate of Carl
C. Icahn, our principal beneficial stockholder and the chairman
of our board of directors, entered into a stock purchase
agreement with the Foundation for a Greater Opportunity, or the
Foundation, our other significant beneficial stockholder, to
acquire all of our common stock held by the Foundation. The
consummation of this acquisition requires the completion of this
offering and the approval of applicable authorities of the State
of New York. If the parties obtain this approval, we have been
advised that the parties expect that the purchase would be
completed in the first three months of 2006. Pending the closing
of this purchase, and for so long as the stock purchase
agreement has not been terminated, the Foundation has granted
the affiliate of Mr. Icahn purchasing the shares owned by
the Foundation an irrevocable proxy to vote all of the shares of
our common stock held by the Foundation. The stock purchase
agreement may be terminated by either party if the purchase does
not occur by May 2006. As a result of these contemplated
arrangements, we expect that Mr. Icahn will control
approximately           %
of the voting power of our capital stock following the offering.
If the common stock held by the Foundation is not acquired by
affiliates of Mr. Icahn, and the irrevocable proxy expires,
Mr. Icahn will control
approximately           %
of the voting power of our common stock. Whether or not
affiliates of Mr. Icahn acquire our common stock held by
the Foundation, Mr. Icahn will be able to exert
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Risk factors
substantial influence over us, including the election of our
directors, and controlling most matters requiring board or
shareholder approval, including:
4
any determination with respect to
    our business strategy and policies;
4
mergers or other business
    combinations involving us;
4
our acquisition or disposition of
    assets;
4
future issuances of common stock
    or other securities by us;
4
our incurrence of debt or
    obtaining other sources of financing; and
4
the payment of dividends on our
    common stock.
In addition, the existence of a controlling stockholder may have
the effect of making it difficult for, or may discourage or
delay, a third party from seeking to acquire, a majority of our
outstanding common stock, which may adversely affect the market
price of the stock.
Mr. Icahn's interests may conflict with the
interest of our stockholders.
Mr. Icahn owns and controls and has an interest in a wide
array of companies, some of which such as ARL and ACF as
described below, may compete directly or indirectly with us. As
a result, his interests may not always be consistent with our
interests or the interests of our other stockholders. For
example, ARL, a railcar leasing company owned by Mr. Icahn,
competes directly with our other customers that are in the
railcar leasing business and ACF, which supplies us with
critical components, also provides components to our
competitors. ACF has also previously manufactured railcars and
may do so in the future. Mr. Icahn and entities controlled
by him may also pursue acquisitions or business opportunities
that may be complementary to our business. Our certificate of
incorporation will allow Mr. Icahn, entities controlled by
him, and any director, officer, member, partner, stockholder or
employee of Mr. Icahn or entities controlled by him, to
take advantage of such corporate opportunities without first
presenting such opportunities to us, unless such opportunities
are expressly offered to any such party solely in, and as a
direct result of, his or her capacity as our director, officer
or employee. As a result, corporate opportunities that may
benefit us may not be available to us in a timely manner, or at
all. See "Description of Capital Stock— Corporate
Opportunities." To the extent that conflicts of interest
may arise between us and Mr. Icahn and his affiliates,
those conflicts may be resolved in a manner adverse to us or to
you or other holders of our securities.
Upon the closing of this offering we may be a
"controlled company" within the meaning of the Nasdaq
National Market rules and you will not have the same protections
afforded to shareholders of companies that are not
"controlled companies" and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements.
We have been advised that an affiliate of Carl C. Icahn has
entered into an agreement to acquire all of our common stock
held by the Foundation. The consummation of this acquisition of
our common stock would require the completion of this offering
and the approval of applicable authorities of the State of New
York. If the parties obtain this approval, we have been advised
that the parties expect that the purchase would be completed in
the first three months of 2006. Pending the closing of this
purchase, and for so long as the stock purchase agreement has
not been terminated, the Foundation has granted the affiliate of
Mr. Icahn purchasing the shares owned by the Foundation an
irrevocable proxy to vote all of the shares of our common stock
held by the Foundation. As a result of these contemplated
arrangements, Mr. Icahn will control
approximately            %
of the voting power of our capital stock following the offering.
Consequently, after the offering, we will be a "controlled
company" within the meaning of the corporate governance
standards of the Nasdaq National Market. Under these rules, a
"controlled company" may elect not to comply with
certain Nasdaq National Market corporate governance
requirements, including requirements that a majority of the
board of directors consist of independent directors;
compensation of
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Risk factors
officers be determined or recommended to the board of directors
by a majority of its independent directors or by a compensation
committee that is composed entirely of independent directors;
and director nominees be selected or recommended for selection
by a majority of the independent directors or by a nominating
committee composed solely of independent directors. If we are a
"controlled company" following this offering, we
intend to use these exemptions. As a result, we expect that we
would not have a majority of independent directors, we would not
have a compensation committee and we would not have a nominating
committee. Accordingly, if we are a "controlled
company" following this offering, you will not have the
same protections afforded to shareholders of other companies
that are not "controlled companies" and, therefore,
are subject to all of the Nasdaq National Market corporate
governance requirements.
Payments of cash dividends on our common stock may be made
only at the discretion of our board of directors and Delaware
law may restrict, and the agreements governing our revolving
credit facility contain provisions that limit, our ability to
pay dividends.
Our board of directors has never declared or paid any cash
dividends on our common stock. Our board of directors may, in
its discretion, refuse to pay dividends and any payment of
dividends will depend upon our operating results, strategic
plans, capital requirements, financial condition, provisions of
our borrowing arrangements and other factors our board of
directors considers relevant. In addition, the agreements
governing our existing revolving credit facility restrict our
ability to declare and pay dividends on our capital stock and
the amended and restated revolving credit facility that we
expect to enter into concurrently with this offering will also
restrict our ability to declare and pay dividends. Furthermore,
Delaware law imposes restrictions on our ability to pay
dividends. For example, our board of directors may declare
dividends only to the extent of our "surplus" (which
is defined as total assets at fair market value minus total
liabilities, minus statutory capital), or if there is no
surplus, out of our net profits for the then-current and/or
immediately preceding fiscal years. Accordingly, we may not be
able to pay dividends in any given amount in the future, or at
all.
As a result of being a public company, we will incur
increased costs that may place a strain on our resources and our
management's attention may be diverted from other business
concerns.
As a public company, we will incur significant legal, accounting
and other expenses that we did not incur as a private company.
In addition, the Sarbanes-Oxley Act, as well as new rules
subsequently implemented by the Securities and Exchange
Commission, or SEC, and the Nasdaq National Market, have
required changes in corporate governance practices of public
companies. We expect these new rules and regulations to increase
our legal and financial compliance costs and to make some
activities more time-consuming and costly. These requirements
may place a strain on our systems and resources. The Exchange
Act requires that we file annual, quarterly and current reports
with respect to our business and financial condition. The
Sarbanes-Oxley Act requires that we maintain effective
disclosure controls and procedures and internal controls over
financial reporting. We currently do not have an internal audit
group. We will require significant resources and management
oversight to maintain and improve the effectiveness of our
disclosure controls and procedures and internal controls over
financial reporting. This may divert management's attention
from other business concerns, which could have a material
adverse effect on our business, financial condition, results of
operations and cash flows. In addition, we will need to hire or
outsource additional accounting and financial staff with
appropriate public company experience and technical accounting
knowledge.
We also expect these new rules and regulations to make it more
difficult and expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs
to obtain coverage. As a result, it may be more difficult for us
to attract and retain qualified persons to serve on our board of
directors or as executive officers. We
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Risk factors
are currently evaluating and monitoring developments with
respect to these new rules, and we cannot predict or estimate
the amount of costs we may incur with respect to them or the
timing of such costs.
This offering may cause us to undergo an "ownership
change" for purposes of Section 382 of the Internal
Revenue Code, which may limit our ability to use our net
operating loss carryforwards and certain other tax
attributes.
At December 31, 2004, the Company had net operating loss
carryforwards of $26 million, which begin to expire in 2024. The
tax effect of this federal net operating loss carryforwards were
approximately $10.1 million. Under Section 382 of the
Internal Revenue Code, if a corporation undergoes an
"ownership change," generally defined as a greater
than 50% change (by value) in its equity ownership over a
three-year period, the corporation's ability to use its
pre-change of control net operating loss carryforward and other
pre-change tax attributes against its post-change income may be
limited. Although no definite determination can be made at this
time, there is a possibility that this offering will cause us to
undergo an ownership change under the Internal Revenue Code.
These limitations may have the effect of reducing our after-tax
cash flow. Even if this offering does not cause an ownership
change to occur, we may undergo an ownership change after the
offering due to subsequent changes in ownership of our common
stock.
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Table of Contents
Special note regarding forward-looking statements
This prospectus contains some forward-looking statements
including, in particular, statements about our industry, plans,
strategies and prospects. These statements involve known and
unknown risks, uncertainties and other factors that may cause
our actual results, financial position or performance to be
materially different from any future results, financial position
or performance expressed or implied by such forward-looking
statements. We have used the words "may,"
"will," "expect," "anticipate,"
"believe," "forecast," "estimate,"
"plan," "projected," "intend" and
similar expressions in this prospectus to identify
forward-looking statements. We have based these forward-looking
statements on our current views with respect to future events
and financial performance. Our actual results or those of our
industry could differ materially from those projected in the
forward-looking statements.
Our forward-looking statements are subject to risks and
uncertainties, including:
4
the cyclical nature of our
    business;
4
adverse economic and market
    conditions;
4
fluctuating costs of raw
    materials, including steel and railcar components, and delays in
    the delivery of such raw materials and components;
4
our ability to maintain
    relationships with our suppliers of railcar components and raw
    materials;
4
fluctuations in the supply of
    components and raw materials we use in railcar manufacturing;
4
the highly competitive nature of
    our industry;
4
the risk of damage to our primary
    railcar manufacturing facilities or equipment in Paragould or
    Marmaduke, Arkansas;
4
our reliance upon a small number
    of customers that represent a large percentage of our revenues;
4
the variable purchase patterns of
    our railcar customers and the timing of completion, delivery and
    acceptance of customer orders;
4
our dependence on our key
    personnel;
4
the risks of a labor shortage in
    light of our recent growth;
4
risks associated with the
    conversion of our railcar backlog into revenues;
4
the risk of lack of acceptance of
    our new railcar offerings by our customers;
4
the cost of complying with
    environmental laws and regulations;
4
the costs associated with being a
    public company;
4
our relationship with Carl C.
    Icahn, our principal beneficial stockholder and the chairman of
    our board of directors, and his affiliates as a purchaser of our
    products, supplier of components and services to us and as a
    provider of significant capital, financial and managerial
    support;
4
potential failure by ACF to honor
    its indemnification obligations to us;
4
potential risk of increased
    unionization of our workforce;
4
our ability to manage our pension
    costs;
4
potential significant warranty
    claims; and
4
covenants in our existing
    revolving credit facility and other agreements as they presently
    exist and similar covenants that we expect in our amended and
    restated revolving credit facility governing our indebtedness
    that limit our management's discretion in the operation of
    our businesses.
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Special note regarding forward-looking statements
Our actual results could be different from the results described
in or anticipated by our forward-looking statements due to the
inherent uncertainty of estimates, forecasts and projections and
may be better or worse than anticipated. Given these
uncertainties, you should not rely on forward-looking
statements. Forward-looking statements represent our estimates
and assumptions only as of the date that they were made. We
expressly disclaim any duty to provide updates to
forward-looking statements, and the estimates and assumptions
associated with them, after the date of this prospectus, in
order to reflect changes in circumstances or expectations or the
occurrence of unanticipated events except to the extent required
by applicable securities laws. All of the forward-looking
statements are qualified in their entirety by reference to the
factors discussed above under "Risk factors." We
caution you that these risks may not be exhaustive. We operate
in a continually changing business environment and new risks
emerge from time to time. You should carefully read this
prospectus in its entirety as it contains information you should
consider when making your investment decision.
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Use of proceeds
We estimate that we will receive net proceeds from this offering
of approximately $      million
(or $      million, if the
underwriters exercise their over-allotment option in full),
after deducting underwriting discounts and other estimated fees
and expenses related to this offering payable by us, assuming an
initial offering price of $     per
share, which represents the midpoint of the range on the cover
of this prospectus.
The table below shows the application of the net proceeds of
this offering to give effect to the Transactions, as if the
Transactions were completed as of September 30, 2005.
Actual amounts will vary from the amounts shown below.
Amount
(in thousands)
Uses of Funds
Repayment of amounts outstanding under revolving credit
    facility(1)
Repayment of notes due to affiliates(2)
Repayment of all industrial revenue bonds(3)
Redemption of all outstanding shares of preferred stock(4)
Fees and expenses relating to this offering(5)
Total uses
$
(1)
Borrowings under our existing revolving credit facility bear
    interest at various rates based on either the LIBOR or the
    U.S. prime rate. As of September 30, 2005, the
    interest rate on the borrowings under the revolving credit
    facility was 6.5%, based on the U.S. prime rate at that
    time. Our existing revolving credit facility matures in
    March 2006. In conjunction with this offering we intend to
    amend and restate the existing revolving credit facility
    pursuant to a commitment letter we have obtained from our
    lenders. See "Management's discussion and analysis of
    financial condition and results of operations—Liquidity and
    capital resources—Revolving credit facility" for a
    description of the material terms of our existing revolving
    credit facility and the expected terms of our amended and
    restated revolving credit facility.
(2)
Includes indebtedness owed to Arnos Corp. and ACF Industries
    Holding Corp., both of which are beneficially-owned and
    controlled by Carl C. Icahn, our principal beneficial
    stockholder and the chairman of our board of directors. On
    December 17, 2004, we issued a note payable to Arnos Corp.
    in the amount of $7.0 million that bears interest at the
    U.S. prime rate plus 1.75% and is payable on demand. We
    refer to this note as the Arnos note. We used the proceeds of
    the Arnos note to provide additional working capital. As of
    September 30, 2005, the interest rate on the Arnos note was
    8.0%. As of September 30, 2005, we had $7.0 million in
    principal amount and $0.4 million in accrued interest on
    the Arnos note outstanding. As of January 1, 2005, in
    connection with our purchase of Castings LLC, the entity through
    which we own our interest in the Ohio Castings joint venture,
    from ACF Industries Holding Corp., we issued a note payable to
    ACF Industries Holding Corp. in the principal amount of
    $12.0 million. We refer to this note as the Castings note.
    The Castings note bears interest at the U.S. prime rate
    plus 0.5% and is due on demand. As of September 30, 2005,
    the interest rate on the Castings note was 7.25%. As of
    September 30, 2005, we had $12.0 million in principal
    amount and $0.6 million in accrued interest on the Castings
    note outstanding. See "Certain relationships and related
    party transactions—Certain transactions with ACF Industries
    LLC and American Railcar Leasing LLC—Amounts due to
    affiliates."
(3)
The industrial revenue bonds are due at varying dates through
    2011 and as of September 30, 2005 bear interest at rates
    ranging from 7.75% to 8.5%, with a weighted average interest
    rate of 8.3% per year. See "Management's
    discussion and analysis of financial condition and results of
    operations—Liquidity and capital resources—Industrial
    revenue bonds." The industrial revenue bonds are guaranteed
    by affiliates of Mr. Icahn, and these affiliates will be
    released from such guarantees upon repayment of the industrial
    revenue bonds. In addition, James J. Unger, our president and
    chief executive officer, and his wife own
39
Table of Contents
Use of proceeds
$0.4 million of the industrial
    revenue bonds issued by Paragould, Arkansas. See "Certain
    relationships and related party transactions—Guarantees of
    indebtedness by ACF and other related parties—Industrial
    revenue bonds" and "Certain relationships and related
    party transactions—Certain transactions involving James J.
    Unger—Industrial revenue bonds" for more details.
    Amounts include accrued and unpaid interest through the date of
    the repurchase of the industrial revenue bonds. At the closing
    of this offering, we will deliver the aggregate principal amount
    outstanding under the industrial revenue bonds and accrued and
    unpaid interest to the date of redemption to the trustee under
    the indenture governing the industrial revenue bonds and we will
    deliver to the trustee irrevocable instructions to notify the
    holders of the industrial revenue bonds of the redemption of all
    outstanding industrial revenue bonds. Pursuant to the terms of
    the indenture, the industrial revenue bonds will be redeemed
    upon the expiration of a 30-day to 60-day notice period from the
    date the trustee gives notice to the holders of the industrial
    revenue bonds. At the time we deposit the amounts due under the
    industrial revenue bonds with the trustee and give irrevocable
    instructions to the trustee the industrial revenue bonds will be
    deemed to be repaid.
(4)
We intend to redeem all of the
    outstanding shares of our preferred stock and pay all
    accumulated and unpaid dividends on that stock immediately
    following the completion of this offering. As of
    September 30, 2005, there was one share of our mandatorily
    redeemable preferred stock outstanding and $770 of accumulated
    and unpaid dividends on that share. As of September 30,
    2005, there were 82,055 shares of our new preferred stock
    outstanding and $9.3 million of accumulated and unpaid
    dividends on those shares. All of our outstanding preferred
    stock is held by Mr. Icahn and his affiliates. See
    "Certain relationships and related party
    transactions—Redemption of new preferred stock" and
    "Description of capital stock."
(5)
Represents the underwriting
    discounts and commissions and other fees and expenses related to
    the offering and the transactions. This excludes a one-time
    special cash bonus of $500,000 William P. Benac, our chief
    financial officer, is entitled to receive on April 22, 2007
    in the event we complete this offering and provided
    Mr. Benac remains employed with us until that date, subject
    to certain exceptions. See "Management —
    Employment Agreements." We intend to pay
    Mr. Benac's bonus with cash from operations.
40
Table of Contents
Dividend policy and restrictions
Our board of directors has never declared or paid any cash
dividends on our common stock. Following this offering, we
intend to pay cash dividends on our common stock.
As of the date of this prospectus, our board of directors has
not determined the amount of any specific dividend. The
declaration and payment of dividends will be at the discretion
of our board of directors and will depend upon our operating
results, strategic plans, capital requirements, financial
condition, provisions of our borrowing arrangement and other
factors our board of directors considers relevant.
Our existing revolving credit facility provides that the payment
of dividends triggers a right in favor of the administrative
agent and our lenders to accelerate all of our obligations under
the credit facility, a demand right, unless we satisfy certain
financial covenants and provide our lenders under that facility
with advance notice of the dividend. We expect to amend and
restate our existing revolving credit facility pursuant to a
commitment letter we have received from our lenders concurrently
with the completion of this offering. The amended and restated
revolving credit facility would continue to contain provisions
that trigger a demand right if we pay dividends on our common
stock unless the payment would not cause the adjusted fixed
charge coverage ratio to be less than 1.2 to 1.0 or the adjusted
ratio of indebtedness to earnings before interest, taxes,
depreciation and amortization to be greater than 4.0 to 1.0,
each on a quarterly and/or annual basis, as defined in the
amended and restated revolving credit facility. In addition,
Delaware law imposes restrictions on our ability to pay
dividends. For example, our board of directors may declare
dividends only to the extent of our "surplus" (which
is defined as total assets at fair market value minus total
liabilities, minus statutory capital), or if there is no
surplus, out of our net profits for the then-current and/or
immediately preceding fiscal years. Accordingly, we may not be
able to pay dividends in any given amount in the future, or at
all.
41
Table of Contents
Capitalization
The following table sets forth our cash and cash equivalents and
capitalization as of September 30, 2005, on an actual basis
and on an adjusted basis to give effect to the Transactions,
assuming an initial offering price of
$               per
share, which represents the midpoint of the range on the cover
of this prospectus.
You should read this table together with "Prospectus
summary— The transactions," "Use of
proceeds," "Management's discussion and analysis
of financial condition and results of operations" and the
consolidated financial statements and the related notes thereto
included elsewhere in this prospectus.
As of September 30, 2005
Actual
As Adjusted
(in thousands, except share
information)
Cash and cash equivalents
$
26,201
Short-term debt:
Revolving credit facility(1)
31,294
Notes payable to affiliates
19,000
Total short-term debt
50,294
Long-term debt:
Industrial revenue bonds (including current portion)
8,340
Note payable for land
196
Mandatorily redeemable preferred stock, $0.01 par value,
    99,000 shares authorized, 1 share issued and
    outstanding, actual; no shares authorized, issued or
    outstanding, as adjusted
1
Shareholders' equity:
New preferred stock, par value $0.01 per share,
    500,000 shares authorized, 82,055 shares issued and
    outstanding, actual; no shares authorized, issued or
    outstanding, as adjusted
82,055
Preferred stock, $0.01 par value, no shares authorized,
    issued or outstanding, actual;    shares
    authorized and no shares issued or outstanding, as adjusted(2)
—
Common stock, par value $0.01 per share, 12,000 shares
    authorized, 1,195 issued and outstanding,
    actual;    shares
    authorized,    shares issued and outstanding, as
    adjusted(2)
—
Additional paid-in capital
40,125
Accumulated deficit(3)
(13,599
)
Accumulated other comprehensive loss
(1,046
)
Total shareholders' equity
107,535
Total capitalization
$
166,366
(1)
We anticipate that our amended and restated revolving credit
    facility that we intend to enter into concurrently with the
    closing of this offering, pursuant to a commitment letter we
    have received from our lenders, will permit us to borrow
    $75 million and will mature three years after the closing
    of this offering.
(2)
To be authorized immediately prior to the completion of the
    offering.
(3)
As adjusted, reflects the write-off of deferred financing costs
    of $0.6 million relating to the redemption of the
    industrial revenue bonds.
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Table of Contents
Dilution
Purchasers of the common stock in the offering will suffer an
immediate and substantial dilution in net tangible book value
per share. Dilution is the amount by which the initial public
offering price paid by purchasers of shares of our common stock
exceeds the net tangible book value per share of our common
stock immediately following the completion of the offering. Net
tangible book value represents the amount of our total tangible
assets reduced by our total liabilities. Tangible assets
represents our total assets less intangible assets. Net tangible
book value per share represents our net tangible book value
divided by the number of shares of common stock outstanding. As
of September 30, 2005, prior to giving effect to the
Transactions, our net tangible book value was
$107.5 million and our net tangible book value per share,
after giving effect to the merger, was
$          .
After giving effect to the Transactions at the assumed initial
public offering price of
$           per
share, which represents the midpoint of the range on the cover
of this prospectus, our net tangible book value would have been
approximately
$           million,
or
$           per
share. This represents an immediate increase in net tangible
book value of
$           per
share to existing stockholders and an immediate dilution in net
tangible book value of
$           per
share to new investors purchasing shares of our common stock in
this offering. Dilution per share represents the difference
between the price per share paid by new investors for shares
issued in this offering and the net tangible book value per
share immediately after the completion of this offering. The
following table illustrates this dilution:
Assumed initial public offering price per share
$
Net tangible book value per share as of September 30, 2005
$
Increase in net tangible book value per share attributable to
    new investors
Adjusted net tangible book value per share after this offering
Dilution per share to new investors
$
The following table presents, on an adjusted basis, after giving
effect to the Transactions, as of September 30, 2005, the
total number of shares of common stock purchased from us, the
total consideration paid and the average price per share paid by
the existing stockholders and by new investors purchasing shares
of our common stock in this offering, assuming an initial public
offering price of
$           per
share, which represents the midpoint of the range on the cover
of this prospectus.
Shares purchased
Total consideration
Average price
Number
Percent
Amount
Percent
per share
Existing stockholders
New investors
Total
100
%
100
%
The above table excludes
the           shares
that will be available for future issuance under stock options
granted under our 2005 Equity Incentive Plan on or about the
closing date of this offering
and           remaining
shares that will be available for future issuance under our 2005
Equity Incentive Plan. See "Management —
Executive compensation — Equity incentive plan".
To the extent that any of
our            outstanding
options issued under our 2005 Equity Incentive Plan are
exercised, there will be further dilution to new investors.
If the underwriters exercise their over-allotment option in
full, the number of shares of common stock held by our existing
stockholders will further decrease to
approximately                 %
of the total number of shares of our common stock outstanding,
and the number of shares of our common stock held by new
investors will further increase
to            shares,
or
approximately                 %
of the total number of shares of our common stock outstanding.
43
Table of Contents
Selected consolidated financial data
The following table sets forth our summary consolidated
financial data for the periods presented. The consolidated
statements of operations and cash flow data for the years ended
December 31, 2002, 2003 and 2004 and the consolidated
balance sheet data as of December 31, 2003 and 2004 are
derived from our audited consolidated financial statements and
related notes included elsewhere in this prospectus. The
consolidated statements of operations and cash flow data for the
years ended December 31, 2000 and 2001 and the consolidated
balance sheet data as of December 31, 2000, 2001 and 2002
are derived from our historical consolidated financial
statements not included in this prospectus. The consolidated
statements of operations and cash flow data for the nine months
ended September 30, 2004 and 2005 and the consolidated
balance sheet data as of September 30, 2005 have been
derived from unaudited consolidated financial statements and
related notes included elsewhere in this prospectus and reflect
all adjustments (consisting only of normal, recurring
adjustments) which are, in the opinion of management, necessary
for a fair presentation of our financial position, the results
of operations and cash flows for the periods presented.
Operating results for the nine months ended September 30,
2005 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2005 or any other
future period.
You should read this information together with
"Capitalization," "Management's discussion
and analysis of financial condition and results of
operations" and our consolidated financial statements and
the related notes thereto included elsewhere in this prospectus.
44
Table of Contents
Selected consolidated financial data
Nine months ended
Years ended December 31,
September 30,
2000
2001
2002
2003
2004
2004
2005
(unaudited)
(in thousands, except share data)
Consolidated statement of operations data:
Revenues
Manufacturing operations(1)
$
200,691
$
181,438
$
138,441
$
188,119
$
316,432
$
226,759
$
409,208
Railcar services(2)
38,093
32,703
30,387
29,875
38,624
27,572
32,940
Total revenues
238,784
214,141
168,828
217,994
355,056
254,331
442,148
Cost of goods sold
Cost of manufacturing operations(3)
187,375
169,952
134,363
174,629
306,283
216,027
377,181
Cost of railcar services(4)
37,111
33,255
29,533
29,762
34,473
24,585
27,538
Total cost of goods sold
224,486
203,207
163,896
204,391
340,756
240,612
404,719
Gross profit
14,298
10,934
4,932
13,603
14,300
13,719
37,429
Selling, administrative and other
8,693
9,219
9,505
10,340
10,334
8,543
11,417
Operating earnings (loss)
5,605
1,715
(4,573
)
3,263
3,966
5,176
26,012
Interest income(5)
5,777
4,770
3,619
3,161
4,422
2,122
1,265
Interest expense(6)
(13,687
)
(9,525
)
(4,853
)
(3,616
)
(3,667
)
(2,216
)
(3,577
)
Income (loss) from joint venture
—
—
—
(604
)
(609
)
(351
)
443
Earnings (loss) before income tax (benefit) expense
(2,305
)
(3,040
)
(5,807
)
2,204
4,112
4,731
24,143
Income tax (benefit) expense
(713
)
(1,074
)
(1,894
)
1,139
2,191
1,858
9,611
Net earnings (loss)
$
(1,592
)
$
(1,966
)
$
(3,913
)
$
1,065
$
1,921
$
2,873
$
14,532
Less preferred dividends
—
(3,070
)
(7,139
)
(9,690
)
(13,241
)
(9,296
)
(11,171
)
Net earnings (loss) available to common shareholders
$
(1,592
)
$
(5,036
)
$
(11,052
)
$
(8,625
)
$
(11,320
)
$
(6,423
)
$
3,361
Weighted average shares outstanding basic and diluted(7)
1,000
1,000
1,000
1,000
1,087
1,051
1,195
Net earnings (loss) per common share basic and diluted(7)
$
(1,592
)
$
(5,036
)
$
(11,052
)
$
(8,625
)
$
(10,414
)
$
(6,111
)
$
2,813
Consolidated balance sheet data (at period end):
Cash and cash equivalents
$
2,342
$
1,476
$
183
$
65
$
6,943
$
50,605
$
26,201
Net working capital
32,096
35,172
16,065
15,084
46,565
83,355
31,197
Net property, plant and equipment
84,897
81,090
75,746
71,230
76,951
73,706
88,555
Total assets
204,764
191,229
187,590
196,508
356,840
300,764
262,024
Total liabilities
170,158
113,596
98,463
190,704
221,817
95,332
154,489
Total shareholders' equity
$
34,606
$
77,633
$
89,127
$
5,804
$
135,023
$
205,432
$
107,535
Consolidated cash flow data:
Net cash provided by (used in) operating activities
$
5,217
$
13,434
$
10,611
$
(1,639
)
$
(17,082
)
$
1,946
$
27,831
Net cash used in investing activities
(8,782
)
(2,189
)
(535
)
(2,251
)
(11,037
)
(6,750
)
(16,356
)
Net cash provided by (used in) financing activities
$
5,490
$
(12,111
)
$
(11,369
)
$
3,772
$
34,997
$
55,344
$
7,783
45
Table of Contents
Selected consolidated financial data
(1)
Includes revenues from transactions with affiliates of
    $52.8 million, $64.8 million, $63.6 million,
    $62.9 million and $64.4 million in 2000, 2001, 2002,
    2003 and 2004, respectively and $44.6 million and
    $44.5 million for the nine months ended September 30,
    2004 and 2005, respectively.
(2)
Includes revenues from transactions with affiliates of
    $16.1 million, $8.6 million, $12.8 million,
    $11.0 million and $19.4 million in 2000, 2001, 2002,
    2003 and 2004, respectively and $12.7 million and
    $16.0 million for the nine months ended September 30,
    2004 and 2005, respectively.
(3)
Including costs from transactions with affiliates of
    $46.6 million, $57.6 million, $55.7 million,
    $54.4 million and $59.1 million in 2000, 2001, 2002,
    2003 and 2004, respectively and $40.2 million and
    $41.4 million for the nine months ended September 30,
    2004 and 2005, respectively.
(4)
Includes costs from transactions with affiliates of
    $12.8 million, $7.2 million, $12.2 million,
    $10.1 million and $15.5 million in 2000, 2001, 2002,
    2003 and 2004, respectively and $9.6 million and
    $12.7 million for the nine months ended September 30,
    2004 and 2005, respectively.
(5)
Includes interest income from affiliates of $5.6 million,
    $4.3 million, $3.4 million, $3.0 million and
    $3.9 million in 2000, 2001, 2002, 2003 and 2004,
    respectively and $1.2 million and $0.8 million for the
    nine months ended September 30, 2004 and 2005, respectively.
(6)
Includes interest expense to affiliates of $0.2 million in
    2001, and $1.5 million in 2004 and $0.2 million and
    $1.7 million for the nine months ended September 30,
    2004 and 2005, respectively.
(7)
Share and per share data have not been restated to give effect
    to the merger.
46
Table of Contents
Management's discussion and analysis of financial condition
and results of operations
You should read the following discussion in conjunction with
"Selected consolidated financial data" and our
consolidated financial statements and related notes included
elsewhere in this prospectus. This discussion contains
forward-looking statements that are based on management's
current expectations, estimates and projections about our
business and operations. Our actual results may differ
materially from those currently anticipated and expressed in
such forward-looking statements and as a result of the factors
we describe under "Risk factors" and elsewhere in this
prospectus. See "Special note regarding forward-looking
statements" and "Risk factors."
OVERVIEW
We are a leading North American manufacturer of covered hopper
and tank railcars. We also repair and refurbish railcars,
provide fleet management services and design and manufacture
certain railcar and industrial components used in the production
of our railcars as well as railcars and non-railcar industrial
products produced by others. We provide our railcar customers
with integrated solutions through a comprehensive set of high
quality products and related services.
We operate in two segments: manufacturing operations and
railcar services. Manufacturing operations consists of railcar
manufacturing and railcar and industrial component
manufacturing. Railcar services consists of railcar repair and
refurbishment services and fleet management services.
We have experienced significant growth in the last three years
with revenues growing to $355.1 million in 2004, from
$218.0 million in 2003 and $168.8 million in 2002. Our
revenues in the first nine months of 2005 were
$442.1 million, compared to $254.3 million in the
first nine months of 2004. Our revenues in 2004 included
$316.5 million from manufacturing operations and
$38.6 million from the sale of railcar services. Our
revenues in the first nine months of 2005 included
$409.2 million from manufacturing operations and
$32.9 million from the sale of railcar services.
Manufacturing operations
We manufacture all of our railcars in modern facilities located
in Paragould and Marmaduke, Arkansas, which were built in 1995
and 1999, respectively. We strategically located these
facilities in close proximity to our main shipper and railroad
customers, as well as our main suppliers of railcar components.
As of the date of this prospectus, none of our over 1,100
employees at our Paragould and Marmaduke facilities are
represented by a union. However, employees of three of our
repair facilities and one of our component manufacturing
facilities, representing 16% of our total workforce as of
September 30, 2005, are represented by a union. We
manufacture components in four other manufacturing facilities.
Our Paragould facility was designed primarily to produce covered
hopper railcars, but is also capable of producing other railcar
types. For example, in 2004 and the first nine months of 2005,
we produced centerbeam platform railcars at our Paragould
facility. This facility originally consisted of two production
tracks with an initial production capacity of approximately six
railcars per day. Changes in plant design and manufacturing
processes since 1995, along with the addition of painting and
lining capabilities in 1999, and a third production track in
December 2004, increased our production capacity. Based on our
current backlog, we plan to produce an average of approximately
24 covered hopper railcars per working day, dependent upon
product mix and the availability of raw materials and
components. The production lines at our Paragould facility are
designed to provide maximum flexibility for efficient and rapid
changeover in product mix between various types and sizes
47
Table of Contents
Management's discussion and analysis of financial
condition and results of operations
of railcars. Currently, we are expanding our Paragould facility
through the construction of additional painting and lining
capabilities, which are scheduled to be completed by the end of
2005.
We delivered the following quantities and types of railcars in
2002, 2003 and 2004, and the first nine months of 2004 and 2005,
manufactured at our Paragould facility:
Nine Months
Ended
Year Ended December 31,
September 30,
2002
2003
2004
2004
2005
Covered hoppers
1,053
1,343
1,507
1,081
2,759
Centerbeam platform
—
5
1,240
981
785
Total Paragould railcar deliveries
1,053
1,348
2,747
2,062
3,544
Our Marmaduke facility was built in 1999 to manufacture tank
railcars. Based on our current backlog, we plan to produce an
average of approximately 7.5 tank railcars per working day at
this facility, dependent upon product mix of tank railcar types
and the availability of raw materials and components. The
facility is designed to produce both pressure and non-pressure
tank railcars.
We delivered the following quantities and types of tank railcars
in 2002, 2003 and 2004, and the first nine months of 2004 and
2005, manufactured at our Marmaduke facility:
Nine Months
Ended
Year Ended December 31,
September 30,
2002
2003
2004
2004
2005
Pressure tanks
76
277
322
203
223
Non-pressure tanks
637
932
1,315
995
1,213
Total Marmaduke railcar deliveries
713
1,209
1,637
1,198
1,436
We provide components for our railcar manufacturing operations
as well as for other railcar manufacturers and other industries.
Components manufactured by us include aluminum and steel
fabricated and machined parts and carbon steel, aluminum, high
alloy and stainless steel castings, primarily for the trucking
and construction equipment and oil and gas exploration markets.
Our revenues from the sales of components exclude the components
we manufacture for use in our railcar manufacturing business. In
2004, our revenues from sales of components increased by 52% to
$50.7 million from $33.4 million in 2003. In the first
nine months of 2005, our revenues from sales of components
increased to $51.7 million from $36.6 million in the
first nine months of 2004. We attribute the increase in these
revenues primarily to an overall increase in demand for
commercial railcar components as well as the demand for steel
castings and machine components in the non-railcar industrial
sectors that we serve.
Railcar services
Our railcar services include railcar repair and refurbishment
and fleet management and engineering services. Our railcar
repair and refurbishment services are provided through our
network of six full service maintenance and repair facilities
and four mobile repair units. Our railcar service facilities are
located in strategic areas near major customers. We have
established long-term business relationships with a customer
base that includes railcar leasing companies, shippers and
railroads. In 2004, our railcar services revenues increased by
29% to $38.6 million, from $29.9 million in 2003. In
2002, our railcar services revenues were $30.4 million. In
the first nine months of 2005, our railcar services revenues
increased to $32.9 million from $27.6 million in the
first nine months of 2004. We believe
48
Table of Contents
Management's discussion and analysis of financial
condition and results of operations
the growth in these revenues reflects the overall trend in the
United States toward increased railcar utilization, the increase
in our customer base, the increase in our service offerings and
the increase in the number of railcars under fleet management by
us. Our fleet management business complements both our railcar
repair and refurbishment and railcar manufacturing operations.
As of September 30, 2005, we managed approximately 57,000
railcars for various customers, including approximately 22,000
railcars for ARL, an affiliate of Carl C. Icahn, the chairman of
our board of directors and our principal controlling stockholder.
AMERICAN RAILCAR LEASING LLC FORMATION AND EXCHANGE
We formed ARL, a company that buys and leases railcars, as our
wholly owned subsidiary in June 2004. As part of the formation
of ARL and its further capitalization, ACF and certain of its
subsidiaries transferred to us and ARL their railcars and
related leases, as well as equity in certain of ACF's
subsidiaries that supported its leasing business, in exchange
for shares of our new preferred stock and preferred interests of
ARL. We, in turn, contributed the assets we received to ARL in
return for common equity interests in ARL. ACF is a company
beneficially owned and controlled by Mr. Icahn. On
June 30, 2005, we transferred all of our interest in ARL to
the holders of our new preferred stock, all of which are
beneficially owned and controlled by Mr. Icahn, in exchange
for the redemption of 116,116 shares of our new preferred
stock held by them plus accrued dividends. The description of
our operations and the presentation of our financial information
and consolidated financial statements has been prepared on a
standalone basis, excluding ARL's operations for all
periods, and all transactions giving effect to ARL's
formation and subsequent transfer have been eliminated from the
financial statements, with the exception of deferred tax assets
retained by us. Any differences related to the amounts
originally capitalized and the amount paid for ARL or our
subsequent transfer of ARL have been recorded through
adjustments to shareholder's equity, including certain tax
benefits that we received as a result of using ARL's
previously incurred tax losses.
For further information relating to the formation of ARL, the
subsequent ARL transfer and our prior and continuing agreements
with ARL and with other affiliates of Mr. Icahn, see
"Certain relationships and related party transactions—
Certain transactions involving American Railcar Leasing
LLC."
FACTORS AFFECTING OPERATING RESULTS
The following is a discussion of some of the key factors that
have in the past and are likely in the future to affect our
operating results. These factors include, but are not limited
to, the cyclical nature of the North American railcar market,
our reliance on a few customers for most of our revenues, our
historical reliance on revenues from our affiliates for a
significant portion of our revenue, our reliance on large
orders, the variable purchasing patterns of our customers and
fluctuation in supplies and prices of raw materials and
components used in railcar manufacturing. See "Risk
factors" for a more comprehensive list of factors that
could affect our operating results.
Cyclicality of the railcar industry.
Historically, the
North American railcar market has been highly cyclical and we
expect it to continue to be highly cyclical. During the most
recent industry cycle, industry-wide railcar deliveries declined
from a peak of 75,704 in 1998 to a low of 17,714 railcars in
2002. During this downturn, our revenues dropped from
$238.8 million in 2000 to $168.8 million in 2002 and
we incurred losses of $1.6 million, $2.0 million and
$3.9 million in 2000, 2001 and 2002, respectively. We
believe that downturns in the railcar manufacturing industry
will occur in the future and will result in decreased demand for
our products and services. The cycles in our industry result
from many factors that are beyond our control, including
economic conditions in the United States. Although railcar
production has increased since 2002, industry professionals
believe demand for railcars may have reached a peak and may not
persist if favorable economic and other conditions are not
sustained. Even if a sustained economic recovery occurs in the
United States, demand for our
49
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Management's discussion and analysis of financial
condition and results of operations
railcars may not match or exceed expected levels. An economic
downturn may result in increased cancellations of railcar orders
which could have a material adverse effect on our ability to
convert our railcar backlog into revenues. If industry backlog
for railcars declines below certain levels, CIT, one of our
customers which accounts for 71% of our September 30, 2005
backlog, will be permitted to cancel some or, in certain
circumstances, all its orders after 180 days written notice,
which could have a material adverse effect on our business,
financial condition and results of operations. In addition, an
economic downturn in the United States could result in lower
sales volumes, lower prices for railcars and a loss of profits
for us. Furthermore, a substantial number of the end users of
our railcars acquire railcars through leasing arrangements with
our leasing company customers. Economic conditions that result
in higher interest rates would increase the cost of new leasing
arrangements, which could cause our leasing company customers to
purchase fewer railcars.
Customer concentration.
Railcars are typically sold
pursuant to large, periodic orders, and a limited number of
customers typically represent a significant percentage of our
railcar sales in any given year. In 2004, sales to our top three
customers accounted for approximately 23%, 20% and 16%,
respectively, of our total revenues. In the nine months ended
September 30, 2005, sales to our top three customers
accounted for approximately 17%, 16% and 15%, respectively, of
our total revenues. The loss of any significant portion of our
sales to any major customer, the loss of a single major customer
or a material adverse change in the financial condition of any
one of our major customers could have a material adverse effect
on our business and financial results. Most of our individual
railcar customers do not make railcar purchases every year
because they do not need to replace or replenish their railcar
fleets on a yearly basis. Many of our customers place orders for
railcars on an as-needed basis, sometimes only once every few
years. As a result, the order levels for railcars, the mix of
railcar types ordered and the railcars ordered by any particular
customer have varied significantly from quarterly period to
quarterly period in the past and may continue to vary
significantly in the future. As railcar sales comprised 75% of
our total revenue in 2004 and 81% of our total revenue in the
nine months ended September 30, 2005, our results of
operations in any particular quarterly period may be
significantly affected by the number of railcars and the product
mix of railcars we deliver in any given quarterly period.
Additionally, because we record the sale of a railcar at the
time we complete production, the railcar is accepted by the
customer following inspection, the risk for any damage or loss
with respect to the railcar passes to the customer and title to
the railcar transfers to the customer, and not when the order is
taken, the timing of completion, delivery and acceptance of
significant customer orders will have a considerable effect on
fluctuations in our quarterly results.
Revenues from affiliates.
In 2002, 2003, 2004 and the
first nine months of 2005, our revenues from affiliates
accounted for 45%, 34%, 24% and 14% of our total revenues,
respectively. These affiliates consisted of entities
beneficially owned and controlled by Carl C. Icahn, the
chairman of our board of directors and our principal controlling
stockholder. The decline in our percentage of revenues from
affiliates is primarily attributable to the growth in our
revenues from third parties. We anticipate that our percentage
of revenues from affiliates will continue to decline if we are
successful in growing our business. Nevertheless we believe that
revenues from affiliates will continue to constitute an
important portion of our business. A significant reduction in
sales to affiliates could have a material adverse effect on our
business and financial results.
Raw material costs.
The price for steel, the primary raw
material used in the manufacture of our railcars, increased
sharply in 2004 as a result of strong worldwide demand, limited
availability of production inputs for steel, including scrap
metal, industry consolidation and import trade barriers. These
factors have caused a corresponding increase in the cost and
decrease in the availability of castings and other railcar
components constructed with steel. Costs for other railcar
manufacturers have been similarly affected by the availability
and pricing of steel and castings and other components. The
costs for raw steel, based on a Semi Finished Steel Mill Product
Index, have almost doubled during the period from October 2003
through December 2004. The availability of scrap metal has
50
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Management's discussion and analysis of financial
condition and results of operations
been limited by exports of scrap metal to China and, as a
result, steel producers have charged steel and scrap metal
surcharges in excess of agreed-upon prices. Price levels for
steel have increased again in 2005 and we expect worldwide
demand for steel to increase, supplies to continue to be limited
and prices to continue to increase in 2006.
In 2004, we were unable to pass on an estimated
$7.9 million in increased raw material and component costs
to our customers under existing customer contracts. In the first
nine months of 2005, we estimate that we were unable to pass
through to our customers an estimated $1.5 million of such
increased costs. In response to the increasing cost of raw
materials and railcar components, we are working with suppliers
to reduce surcharges that they charge us, and we have entered
into variable pricing contracts with most of our railcar
customers that allow us to pass along changes in costs of
certain raw materials and components to our customers to protect
us against future changes in these costs. By September 30,
2005, we completed most of the deliveries of railcars under
contracts that did not allow us to pass through these increased
costs. Most of our current deliveries and backlog for railcars
include variable pricing to protect us against further
volatility in the price of certain raw materials and railcar
components.
Component supply constraints.
Our business depends on the
adequate supply of numerous specialty components, such as
railcar wheels, brakes, sideframes, axles, bearings, yokes,
bolsters and other heavy castings, and specialized raw
materials, such as normalized steel plate used in the production
of railcars. Over the last few years many suppliers have been
acquired or have ceased operations, which has caused the number
of alternative suppliers of specialty components and raw
materials to decline. The combination of industry consolidation
and high demand has caused recent railcar industry-wide
shortages of many critical components as many reliable suppliers
are frequently at or near production capacity. In certain cases,
such as for railcar wheels, only two significant suppliers
continue to produce the type of component we use in our
railcars. With the recent increased demand for railcars, our
remaining suppliers are facing significant challenges in
providing components and materials on a timely basis to us and
other railcar manufacturers. If our suppliers of railcar
components and raw materials were to stop or reduce the
production of railcar components and raw materials that we use,
go out of business, refuse to continue their business
relationships with us, reduce the amounts they are willing to
sell to us or become subject to work stoppages, our business
would be disrupted. Our inability to obtain components and raw
materials in required quantities or of acceptable quality could
result in significant delays or reductions in railcar shipments.
This would materially and adversely affect our operating
results. Furthermore, our ability to increase our railcar
production to expand our business depends on our ability to
obtain an adequate supply of these railcar components and raw
materials.
Our participation in the Ohio Castings joint venture has
facilitated our ability to meet some of our requirements for
heavy castings such as bolsters and sideframes. In 2005, Ohio
Castings expanded its castings production and added couplers and
yokes to its products. We believe that this expanded production
capability should help to reduce our risk of encountering supply
shortages. In 2004, we purchased $24.8 million of railcar
components produced by Ohio Castings.
Completion of our centerbeam platform railcar contract.
In 2004 we entered into an agreement with The Greenbrier
Companies to manufacture centerbeam platform railcars at our
Paragould manufacturing facility. This was the first time we
manufactured centerbeam platform railcars and, as a result of
start-up and increased production costs, we did not realize a
profit on this contract. We completed our deliveries of these
centerbeam platform railcars in July 2005 and we do not
anticipate significant sales to Greenbrier in the future. Our
revenues from our sales of centerbeam platform railcars were
$50.8 million in the first nine months of 2005 and
$53.0 million in 2004. Upon completion of production of the
centerbeam platform railcars for Greenbrier, we converted the
manufacturing line at our Paragould facility that we used to
manufacture those railcars to manufacture covered hopper
railcars. This manufacturing line, along with our two other
covered hopper railcar
51
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Management's discussion and analysis of financial
condition and results of operations
manufacturing lines at our Paragould manufacturing facility have
been operating at capacity since the conversion and, as a result
of our significant backlog for covered hopper cars, we expect
those lines to continue, subject to cancellations or adjustments
in existing railcar orders in our backlog, to operate at or
close to capacity through at least 2007. We have generally been
able to achieve higher profit margins on our sale of covered
hopper railcars than we were able to achieve on our sales of the
centerbeam platform railcars to Greenbrier. Therefore, we do not
believe that the completion of our centerbeam platform railcar
contracts and the corresponding reduction of sales to Greenbrier
will have a material adverse affect on our business or results
of operations.
OUTLOOK
We believe that demand for railcars has reached a peak and
should continue at or near current levels due to generally
positive economic conditions, the current United States economic
recovery, strong industry-wide backlog for railcars, increased
rail traffic, the projected replacement of aging railcar fleets
and an increasing demand for products that are hauled and stored
in railcars. We believe that we are strategically positioned to
capitalize on the current strong demand for railcars, and that
we have growth opportunities across our broad array of product
and service offerings.
BACKLOG
Our backlog consists of orders for railcars. We define backlog
as the number and sales value of railcars that our customers
have committed in writing to purchase from us that have not been
recognized as revenues. Customer orders, however, may be subject
to cancellation, customer requests for delays in railcar
deliveries, inspection rights and other customary industry terms
and conditions. Although we generally have one to three year
contracts with most of our fleet management customers, neither
orders for our railcar repair and refurbishment services
business nor our fleet management business are included in our
backlog because we generally deliver our services in the same
period in which orders are received. Similarly, orders for our
component manufacturing business are not included in our backlog
because we generally deliver components to our customers in the
same period in which orders for the components are received. Due
to the large size of railcar orders and variations in the number
and mix of railcars ordered in any given period, the size of our
reported backlog at the end of any such period may fluctuate
significantly. See "Risk factors— Risks related to our
business— The variable purchase patterns of our customers
and the timing of completion, delivery and acceptance of
customer orders may cause our revenues and income from
operations to vary substantially each quarter, which could
result in significant fluctuations in our quarterly
results."
Our backlog has increased from 412 railcars at the end of 2002
to 15,567 railcars at September 30, 2005. We believe this
increase is due to the current strength of the economy, the
replacement of aging railcar fleets, increasing demand for
consumer and industrial products, and an increasing demand for
covered hopper and tank railcars.
On July 29, 2005, we entered into a multi-year purchase and
sale agreement with CIT to manufacture and sell to CIT covered
hopper and tank railcars. Under this agreement, CIT has agreed
to buy a minimum of 3,000 railcars from us in each of 2006, 2007
and 2008 and we have agreed to offer to sell to CIT up to 1,000
additional railcars in each of those years. CIT may choose to
satisfy its purchase obligations from among a variety of covered
hopper and tank railcars described in the agreement. CIT may
reduce its future purchase obligations or cancel pending
purchase orders, upon prior written notice to us, under certain
conditions, including a reduction of the then current American
Railway Car Institute's most recently reported quarterly
backlog below specified levels. As of September 30, 2005, the
American Railway Car Institute reported a quarterly backlog in
excess of 60,900 railcars. If during the term of the
agreement, the levels of quarterly backlog reported by American
Railway Car Institute falls below 45,000 railcars but remains
above 35,000 railcars, CIT has
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Management's discussion and analysis of financial
condition and results of operations
the right, on 240 days prior written notice, to cancel
pending purchase orders or reduce subsequent purchase
obligations for the then current agreement year, in either case
such that actual purchases by CIT would not fall below 50% of
that agreement year's original minimum purchase
requirements. If the American Railway Car Institute's
reported quarterly backlog falls below 35,000 railcars, CIT has
the right to cancel or suspend all, or any, pending purchase
orders or remaining purchase obligations under the Agreement
upon 180 days prior written notice. If CIT elects to cancel
any pending purchase order under these provisions within
120 days of the delivery date of the order, we may require
that CIT purchase from us, at our cost, all material which we
had purchased and identified to such cancelled purchase order.
CIT also has the right to reduce its railcar orders from us if
market prices for the railcars subject to our agreement are
reduced significantly below our quoted prices and we fail to
meet such price reductions. Under the agreement, purchase prices
for railcars are subject to steel surcharges and certain other
material cost increases applicable at the time of production.
The following table shows our reported railcar backlog, in
number of railcars and estimated future value attributable to
such backlog, for the periods shown. This reported backlog
includes 9,000 railcars relating to CIT's minimum purchase
obligations under its agreement with us based upon an assumed
product mix consistent with CIT's orders for railcars.
Changes in product mix from that assumed would affect the dollar
amount of our backlog from CIT.
Nine months ended
Year ended December 31,
September 30,
2002
2003
2004
2004
2005
Railcar backlog at start of period
317
412
2,287
2,287
7,547
New railcars delivered
(1,766
)
(2,557
)
(4,384
)
(3,260
)
(4,980
)
New railcar orders
1,861
4,432
9,644
6,626
13,000
Railcar backlog at end of period
412
2,287
7,547
5,653
15,567
Estimated backlog value at end of period (in thousands of
    dollars)(1)
$
26,906
$
129,850
$
494,107
$
365,097
$
1,132,788
(1)
Estimated backlog value reflects the total revenues expected to
    be attributable to the backlog reported at the end of the
    particular period as if such backlog were converted to actual
    revenues. Estimated backlog does not reflect potential price
    increases and decreases under certain customer contracts that
    provide for variable pricing based on changes in the cost of
    certain raw materials and railcar components, or the
    cancellation or delay of railcar orders that may occur.
We anticipate that approximately 12% of our reported backlog as
of September 30, 2005 will be converted to revenues by the
end of 2005. Historically, we have experienced little variation
between the number of railcars ordered and the number of
railcars actually delivered. However, our backlog is not
necessarily indicative of our future results of operations as
orders may be canceled or delivery dates extended. We cannot
assure that our reported backlog will convert to revenues in any
particular period, if at all, that the actual revenues from
these orders will equal our reported backlog estimates or that
our future revenue collection efforts will be successful. See
"Risk factors— Risks related to our business— The
level of our reported railcar backlog may not necessarily
indicate what our future revenues will be and our actual
revenues may fall short of the estimated revenue value
attributed to our railcar backlog."
We rely on supplies from third-party providers and our Ohio
Castings joint venture for steel, heavy castings, wheels and
other components for our railcars. In the event that our
suppliers were to stop or reduce their supply of steel, heavy
castings, wheels or the other railcar components that we depend
upon, our business would be disrupted and the actual sales from
our customer contracts may fall significantly short of our
reported backlog. See "Risk factors— Risks related to
our business— Fluctuations in the supply of components and
raw materials we use in manufacturing railcars could
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Management's discussion and analysis of financial
condition and results of operations
cause production delays or reductions in the number of railcars
we manufacture, which could adversely affect our business and
operating results."
CHARGES AND COSTS ASSOCIATED WITH OUR PUBLIC OFFERING
We expect to incur significant additional selling,
administrative and other fees and expenses in connection with
the preparation for this offering and becoming a public company.
In addition we expect to incur a number of charges in connection
with transactions contemplated in connection with this offering.
ACF employee benefit plans
In anticipation of our no longer being a part of ACF's
controlled group upon completion of this offering, we have been
discussing with ACF an appropriate arrangement for allocating
the assets and liabilities of the pension benefit plans retained
by ACF in the 1994 ACF asset transfer in which some of our
employees continue to participate, and for relieving us of our
further employee benefit reimbursement obligations to ACF under
the 1994 ACF asset transfer agreement. The principal employee
benefit plans affected by this arrangement are two ACF sponsored
pension plans, known as the ACF Employee Retirement Plan and the
ACF Shippers Car Line Pension Plan, and certain ACF sponsored
retiree medical and retiree life insurance plans. See
"Certain relationships and related party
transactions—Certain transactions with ACF Industries
LLC—1994 ACF asset transfer."
Under the proposed arrangement, in exchange for our agreement to
pay ACF approximately $9.2 million and to become the
sponsoring employer under the ACF Shippers Car Line Pension
Plan, including the assumption of all obligations for our and
ACF's employees under that plan, we will cease to be a
participating employer under the ACF Employee Retirement Plan
and will be relieved of all further reimbursement obligations,
including for our employees, under that plan. We estimate that
as of December 1, 2005, the ACF Shippers Car Line Pension
Plan had $4.0 million of unfunded liabilities on an
accounting basis, that will be assumed by us in connection with
this arrangement. The payment of approximately $9.2 million
to be made by us to ACF represents our and ACF's estimate
of the payment required to be made by us to achieve an
appropriate allocation of the assets and liabilities of the
benefit plans accrued after the 1994 ACF asset transfer, with
respect to each of our and ACF's employees in connection
with the two plans. This allocation will be determined in
accordance with actuarial calculations consistent with those
that would be required to be used by us and ACF in allocating
plan assets and liabilities at such time as we cease to be a
member of ACF's controlled group.
As part of this arrangement, we will also assume sponsorship of
a retiree medical and retiree life insurance plan for active and
identified former ARI employees that are covered by the ACF
sponsored medical and retiree life insurance plans, and ACF will
be relieved of all further liability under those plans with
respect to those employees. We estimate that as of
December 1, 2005, the post-retirement liability related to
this obligation was approximately $3.9 million. ACF will
pay ARI approximately $2.9 million to assume the pre 1994
portion of this liability.
In connection with the foregoing, we anticipate that we will
record an expense of approximately $10.4 million during the
period in which these transactions are completed, including
$6.3 million for the net cash payment to ACF,
$4.0 million for the unfunded liability assumed under the
Shippers Car Line pension plan and $3.9 million for the
assumption and sponsorship of an unfunded post retirement
medical and retiree life insurance plan for our employees. We
have previously accrued an estimated liability related to this
settlement of $3.8 million.
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Management's discussion and analysis of financial
condition and results of operations
Equity incentive awards
We also expect to incur a non-cash operating expense in
connection with the issuance at the close of this offering to
James Unger, our chief executive officer, of the number of
shares of our common stock obtained by dividing
$6.0 million by the initial public offering price set forth
on the cover page of this prospectus for no consideration.
Assuming an initial offering price of
$           per
share, which represents the midpoint of the range on the cover
of this prospectus, Mr. Unger will
receive                      shares
of our common stock. The expense we will recognize in connection
with this grant will equal the value of the shares granted to
Mr. Unger as of the date of issuance, which we expect will
be approximately $6.0 million. We expect to recognize
$2.4 million of this expense in the quarter that we
complete this offering, when 40% of these shares will vest. We
expect to recognize the remaining $3.6 million of this
expense in the quarter that is one year after we complete the
offering, when the balance of these shares will vest. See
"Management—Execution compensation—Employment
agreements" and "Certain relationships and related
party transactions—Certain transactions involving James J.
Unger—Grant of common stock."
We also intend to issue options to purchase up to an
estimated                      shares
of common stock under our 2005 equity incentive plan upon the
closing of this offering. These options will be granted at an
exercise price equal to the fair market value of the shares on
the date of the grant, have a term of five years and vest in
equal annual installments over a three-year period. Under the
terms of his employment agreement, James A. Cowan, our chief
operating officer, is entitled to receive an option to purchase
1.25% of our outstanding shares of common stock immediately
following the offering (excluding the shares that may be issued
upon the exercise, if any, of the over-allotment option). As a
result, the actual number of shares subject to the option
granted to Mr. Cowan will be proportionately adjusted if
the number of shares to be issued by us in this offering is
increased or decreased. Based on the anticipated number of
shares we will issue in this offering, Mr. Cowan would have
an option to
purchase           shares
of our common stock. We have also agreed to issue options to
other of our employees to purchase up to approximately
$5.0 million of our shares, representing the balance of the
options we intend to issue upon the closing of this offering,
under our 2005 equity incentive plan. The number of shares
subject to those options will be determined by dividing the
dollar value of the shares allocated to each recipient by the
exercise price as so determined. Actual valuation of the options
and shares to be granted at the closing will be based upon a
number of factors that are not in our control, such as the fair
market value of our common stock on the closing of this offering
and the market performance of our common stock. We estimate that
our stock option expense for all these options will total
approximately $3.5 million over the next three years assuming a
Black-Scholes calculation based on the following assumptions:
stock volatility of 33.78%; 5-year term; interest rate of 4.46%;
and dividend yield of 0%.
The 2005 Equity Incentive Plan will be administered by the Board
of Directors who will be authorized to grant incentive stock
options, nonqualified stock options, stock appreciation rights
(SARs), performance shares, restricted stock, other forms of
equity-based or equity-related awards, or other cash awards.
Other additional expenses
We have agreed to pay William Benac, our chief financial
officer, a one-time special cash bonus of $500,000 on
April 22, 2007 if, prior to that date, we issue common
stock to the public in an offering registered with the SEC or
Mr. Icahn sells his controlling interest in us to a third
party in a private transaction. If at any time on or before
April 22, 2007, we terminate Mr. Benac's
employment without cause, he resigns for good reason, or a
change in control occurs, he will be entitled to receive the
special cash bonus of $500,000 upon the occurrence of such
event. Mr. Benac's right to the special cash bonus of
$500,000 and any severance immediately terminates if his
employment is terminated for cause or he resigns without good
reason. As a result of this arrangement, we expect that we will
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Management's discussion and analysis of financial
condition and results of operations
accrue a $500,000 expense in the quarter that we complete this
offering. See "Management— Executive
compensation— Employment agreements."
Other additional expenses that we expect to incur in connection
with this offering includes the write-off of the remaining
$0.6 million of deferred financing costs that we incurred
in connection with our industrial revenue bond financings, which
we plan to repay in full with a portion of the net proceeds of
this offering. We had previously been amortizing these expenses
over the remaining terms of the industrial revenue bonds.
RESULTS OF OPERATIONS
The following table summarizes our historical operations as a
percentage of revenues for the periods shown. Our historical
results are not necessarily indicative of operating results that
may be expected in the future.
Nine months ended
Years ended December 31,
September 30,
2002
2003
2004
2004
2005
Revenues
Manufacturing Operations
82.0
%
86.3
%
89.1
%
89.2
%
92.6
%
Railcar Services
18.0
%
13.7
%
10.9
%
10.8
%
7.4
%
Total revenues
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
Cost of goods sold
Cost of manufacturing
79.6
%
80.1
%
86.3
%
84.9
%
85.3
%
Cost of railcar services
17.5
%
13.7
%
9.7
%
9.7
%
6.2
%
Total cost of goods sold
97.1
%
93.8
%
96.0
%
94.6
%
91.5
%
Gross profit
2.9
%
6.2
%
4.0
%
5.4
%
8.5
%
Selling, administrative and other expenses
5.6
%
4.7
%
2.9
%
3.4
%
2.6
%
Earnings (loss) from operations
(2.7
)%
1.5
%
1.1
%
2.0
%
5.9
%
Interest income
2.1
%
1.5
%
1.2
%
0.8
%
0.3
%
Interest expense
(2.9
)%
(1.7
)%
(1.0
)%
(0.9
)%
(0.8
)%
Income (loss) from joint venture
0.0
%
(0.3
)%
(0.2
)%
(0.1
)%
0.1
%
Earnings (loss) before income tax expense (benefit)
(3.4
)%
1.0
%
1.1
%
1.8
%
5.5
%
Income tax expense (benefit)
(1.1
)%
0.5
%
0.6
%
0.7
%
2.2
%
Net earnings (loss)
(2.3
)%
0.5
%
0.5
%
1.1
%
3.3
%
Comparison of the nine months ended September 30, 2005
to the nine months ended September 30, 2004
Our net earnings for the nine months ended September 30,
2005 were $14.5 million, compared to $2.9 million for
the nine months ended September 30, 2004, representing an
increase of $11.6 million. In the first nine months of
2005, we sold 4,980 railcars, which is 1,720 more than the 3,260
railcars we sold in the first nine months of 2004. Most of our
revenues for the first nine months of 2005 included sales under
contracts that allowed us to adjust our sale prices to pass on
to our customers the impact of increases in the costs of certain
raw materials, particularly steel, and components. This
improvement was partially offset by increased costs associated
with outsourcing our railcar painting and lining for our new
production line at our Paragould facility and the start-up costs
for that new production line.
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condition and results of operations
Revenues
Our revenues for the nine months ended September 30, 2005
increased 74% to $442.1 million from $254.3 million in
the nine months ended September 30, 2004. This increase was
primarily attributable to an increase in our revenues from sales
of railcars.
Our manufacturing operations revenues increased 81% to
$409.2 million in the first nine months of 2005 from
$226.8 million in the first nine months of 2004. This
increase was primarily attributable to the delivery of an
additional 1,720 railcars in the first nine months of 2005,
increased prices resulting from our ability to pass through a
portion of our increased raw material and component costs and
increases in the base unit price for some of our railcars. Our
revenues from sales of railcars increased $166.8 million to
$356.5 million in the first nine months of 2005 from
$189.7 million in the first nine months of 2004. The
additional deliveries of railcars in the first nine months of
2005 reflected increased sales of covered hopper and tank
railcars and a continuation of deliveries of centerbeam platform
railcars ordered in 2004. These increased sales reflected our
increased capacity at our Paragould facility supported by the
continued strong backlog of orders for our railcars. Our
manufacturing operations revenues attributable to sales of
railcar and industrial components increased by
$15.1 million in the first nine months of 2005 to
$51.7 million from $36.6 million in the first nine
months of 2004. This increase was primarily attributable to
increased unit sales reflecting increased railcar manufacturing
and industrial activity. For the first nine months of 2005, our
manufacturing operations revenues included $44.5 million,
or 10.1% of our total revenues, from transactions with
affiliates, compared to $44.6 million, or 17.5% of our
total revenues, in the first nine months of 2004. These revenues
were attributable to sales of railcars to companies controlled
by Mr. Icahn.
Our railcar services revenues increased by $5.3 million to
$32.9 million in the first nine months of 2005, from
$27.6 million in the first nine months of 2004. This
increase was primarily attributable to strong railcar repair
demand and a $2.0 million increase in leasing and other
fleet management service revenue from subsidiaries of our
affiliate, ARL, a company controlled by Mr. Icahn. The
increase in railcar services revenues from ARL was fully offset
by $2.0 million of pass through costs paid to ACF, also a
company controlled by Mr. Icahn, that was included in our
cost of railcar services. Our management agreements with the ARL
subsidiaries were terminated on June 30, 2005. However, we
continue to provide repair, maintenance and fleet management
services for those fleets. For the first nine months of 2005,
our railcar services revenues included $16.0 million, or
3.6% of our total revenues, from transactions with affiliates,
compared to $12.7 million, or 5.0% of our total revenues,
in the first nine months of 2004.
Gross profit
Our gross profit increased to $37.4 million in the first
nine months of 2005 from $13.7 million in the first nine
months of 2004. Our gross profit margin increased to 8.5% in the
first nine months of 2005 from 5.4% in the first nine months of
2004, primarily reflecting improved margins in our manufacturing
operations.
Our gross profit margin for our manufacturing operations
increased to 7.8% in the first nine months of 2005 from 4.7% in
the first nine months of 2004. This increase was primarily
attributable to the contribution from increased overhead
absorption on plant work volume and our ability to pass through
a greater portion of increased raw material and component costs
through variable pricing contracts. In the first nine months of
2005, we were unable to pass through only approximately
$1.5 million of $32.5 million of increased raw
material and component costs. In the first nine months of 2004,
we were unable to pass through approximately $5.0 million
of $7.0 million of increased raw material and component
costs. Most of our railcar manufacturing contracts providing for
deliveries after the first nine months of 2005 have variable
cost provisions that adjust the delivery price for changes in
certain raw material and component costs. As a result, changes
in steel prices and other raw material and component prices
should have little impact on our gross profits for the remainder
of the year. However, increases in
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raw material and component costs would have an adverse effect on
our gross profit margin as a percentage of revenues, because we
do not earn any additional net profit margin on our price
adjustments.
Our improvement in gross profit margin in 2005 was partially
offset by a contract to manufacture centerbeam platform
railcars, a new product line for us in 2004. This was the first
time we manufactured centerbeam platform railcars and, as a
result of start-up and increased production costs, we did not
realize a profit on this contract. Our centerbeam platform
railcar contracts were completed at our Paragould facility in
July 2005 and we have since converted the manufacturing line at
that facility to manufacturing covered hopper railcars. In the
first six months of 2005, we also incurred additional costs in
connection with the completion of our new third production line
at our Paragould facility, including costs associated with
outsourcing our railcar painting and lining for the increased
railcar production from that new production line and costs of
the initial training and supplies for that production line. We
are currently constructing additional painting and lining
capabilities at our Paragould facility, which we expect to be
completed by the end of 2005. This new painting and lining
capacity should allow us to improve margins as we reduce or
eliminate outsourcing of this function.
Our gross profit margin for our railcar services increased to
16.4% in the first nine months of 2005 from 10.8% in the first
nine months of 2004. This increase was primarily attributable to
our service facilities operating at a higher volume level, which
resulted in efficiencies in labor and overhead.
Selling, administrative and other expenses
Our selling, administrative and other expenses increased by
$2.9 million in the first nine months of 2005, to
$11.4 million from $8.5 million in the first nine
months of 2004. Selling, administrative and other expenses were
2.6% of total revenues in the first nine months of 2005 as
compared to 3.4% of total revenues in the first nine months of
2004. Our increase in the amount of our selling, administrative
and other expenses was primarily attributable to an increase in
information technology costs, audit and outside professional
service fees.
Interest expense and interest income
Our interest expense in the nine months ended September 30,
2005 was $3.6 million as compared to $2.2 million for
the nine months ended September 30, 2004, representing an
increase of $1.4 million. The increase in interest expense
was primarily attributable to higher debt balances. Our interest
income in the nine months ended September 30, 2005 was
$1.3 million as compared to $2.1 million for the nine
months ended September 30, 2004, representing a decrease of
$0.8 million. The decrease in interest income was primarily
attributable to a $57.2 million loan to an affiliate that
was repaid in 2004 that was partially offset by interest income
we earned on a $165.0 million secured loan we made to
Mr. Icahn in October 2004. In January 2005, we transferred
our entire interest in this loan to ARL in exchange for
additional common interests in ARL and in satisfaction of our
$130.0 million loan from ARL. See "Certain
relationships and related party transactions— Certain
transactions with Mr. Icahn and other related
entities."
Income tax expense
Our income tax expense for the nine months ended
September 30, 2005 was $9.6 million, or 39.8% of our
earnings before income taxes, as compared to $1.9 million
for the nine months ended September 30, 2004, or 39.3% of
our earnings before income taxes. Our effective tax rate is
impacted by expenses included in pre-tax earnings for which we
do not receive a deduction for tax purposes. These expenses
result from the liabilities and obligations retained by ACF as
part of its transfer of assets to us in 1994. See "Certain
relationships and related party transactions— Certain
transactions with ACF Industries LLC." Although ACF is
responsible for any costs associated with these liabilities, we
are required to recognize these costs as expenses in order to
reflect the full cost of doing business. The entire amount of
such permanently nondeductible expenses is treated as
contribution of capital resulting in an increase to our
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effective tax rate. The expenses included in pre-tax income were
$0.8 million and $0.8 million for the nine months
ended September 30, 2004 and September 30, 2005,
respectively.
Comparison of the year ended December 31, 2004 to the
year ended December 31, 2003
Our net earnings for the year ended December 31, 2004 was
$1.9 million as compared to $1.1 million for the year
ended December 31, 2003, representing an increase of
$0.8 million. In 2004, we sold 4,384 railcars, 1,827 more
than the 2,557 railcars we sold in 2003. Despite the increase in
railcar deliveries in 2004, our net earnings for 2004 was
negatively affected by dramatic increases in raw materials,
especially steel, and railcar component prices, particularly for
components manufactured from steel. Our railcar manufacturing
contracts precluded us from passing most of these increased
costs on to our customers. Our gross margins in 2004 were also
adversely affected by the losses we incurred from our
introduction and sale of centerbeam platform railcars
manufactured at our Paragould facility. Net earnings for 2003
reflected a $0.8 million write-down of the carrying value
of buildings and improvements, and equipment at our Milton,
Pennsylvania railcar repair facility, and a $0.4 million
charge to adjust inventory to the lower of cost or market. We
incurred no such write-downs in 2004.
Revenues
Our revenues in 2004 increased 63% to $355.1 million from
$218.0 million in 2003. This increase was attributable to
an increase in revenues from both manufacturing operations and
railcar services.
Our manufacturing operations revenues increased 68% to
$316.4 million in 2004 from $188.1 million in 2003.
This increase was primarily attributable to our delivery of an
additional 1,827 railcars in 2004 and, to a lesser extent, an
increase in pricing based upon our ability to pass through some
of our increased costs as well as an increase in the base price
of our railcars. Our revenues from railcar sales increased
$111.1 million to $265.8 million in 2004 from
$154.7 million in 2003. The additional deliveries of
railcars in 2004 reflected increased sales of covered hopper and
tank railcars and sales of centerbeam platform railcars. We
believe that the increases were primarily attributable to the
continuing recovery of the railcar industry which resulted in a
strong backlog of orders for delivery in 2004. In 2004,
deliveries increased by 428 tank railcars and 164 covered hopper
railcars from 2003, and our centerbeam platform railcar
deliveries totaled 1,240. We delivered five centerbeam platform
railcars in 2003. Our increase in manufacturing operations
revenues also reflected a $17.3 million increase in our
sales of railcar and industrial components. This increase was
primarily attributable to an increase in demand for castings and
components in the oil refinery and transportation markets. In
2004, our manufacturing operations revenues included
$64.4 million, or 18.1% of our total revenues, from
transactions with affiliates, compared to $62.9 million, or
28.8% of our total revenues, in 2003. These revenues were
primarily attributable to sales of railcars to companies
controlled by Mr. Icahn.
Our railcar services revenues increased 29% to
$38.6 million in 2004 from $29.9 million in 2003. This
increase was attributable to increased sales, primarily related
to repair and maintenance services provided to affiliates,
including ACF and ARL and their subsidiaries. In 2004, our
railcar services revenues included $19.4 million, or 5.5%
of our total revenues, from transactions with affiliates, as
compared to $11.0 million, or 5.1%, in 2003.
Gross profit
Our gross profit increased to $14.3 million in 2004 from
$13.6 million in 2003. Our gross profit margin decreased to
4.0% in 2004 from 6.2% in 2003. The decrease in our gross profit
margin was primarily attributable to a decrease in our gross
profit margin for our manufacturing operations that was
partially offset by an increase in our gross profit margin for
our railcar services.
Our gross profit margin for our manufacturing operations
decreased to 3.2% in 2004 from 7.2% in 2003. This decrease was
primarily attributable to an increase in the cost of raw
materials and
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components, consisting primarily of steel and steel-based
components, that we were not able to pass through to our
customers due to fixed price contracts. Our cost of sales
increased by approximately $11.3 million in 2004 based upon
these increased raw material and component costs. We estimate
that we were able to pass through $3.4 million of these
costs to our customers. Our margins were also adversely affected
by the losses we incurred resulting from our introduction and
sale of centerbeam platform railcars in 2004. We completed
deliveries under our centerbeam platform railcar contract by in
July 2005 and have converted the manufacturing line we used to
manufacture these railcars to manufacture covered hopper
railcars.
Our gross profit margin for railcar services increased to 10.7%
in 2004 from 0.4% in 2003. This increase was primarily
attributable to increased sales that resulted in increased
efficiencies of labor and overhead. Our gross profit margin for
railcar services in 2003 was adversely affected by a
$0.8 million write-down of the carrying value of buildings
and improvements, and equipment at our Milton, Pennsylvania
railcar maintenance facility, which we idled during 2003, and a
$0.4 million charge to adjust inventory to the lower of
cost or market.
Selling, administrative and other expenses
Our selling, administrative and other expenses did not increase
in 2004 from the $10.3 million expense in 2003. Selling,
administrative and other expenses were 2.9% of sales in 2004 as
compared to 4.7% of sales in 2003. In 2004, we were able to use
the infrastructure we put in place in 2003 to grow our revenues
without increasing our selling, administrative and other
expenses. Our expenses in 2004 reflected an increase in
engineering and purchasing personnel, but these expenses were
offset by reduced spending in insurance, retirement, legal fees
and engineering consulting services.
Interest expense and interest income
Interest expense was $3.7 million and $3.6 million for
years ended December 31, 2004 and 2003, respectively. Our
interest income increased to $4.4 million in 2004 from
$3.2 million in 2003. The increase in interest income and
interest expense was primarily attributable to our
$165.0 million secured loan to Mr. Icahn and our
$130.0 million loan from ARL, respectively, both of which
are no longer outstanding.
Income tax expense
Income tax expense for 2004 was $2.2 million, or 53.3% of
our earnings before income taxes, as compared to
$1.1 million for 2003, or 51.7% of our earnings before
income taxes. Our income tax rates were higher than the
statutory rates in both periods because of the effect of
expenses included in pre-tax income for which we do not receive
a deduction for tax purposes. These expenses primarily relate to
the liabilities and obligations retained by ACF as part of its
transfer of assets to us in 1994.
Comparison of the year ended December 31, 2003 to the
year ended December 31, 2002
Our net earnings for the year ended December 31, 2003 was
$1.1 million as compared to a $3.9 million net loss
for the year ended December 31, 2002, representing an
increase of $5.0 million. In 2003, we sold 2,557 railcars,
791 more than the 1,766 railcars we sold in 2002. The increase
in our earnings was primarily attributable to increased gross
profit from the delivery of these additional railcars, which was
partially offset by an increase in selling, administrative and
other expenses of $0.8 million, as increased engineering
and purchasing support were added to support railcar
manufacturing. Net earnings was reduced in 2003 because we wrote
down the carrying value of buildings and improvements and
equipment for one of our railcar maintenance facilities by
$0.8 million, and an inventory value reduction of
$0.4 million.
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Revenues
Our revenues increased by 29.1% to $218.0 million in 2003
from $168.8 million in 2002. This increase was attributable
to an increase in our manufacturing operations revenues that was
partially offset by a decrease in railcar services revenues.
Our manufacturing operations revenues increased 36% to
$188.1 million in 2003 from $138.4 million in 2002.
This increase was primarily attributable to our delivery of an
additional 791 railcars in 2003 and, to a lesser extent, an
increase in the base unit price of our railcars. In 2003, we
delivered 496 additional tank railcars and 290 additional
covered hopper railcars as compared to 2002. We attribute these
increased sales to the recovery of the railcar manufacturing
industry. Our revenues from railcar and industrial components
manufacturing increased $3.1 million to $33.4 million
in 2003 from $30.3 million in 2002. This increase reflected
increased demand for our railcar component products and an
increase in demand for our steel castings products in the oil,
gas and transportation markets. In 2003, our manufacturing
operations revenues included $62.9 million, or 28.8% of our
total revenues, from transactions with affiliates, compared to
$63.6 million, or 37.6% of our total revenues, in 2002.
These revenues were primarily attributable to sales of railcars
to companies controlled by Mr. Icahn.
Our revenues from railcar services decreased by
$0.5 million to $29.9 million in 2003 from
$30.4 million in 2002. This decrease is primarily
attributable to the idling of our Milton, Pennsylvania repair
facility and a corresponding loss of repair and maintenance
revenues that had historically been performed at that facility.
In 2003, our railcar services revenues included
$11.0 million, or 5.1% of our total revenues, from
transactions with affiliates, as compared to $12.8 million,
or 7.6% of our total revenues, in 2002.
Gross profit
Our gross profit increased by $8.7 million to
$13.6 million in 2003 from $4.9 million in 2002. Our
gross profit margin increased to 6.2% in 2003 from 2.9% in 2002.
The improvement in our gross profit margin was attributable to
an improved gross profit margin for our manufacturing operations
that was partially offset by a decrease in our gross profit
margin for our railcar services. Our gross profit margin for our
manufacturing operations increased to 7.2% in 2003 from 2.9% in
2002. This increase was primarily attributable to the
contribution from increased overhead absorption as plant work
volume increased. Our gross profit margin for our railcar
services was 0.4% in 2003 compared to 2.8% in 2002. This
decrease in gross profit margin was primarily attributable to
decreased revenues and the $1.2 million asset write-down in
2003 in connection with the idling of our Milton, Pennsylvania
repair and maintenance facility. We incurred a $0.2 million
write-down in connection with this facility in 2002.
Selling, administrative and other expenses
Our selling, administrative and other expenses increased 8.8% to
$10.3 million in 2003 from $9.5 million in 2002. The
increase in our selling, administrative and other expenses in
2003 was primarily attributable to increased information
technology, infrastructure, engineering and purchasing services
to support our growing operations. Selling, administrative and
other expenses decreased to 4.7% of revenues in the year ended
December 31, 2003 from 5.6% in the year ended
December 31, 2002.
Interest expense and interest income
Our interest expense was $3.6 million and $4.9 million
for the years ended December 31, 2003 and 2002,
respectively. Our interest income was $3.2 million and
$3.6 million for the years ended December 31, 2003 and
2002, respectively. The interest income was primarily from a
$57.2 million loan to an affiliate that was repaid in 2004.
The interest expense reduction was primarily due to reduction of
the average outstanding borrowings under our existing revolving
credit facility.
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Income tax expense/benefit
Our income tax expense in the year ended December 31, 2003
was $1.1 million, or 51.7% of income before income taxes,
as compared to a $1.9 million tax benefit in the year ended
December 31, 2002, or 32.6% of loss before income taxes.
Our income tax rate was higher than the statutory rates in 2003,
because of the effect of expenses included in pre-tax income for
which we do not receive a deduction for tax purposes. These
expenses primarily relate to the liabilities and obligations
retained by ACF as part of its transfer of assets to us in 1994.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity have historically been the cash
generated from our operations, the sale of securities and funds
generated from borrowings. Until recently, most of our capital
needs have been satisfied by entities affiliated with
Mr. Icahn. Upon completion of this offering, we intend to
use substantially all of the net proceeds of this offering to
repay amounts outstanding under our revolving credit facility,
to pay the notes due to affiliates of Mr. Icahn, to redeem
all our industrial revenue bonds and to redeem all of the
outstanding shares of our preferred stock, all of which is held
by Mr. Icahn and his affiliates. Following this offering we
cannot guarantee that we will receive any further financial
support from Mr. Icahn or his affiliates.
Outstanding debt
Revolving credit facility.
On March 10, 2005,
we entered into a revolving credit facility with North Fork
Business Capital Corporation, as administrative agent for
various lenders. As of September 30, 2005, we had
$31.3 million in principal and interest outstanding under
this facility. We intend to repay all or a substantial portion
of this credit facility with the proceeds of this offering. We
have entered into a commitment letter with our lenders to amend
and restate our revolving credit facility in conjunction with
the closing of this offering to, among other things, extend the
term of the facility to three years from the completion of the
offering, increase our maximum borrowing amount to
$75 million with a $15 million subfacility and modify
certain covenants, including to eliminate the covenant that
requires Mr. Icahn to retain a majority interest in us.
Terms of our existing revolving credit facility are:
4
Maximum
    borrowing.
The
    revolving credit facility provides for a maximum borrowing of
    the lesser of (a) $50.0 million or (b) 85% of the
    eligible receivables plus 65% of the eligible inventory, which
    inventory may include at the most $40.0 million, less any
    reserves established by the agent in accordance with the
    agreement. As of September 30, 2005, the maximum borrowing
    amount eligible under this facility was $48.4 million;
4
Term.
The revolving credit facility expires March 10, 2006;
4
Interest rate and
    fees.
Borrowings bear
    an interest rate of a base rate less 0.25%, where the base rate
    is the highest prime, base or equivalent rate of interest
    published by the administrative agent, or the published
    annualized rate for 90-day dealer commercial paper published in
    the Wall Street Journal, or a LIBOR rate plus 2.5%. We are
    required to pay an unused line fee of 0.375% per year on
    the difference, if positive, of $50.0 million minus the
    average daily aggregate outstanding amount of the loans. As of
    September 30, 2005, the interest rate under the revolving
    credit facility was 6.5%;
4
Collateral.
Our receivables, inventory and a pledged deposit account serve
    as collateral under the existing revolving credit facility. In
    addition, we are required to maintain one or more blocked
    accounts to which all our collections are remitted, upon notice
    from the administrative agent, if the difference between the
    lesser of $50.0 million or the borrowing base and the
    outstanding amount of our loans is less than $5.0 million,
    or if an event of default is ongoing;
4
Financial
    covenants.
Our existing
    revolving credit facility requires us to meet a fixed charge
    coverage ratio of not less that 1.2 to 1.0 for each of the
    following periods: January 1, 2005
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condition and results of operations
through June 30, 2005; January 1, 2005 through
    September 30, 2005; January 1, 2005 through
    December 31, 2005; and each 12 month period ending on
    the last day of each calendar quarter thereafter; and a leverage
    ratio calculated based on the outstanding amount of indebtedness
    to EBITDA of not greater than 4.0 to 1.0 for each of the above
    mentioned periods. As of September 30, 2005, we were in
    compliance with these financial covenants; and
4
Negative
    covenants.
Our existing
    revolving credit facility includes certain limitations on, among
    other things, our ability to incur additional indebtedness,
    modify our current governing documents, sell or dispose of
    collateral, grant credit and declare or pay dividends or make
    distributions on common stock or other equity securities. In
    addition, our existing revolving credit facility provides that
    Mr. Icahn shall maintain a direct or indirect ownership of
    at least 50.1% of our voting equity interest.
Terms of the proposed amended and restated revolving credit
facility are:
4
Maximum
    borrowing.
Our amended
    and restated revolving credit facility would provide for a
    maximum borrowing of the lesser of (a) $75 million or
    (b) 85% of the eligible accounts receivables plus 65% of
    the eligible raw materials and finished goods inventory.
    Eligible receivables would include only accounts receivable to
    our customers in the United States or Canada arising from sales
    in the ordinary course of business with non-affiliates. In
    addition, the amended and restated revolving credit facility
    would include a $15.0 million capital expenditure
    sub-facility that would be based on 80% of the costs related to
    capital projects we may undertake;
4
Term.
The amended and restated revolving credit facility would expire
    three years after the closing of this offering;
4
Interest rate and
    fees.
Borrowings would
    bear an interest rate of a base rate less 0.5%, where the base
    rate is the higher of the highest prime, base or equivalent rate
    of interest published by the administrative agent, or the
    published annualized rate for 90-day dealer commercial paper
    published in the Wall Street Journal. In addition we would be
    granted a 1 month, 2 month or 3 month LIBOR rate
    plus 1.5%. We would be required to pay a closing fee of
    $0.2 million and an unused line fee of 0.375% per year on
    the unused portion of our amended and restated revolving credit
    facility;
4
Collateral.
Our receivables, inventory and a pledged deposit account
    together with assets we purchase with the proceeds from the
    capital expenditure sub-facility would serve as collateral under
    the amended and restated revolving credit facility and the
    capital expenditure sub-facility. In addition, we would be
    required to maintain one or more blocked accounts to which all
    our collections would be remitted. Under the amended and
    restated revolving credit facility, the types of collections
    that would be subject to the blocked account consist of all
    collections including all cash, funds, checks, notes,
    instruments, any other form of remittance tendered by account
    debtors in respect of payment of our receivables and any other
    payments received by us with respect to any collateral. If the
    funds which we can draw under the amended and restated revolving
    credit facility would fall under $5 million, the proceeds
    in the blocked accounts would be transferred to the
    administrative agent and the administrative agent would be
    required to apply all such proceeds to our loan account with the
    administrative agent, conditional upon final collection,
    effecting a payment of any obligations that are outstanding at
    such time. The interest that the administrative agent would hold
    in such proceeds (until such time as they are applied to the
    obligations) would be in the nature of a collateral security
    interest. Upon termination of the administrative agent's
    security interests in such proceeds in accordance with
    applicable laws generally governing the termination of security
    interests and bank deposits, the administrative agent would
    return to us any proceeds it holds after satisfaction of
    existing or contingent obligations owed to the administrative
    agent and the other lenders. We may borrow, repay, and reborrow
    revolving credit loans in accordance with the proposed terms of
    the revolving credit facility;
4
Financial
    covenants.
Our amended
    and restated revolving credit facility would require us to meet
    an adjusted fixed charge coverage ratio of not less than 1.2 to
    1.0 on a quarterly and/or annual
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basis and a leverage ratio calculated based on the outstanding
    amount of indebtedness to EBITDA of not greater than 4.0 to 1.0
    on a quarterly and/or annual basis; and
4
Negative
    covenants.
Our amended
    and restated revolving credit facility would include certain
    limitations on, among other things, our ability to incur
    additional indebtedness, modify our current governing documents,
    sell or dispose of collateral, grant credit and declare or pay
    dividends or make distributions on common stock or other equity
    securities. The limitation on certain of the actions addressed
    by the amended and restated revolving credit facility would be
    in the nature of a right in favor of the administrative agent
    and our lenders to accelerate all of our obligations under the
    credit facility, a demand right, that is triggered by certain
    actions, rather than in the nature of a negative covenant by
    which we contractually agree not to take such actions. Included
    among the actions that would trigger a demand right would be
    certain actions to modify governing documents, sell or dispose
    of collateral, grant credit, incur indebtedness, and make
    dividends and distributions. An incurrence of indebtedness would
    trigger a demand right if it would cause the adjusted ratio of
    our indebtedness to EBITDA, as defined in the amended and
    restated revolving credit facility, to be greater than 4.0 to
    1.0. The direct or indirect payment of dividends or
    distributions, or purchase, redemption, or retirement of capital
    stock, equity interests, options or rights to purchase capital
    stock or equity interests, or payments to sinking or analogous
    funds, will trigger a demand right if it would cause the
    adjusted fixed charge coverage ratio to be less than 1.2 to 1.0
    or the ratio of adjusted indebtedness to EBITDA to be greater
    than 4.0 to 1.0, each on a quarterly and/or annual basis, as
    defined in the amended and restated revolving credit facility.
    Our amended and restated revolving credit facility would
    eliminate the requirement that Mr. Icahn maintain a direct
    or indirect ownership of at least 50.1% of our voting equity
    interest.
Industrial revenue bonds.
As of September 30,
2005, we had $8.3 million in principal amount and
$0.3 million in accrued interest on the industrial revenue
bonds outstanding. As of that date, these bonds had effective
interest rates ranging from 7.75% to 8.5%, with principal
amounts due through 2011. We intend to use a portion of the net
proceeds of this offering to repay all amounts due under these
bonds. The industrial revenue bonds are guaranteed by affiliates
of Mr. Icahn, and these affiliates will be released from
such guarantees upon repayment of the industrial revenue bonds.
In addition, James J. Unger, our president and chief executive
officer, and his wife own $0.4 million of the industrial
revenue bonds issued by Paragould, Arkansas. Mr. Unger and
his wife will receive approximately $0.4 million upon our
repayment of the amounts due under the industrial revenue bonds.
Outstanding notes to affiliates.
In December 2004,
we borrowed $7.0 million from Arnos Corp., a company
controlled by Mr. Icahn, to provide us with additional
working capital. The loan bears interest at the prime rate plus
1.75% (8.0% at September 30, 2005) and is payable on
demand. Additionally, in connection with our purchase of
Castings LLC, effective January 1, 2005, from an affiliate
of Mr. Icahn, we issued that affiliate a note payable in
the principal amount of $12.0 million. The note bears
interest at the prime rate plus 0.5% (6.75% at
September 30, 2005) and is payable on demand. We intend to
use a portion of the net proceeds of this offering to repay all
amounts due under these obligations. As of September 30,
2005, $20.0 million was outstanding under these obligations.
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Management's discussion and analysis of financial
condition and results of operations
Cash flows
The following table summarizes our net cash provided by or used
in operating activities, investing activities and financing
activities and our capital expenditures for the periods
presented:
Nine Months
Year Ended
Ended
Cash flows
December 31, 2004
September 30, 2005
(in thousands)
Net cash provided by (used in):
Operating activities
$
(17,082
)
$
27,831
Investing activities
(11,037
)
(16,356
)
Financing activities
34,997
7,783
Capital expenditures
(11,441
)
(16,356
)
Operating activities.
Our net cash provided by or used in
operating activities reflects net earnings or loss, adjusted for
non-cash charges and changes in net working capital, including
non-current assets and liabilities. Cash flows from operating
activities are affected by several factors, including
fluctuations in business volume, contract terms for billings and
collections, the timing of collections on our accounts
receivables, processing of payroll and associated taxes and
payments to our suppliers. We do not typically experience
business credit losses, although a payment may be delayed
pending completion of closing documentation, and a typical order
of railcars may not yield cash proceeds until after the end of a
reporting period.
Our net cash provided by operating activities was
$27.8 million for the nine months ended September 30,
2005, which included net earnings of $14.5 million,
increased by depreciation and amortization of $5.0 million,
a provision for deferred income taxes of $8.7 million, and
$0.8 million of expenses that we incurred relating to
pre-capitalization liabilities retained and payable by ACF.
Payment of these expenses by ACF is reflected as additional paid
in capital. These increases were partially offset by
$0.4 million of earnings allocated to us as a result of our
joint venture interest in Ohio Castings. Cash provided by
operating activities attributable to changes in our current
assets and liabilities included an increase in accounts payable
of $33.4 million and an increase in accrued expenses and
taxes of $5.8 million. These sources of cash were partially
offset by an increase in inventories of $7.9 million, an
increase in accounts receivable of $23.8 million and an
increase in prepaid expenses of $8.3 million. The increase
in inventories was primarily attributable to the build-up of
inventory for our new third production line at our Paragould
facility. The increase in accounts payable and accrued expenses
was primarily due to this inventory buildup and a change in the
processing and accounting of accounts payable that had
previously been processed through affiliates. The increase in
accounts receivable was primarily attributable to the increased
volume of sales attributed to railcars manufactured at our
Paragould facility. The increase in prepaid expenses was
primarily attributable to payments for workers'
compensation and general insurance coverages that benefit future
periods.
For the year ended December 31, 2004, cash used by
operating activities was $17.1 million. Our sources of cash
included net earnings of $1.9 million, increased by
depreciation and amortization of $6.2 million, expenses
relating to pre-capitalization liabilities retained by ACF of
$1.4 million, a provision for deferred income taxes of
$1.7 million and $0.6 million of non-cash loss
allocated to us as a result of our joint venture interest in
Ohio Castings. Cash used in operating activities attributable to
changes in our current assets and liabilities included an
increase in inventories of $28.7 million and an increase in
accounts receivable of $12.0 million. These uses of cash were
partially offset by an increase in accounts payable of
$12.0 million. The increase in our inventories and accounts
receivable were primarily attributable to our increased sales
and the increased cost or raw materials and
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Management's discussion and analysis of financial
condition and results of operations
components. The increase in accounts payable was primarily
attributable to our build-up of inventory to support our
increased sales.
Investing activities.
Net cash used in investing
activities for the nine months ended September 30, 2005 was
$16.4 million, including $8.3 million for construction
of additional painting and lining capabilities at our Paragould
facility and $2.8 million for the purchase of manufacturing
equipment and leasehold improvements that we had previously been
leasing from ACF at our St. Charles, Missouri manufacturing
facility. See "Certain relationships and related party
transactions—Certain transactions with ACF Industries
LLC—Corbitt Equipment Lease and Purchase." Net cash
used in investing activities for the year ended
December 31, 2004 was $11.0 million, including
$9.4 million to construct an additional production line at
our Paragould facility.
Financing activities.
Cash provided by financing
activities was $7.8 million for the nine months ended
September 30, 2005, and included $31.3 million
borrowed under our existing revolving credit facility that we
obtained in March 2005, offset by payments to affiliates of
$22.2 million and debt repayments of $1.3 million. The
decrease in amounts due affiliates was primarily attributable to
the change in our financing arrangement with ACF, which was
terminated on April 1, 2005. The accumulated amounts due to
ACF under this intercompany arrangement were repaid by us from
the proceeds of our revolving credit facility that we obtained
in March 2005.
Net cash provided by financing activities was $35.0 million
for the year ended December 31, 2004. During the year ended
December 31, 2004, we received $110.0 million in
additional capital contributions, of which $25.0 million
was used for our contribution in the initial capitalization of
ARL, $137.0 million from the proceeds of notes due to
affiliates. The $137.0 million of proceeds from notes due
to affiliates primarily related to our $130.0 million loan
from ARL. The increase in amounts due to affiliates consisted of
cash advances and affiliate transactions. These sources of cash
were partially offset by a $165.0 million secured loan we
made to Mr. Icahn in October 2004 and a $40.2 million
repayment of our term loan in July 2004.
Capital expenditures.
We continuously evaluate facility
requirements based on our strategic plans, production
requirements and market demand and may elect to make capital
investments at higher or lower levels in the future. These
investments are all based on an analysis of the potential for
these additions to improve profitability and future rates of
return. In response to the current demand for our railcars, we
are pursuing opportunities to increase our production capacity
and reduce our costs through continued vertical integration of
our production capacity. From time to time, we may expand our
business by acquiring other businesses or pursuing other
strategic growth opportunities. We presently have not entered
into any agreements related to any material acquisitions.
In December 2004, we began construction of additional painting
and lining capabilities at our Paragould, Arkansas covered
hopper manufacturing facility. This will complement our
additional production line that was completed in November 2004.
We expect our capital expenditures in connection with the new
painting and lining capabilities, including the
$8.3 million paid in the first nine months of 2005, to be
approximately $13.2 million, with completion by November
2005.
We recently initiated a project that we estimate will cost
approximately $7.0 million to construct a new fabrication
shop at our Paragould facility to produce covered hopper railcar
components that are currently supplied by an outside vendor. We
have also recently initiated a project that we estimate will
cost approximately $2.0 million for additional steel
storage at our Marmaduke facility, which should result in
production efficiencies and contribute to a higher tank railcar
output at our Marmaduke facility.
As of January 1, 2005 we acquired from ACF Industries
Holding Corp., a company beneficially-owned and controlled by
Mr. Icahn, its interest in Castings LLC for total
consideration of $12.0 million, represented by a promissory
note bearing an interest rate equal to the prime rate plus 0.5%,
payable
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Management's discussion and analysis of financial
condition and results of operations
on demand. Castings LLC owns a one-third interest in Ohio
Castings, which operates two foundries that produce heavy
castings. In connection with this transfer, we agreed to assume
certain, and indemnify all liabilities related to and arising
from ACF Industries Holding Corp.'s investment in Castings
LLC, including the guarantee of Castings LLC's obligations
to Ohio Castings, the guarantee of bonds in the amount of
$10.0 million issued by the State of Ohio to one of Ohio
Castings' subsidiaries, of which $8.0 million was
outstanding as of September 30, 2005, and the guarantee of
a $2.0 million state loan that provides for purchases of
capital equipment, of which $0.8 million was outstanding as
of September 30, 2005. The two other partners of Ohio
Castings have made similar guarantees of these obligations. See
"Certain relationships and related party
transactions—Certain transactions involving Ohio
Castings."
We have an equipment lease expiring on January 30, 2006, the
terms of which include an option to either renew the lease or
purchase the equipment at a specified amount. Our intent is to
purchase the equipment upon expiration of the lease. The buyout
amount is estimated at $6.7 million. We expect to fund
these capital expenditures through cash provided by operating
activities and our revolving credit facility.
We anticipate that any future expansion of the business will be
financed through cash flow from operations, our amended and
restated revolving credit facility or term debt associated
directly with that expansion. Moreover, we believe that
following the completion of this offering, these sources of
funds will provide sufficient liquidity to meet our expected
operating requirements over the next twelve months.
Our long-term liquidity is contingent upon future operating
performance and our ability to continue to meet financial
covenants under our proposed amended and restated revolving
credit facility and any other indebtedness. We may also require
additional capital in the future to fund capital expenditures,
acquisitions or incur from time to time other investments and
these capital requirements could be substantial. Our operating
performance may also be affected by matters discussed under
"Risk factors," and trends and uncertainties discussed
in this discussion and analysis, including those factors
discussed under "Factors affecting operating results,"
as well as elsewhere in this prospectus. These risks, trends and
uncertainties may also adversely affect our long-term liquidity.
Dividends.
Our board of directors has never
declared or paid any cash dividends on our common stock.
Following this offering, we intend to pay cash dividends on our
common stock. However, as of the date of this prospectus our
board of directors has not determined the amount of any specific
dividend. Our existing revolving credit facility provides that
the payment of dividends triggers a right in favor of the
administrative agent and our leaders to accelerate all of our
obligations under the credit facility, a demand right, unless we
satisfy certain financial covenants and provide our lenders
under that facility with advance notice of the dividend. Our
revolving credit facility requires us to meet a fixed charge
coverage ratio, after giving effect to the payment of the
dividend, of not less that 1.2 to 1.0 for each 12 month
period ending on the last day of each calendar quarter. We
expect to amend and restate our revolving credit facility
concurrently with the completion of this offering pursuant to a
commitment letter we have obtained from our lenders. The amended
and restated revolving credit facility would continue to contain
provisions that trigger a demand right if we pay dividends on
our common stock unless the payment would not cause the adjusted
fixed charge coverage ratio to be less than 1.2 to 1.0 or the
adjusted ratio of our indebtedness to EBITDA to be greater than
4.0 to 1.0, each on a quarterly and/or annual basis, as defined
in the amended and restated revolving credit facility. In
addition, under Delaware law, our board of directors may declare
dividends only to the extent of our "surplus" (which
is defined as total assets at fair market value minus total
liabilities, minus statutory capital), or if there is no
surplus, out of our net profits for the then-current and/or
immediately preceding fiscal years. Moreover, our declaration
and payment of dividends will be at the discretion of our board
of directors and will depend upon our operating results,
strategic plans, capital
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Management's discussion and analysis of financial
condition and results of operations
requirements, financial condition, covenants under our borrowing
arrangement and other factors our board of directors considers
relevant. Accordingly, we may not pay dividends in any given
amount in the future, or at all.
Contractual obligations
The following table summarizes our contractual obligations as of
December 31, 2004, and the effect that these obligations
and commitments would be expected to have on our liquidity and
cash flow in future periods, assuming that our existing debt
remains outstanding during such periods:
Payments Due By Period
2-3
4-5
After
Contractual Obligations
Total
1 Year
Years
Years
5 Years
(in thousands)
Long-term debt obligations
$
9,851
$
1,334
$
3,014
$
3,353
$
2,150
Notes payable to affiliates
149,000
149,000
—
—
—
Operating lease obligations
9,077
5,355
3,352
303
66
Purchase obligations
67,629
—
43,159
24,470
—
Pension funding(1)
1,623
—
—
494
1,129
Total
$
237,180
$
155,689
$
49,525
$
28,620
$
3,345
(1)
Includes obligations under the pension plan relating to our
    employees at our Bude, Mississippi repair plant and our
    supplemental executive retirement plan.
The operating lease commitment above includes the future minimum
rental payments required under non-cancelable operating leases
for property and equipment leased by us.
In anticipation of the offering, after which we anticipate that
we will no longer be a part of ACF's control group, we have
been discussing with ACF an appropriate arrangement for
allocating the assets and liabilities of the pension benefit
plans and retiree group health and life insurance plans retained
by ACF in the 1994 ACF asset transfer, in which some of our
employees continue to participate, and for relieving us of
further employee benefit reimbursement obligations to ACF under
the 1994 ACF asset transfer agreement. In connection with the
proposed allocation of assets and liabilities of the affected
plans, which we expect to complete in the fourth quarter of
2005, we estimate the net amount that we will pay ACF is
approximately $6.3 million. In addition, in connection with
that arrangement, we estimate that we will assume unfunded post
retirement benefit liabilities totaling $7.9 million. We
have previously accrued an estimated liability related to this
settlement of $3.8 million. For a further description of the
proposed arrangement, see "—Charges and costs
associated with our public offering—ACF employee benefit
plans" and Note 13 to our Condensed Consolidated Financial
Statements.
Contractual obligations for the Bude pension plan are the
estimated minimum required contributions to be made to the Bude
pension plan at the due date of those payments. The first of
these payments is due on January 15, 2008. The amount
included for the supplemental executive retirement plan reflects
accrued benefits to be paid to James J. Unger, our chief
executive officer. These payments are included in the amounts
due after five years. See "Management —
Retirement plans" for more information.
As of November 1, 2005, we had $135.6 million of
purchase orders outstanding, all of which is scheduled to be
delivered within one year. These purchase orders include
purchase orders relating to the commitments described below.
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condition and results of operations
We entered into two vendor supply contracts with minimum volume
commitments in October 2005 with suppliers of materials used at
our railcar production facilities. The agreements have terms of
two and three years respectively. We have agreed to purchase a
combined total of $67.6 from these two suppliers over the next
three years. In 2006, 2007 and 2008 we expect to purchase $16.0
million, $27.1 million and $24.5 million respectively
under these agreements.
We entered into two supply agreements, in January 2005 and June
2005, with a steel supplier for the purchase of regular and
normalized steel plate. The agreements each have terms of five
years and may be terminated by either party at any time after
two years, upon twelve months prior notice. Each agreement
requires us to purchase the lesser of a fixed volume or 75% of
our requirements for the steel covered by that agreement at
prices that fluctuate with the market. We have no commitment
under these arrangements to buy a minimum amount of steel, other
than the minimum percentages, if our overall steel purchases
decline.
We have entered into supply agreements with an affiliate of
Amsted Industries, Inc., an affiliate of one of our Ohio
Castings joint venture partners, to purchase up to 25% and 33%
of the car sets, consisting of sideframes and bolsters, produced
at each of two foundries, respectively, being operated by
subsidiaries of Ohio Castings. Our purchase commitments under
these supply agreements are dependent upon the number of car
sets manufactured by these foundries, which are jointly
controlled by us and the other two members of Ohio Castings.
The following table summarizes our contractual obligations as of
December 31, 2004, and the effect that these obligations
and commitments are expected to have on our liquidity and cash
flow in future periods, after giving effect to this offering and
the application of the net proceeds of this offering as
described in "Use of proceeds":
Payments Due By Period
2-3
4-5
After
Contractual Obligations
Total
1 Year
Years
Years
5 Years
(in thousands)
Long-term debt obligations(1)
$
—
$
—
$
—
$
—
$
—
Notes payable to affiliates
—
—
—
—
—
Operating lease obligations
9,077
5,355
3,352
303
66
Purchase obligations
67,629
—
43,159
24,470
—
Pension funding
1,623
0
0
494
1,129
Total
$
78,329
$
5,355
$
46,511
$
25,267
$
1,195
(1)
We anticipate that our amended and restated revolving credit
    facility that we intend to enter into concurrently with this
    offering, will permit us to borrow $75.0 million and that
    our amended and restated revolving credit facility will mature
    three years following the closing of the offering.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Upon completion of this offering, we intend to repay and replace
our existing revolving credit facility, under which there is
presently $31.3 million outstanding, with an amended and
restated revolving credit facility. We will be exposed to
interest rate risk on the borrowings under our revolving credit
facility. However, we do not plan to enter into swaps or other
hedging arrangements to manage this risk because we do not
believe the risk is significant. On an annual basis, a 1% change
in the interest rate in our revolving credit facility will
increase or decrease our interest expense by $10,000 for every
$1.0 million of outstanding borrowings.
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condition and results of operations
We are exposed to price risks associated with the purchase of
raw materials, especially steel and heavy castings. The cost of
steel, heavy castings and all other materials used in the
production of our railcars represent approximately 80-85% of our
direct manufacturing costs. Given the significant increases in
the price of raw materials since November 2003, this exposure
can affect our costs of production. We believe that the risk to
our margins and profitability has been greatly reduced by the
variable pricing contracts we now have in place. We have
negotiated most of our railcar manufacturing contracts with our
customers to adjust the purchase prices of our railcars to
reflect increases or decreases in the cost of certain raw
materials and components and, as a result, we are able to pass
on to our customers substantially all of the increased raw
material and component costs with respect to the railcars that
we will produce and deliver after the first nine months of 2005.
We believe that we currently have excellent supplier
relationships and do not anticipate that material constraints
will limit our production capacity. Such constraints may exist
if railcar production were to increase beyond current levels, or
other economic changes occur that affect the availability of our
raw materials.
We are not exposed to any significant foreign currency exchange
risks.
CRITICAL ACCOUNTING POLICIES
We prepare our consolidated financial statements in accordance
with U.S. GAAP. The preparation of our financial statements
requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during
the reporting period. Our significant accounting policies are
described in the notes to our consolidated financial statements
included elsewhere in this prospectus. Some of these policies
involve a high degree of judgment in their application. The
critical accounting policies, in management's judgment, are
those described below. If different assumptions or conditions
prevail, or if our estimates and assumptions prove to be
incorrect, actual results could be materially different from
those reported.
Revenue recognition
Revenues from railcar sales are recognized following completion
of manufacturing, inspection, customer acceptance and shipment,
which is when title and risk for any damage or loss with respect
to the railcars passes to the customer. In some cases, painting
and lining work may be outsourced to an independent contractor
and, as a result, the sale will not be recorded until the
railcars are shipped from the independent contractor's
facilities to our customer. Revenues from railcar and industrial
components are recorded at the time of product shipment, in
accordance with our contractual terms. Revenue for railcar
maintenance services are recognized upon completion and shipment
of railcars from our plants. Revenue for fleet management
services are recognized as performed.
We record amounts billed to customers for shipping and handling
as part of sales in accordance with Emerging Issues Task Force
(EITF) 00-10,
Accounting for Shipping and Handling Fees
and Costs
, and we record related costs in our cost of sales.
Accounts receivable
We carry our accounts receivable at cost, less an allowance for
doubtful accounts. On a quarterly basis, we evaluate our
accounts receivable and establish an allowance for doubtful
accounts, based on a history of past write-offs and collections
and current credit conditions. Accounts are placed for
collection on a limited basis once all other methods of
collection have been exhausted. Once it has been determined that
the customer is no longer in business and/or refuses to pay, the
accounts are written off. Our bad debt experience has been
minimal. Write-offs could be materially different than reserves
if economic conditions change or actual results deviate from
historical trends.
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condition and results of operations
Product warranties
We record a liability for an estimate of costs that we expect to
incur under our basic limited warranty when manufacturing
revenue is recognized. Warranty terms are based on the
negotiated railcar sales contracts and typically are for periods
of up to five years. Factors affecting our warranty liability
include the number of units sold and historical and anticipated
rates of claims and costs per claim. We assess quarterly the
adequacy of our warranty liability based on changes in these
factors. We have generally experienced low warranty claims. Our
warranty claims were $0.5 million in 2003 and
$0.1 million in 2004. Actual results differing from
estimates could have a material effect on results from
operations in the event that unforeseen warranty issues were to
occur.
Inventory
Inventories are stated at the lower of average cost or market,
and include the cost of materials, direct labor and
manufacturing overhead. We evaluate our ability to realize the
value of our inventory based on a combination of factors
including historical usage rates, forecasted sales or usage,
product end of life dates, estimated current and future market
values and new product introductions. Assumptions used in
determining our estimates of future product demand may prove to
be incorrect, in which case the provision required for excess
and obsolete inventory would have to be adjusted in the future.
If inventory is determined to be overvalued, we would be
required to recognize such costs as cost of goods sold at the
time of such determination. Any significant unanticipated
changes in demand could have a significant negative impact on
the value of our inventory and our reported operating results.
Additionally, purchasing requirements and alternative usage
avenues are explored within these processes to mitigate
inventory exposure. When recorded, our reserves are intended to
reduce the carrying value of our inventory to its net realizable
value.
Long-lived assets
We evaluate long-lived assets, including property, plant and
equipment, under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 144,
Accounting for
the Impairment or Disposal of Long-Lived Assets
, which
addresses financial accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed
of. Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of assets may not be recoverable. The criteria for
determining impairment or such long-lived assets to be held and
used is determined by comparing the carrying value of these
long-lived assets to be held and used to management's best
estimate of future undiscounted cash flows expected to result
from the use of the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the
fair value of the assets. The estimated fair value of the assets
is measured by estimating the present value of the future
discounted cash flows to be generated. We incurred impairment
losses in the years ended December 31, 2002 and 2003, and
reduced the carrying value of buildings and improvements and
equipment by $0.2 million and $0.8 million, respectively,
at one of our railcar maintenance facilities. Any future
determination requiring write-off of a significant portion of
long-lived assets recorded on our balance sheet could have an
adverse effect on our financial condition and results of
operations.
Income taxes
For financial reporting purposes, income tax expense is
estimated based on planned tax return filings. The amounts
anticipated to be reported in those filings may change between
the time the financial statements are prepared and the time the
tax returns are filed. Further, because tax filings are subject
to review by taxing authorities, there is also the risk that a
position on a tax return may be challenged by a taxing
authority. If the taxing authority is successful in asserting a
position different than that
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Management's discussion and analysis of financial
condition and results of operations
taken by us, differences in a tax expense or between current and
deferred tax items may arise in future periods. Any such
differences which could have a material impact on our financial
statements would be reflected in the financial statements when
management considers them probable of occurring and the amount
reasonably estimable.
Valuation allowances reduce deferred tax assets to an amount
that will more likely than not be realized. Management's
estimates of the realization of deferred tax assets is based on
the information available at the time the financial statements
are prepared and may include estimates of future income and
other assumptions that are inherently uncertain. No valuation
allowance is currently recorded, as we expect to realize our
deferred tax assets.
Accounting for expenses paid by affiliate
In October 1994, we acquired railcar components manufacturing,
railcar maintenance and certain other assets from ACF, a company
beneficially owned and controlled by Carl C. Icahn, our
principal beneficial stockholder and the chairman of our board
of directors. In connection with that transaction, ACF retained,
and agreed to indemnify and hold us harmless for, certain
liabilities and obligations relating to the conduct of business
and ownership of the assets prior to the transfer, including
liabilities relating to employee benefit plans subject to
certain exceptions for transferred employees, workers'
compensation, environmental contamination and third-party
litigation. See "Certain relationships and related party
transactions—Transactions with ACF Industries LLC." At
December 31, 2004, the total liability retained by ACF was
$11.1 million, which is related primarily to pension
benefit obligations. Although ACF is responsible for any costs
associated with the retained liabilities, we have continued to
reflect the costs associated with those retained liabilities in
our financial statements as an expense in order to reflect the
full cost of doing business, and the payment by ACF of these
expenses is reflected as additional paid-in capital, as required
by Staff Accounting Bulletin Topic 5T.
Fair value of financial instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, amounts due to/from affiliates and accounts payable
approximate fair values because of the short-term maturity of
these instruments. The fair value of long-term debt is
calculated by discounting cash flows through maturity using our
current rate of borrowing for similar liabilities. The fair
value of the note receivable from ACF, which was carried at face
amount plus accrued interest, could not reasonably be estimated
due to the lack of market for similar instruments. Fair value
estimates are made at a specific point in time, based on
relevant market information about the financial instrument.
These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and,
therefore, cannot be determined with precision.
Contingencies and litigation
We periodically record the estimated impacts of various
uncertain outcomes. These events are called contingencies and
our accounting for these events is prescribed by
SFAS No. 5,
Accounting for Contingencies
.
SFAS No. 5 defines a contingency as "an existing
condition, situation, or set of circumstances involving
uncertainty as to possible gain or loss to an enterprise that
will ultimately be resolved when one or more future events occur
or fail to occur." Contingent losses must be accrued if:
4
available information indicates it
    is probable that the loss has been or will be incurred, given
    the likelihood of the uncertain future events; and
4
the amount of the loss can be
    reasonably estimated.
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The accrual of a contingency involves considerable judgment on
the part of management. Legal proceedings have elements of
uncertainty, and in order to determine the amount of any
reserves required, we assess the likelihood of any adverse
judgments or outcomes to pending and threatened legal matters,
as well as potential ranges of probable losses.
We are subject to comprehensive federal, state, local and
international environmental laws and regulations relating to the
release or discharge of materials into the environment, the
management, use, processing, handling, storage, transport or
disposal of hazardous materials and wastes, or otherwise
relating to the protection of human health and the environment.
These laws and regulations not only expose us to liability for
the environmental condition of our current or formerly owned or
operated facilities, and our own negligent acts, but also may
expose us to liability for the conduct of others or for our
actions that were in compliance with all applicable laws at the
time these actions were taken. In addition, these laws may
require significant expenditures to achieve compliance, and are
frequently modified or revised to impose new obligations. Civil
and criminal fines and penalties and other sanctions may be
imposed for non-compliance with these environmental laws and
regulations. Our operations that involve hazardous materials
also raise potential risks of liability under common law. We are
involved in investigation and remediation activities at
properties that we now own or lease to address historical
contamination and potential contamination by third parties. We
are also involved with state agencies in the cleanup of two
sites under these laws. These investigations are at a
preliminary stage, and it is impossible to estimate, with any
certainty, the timing and extent of remedial actions that may be
required, and the costs that would be involved in such
remediation. Substantially all of the issues identified relate
to the use of the properties prior to their transfer to us in
1994 by ACF and for which ACF has retained liability for
environmental contamination that may have existed at the time of
transfer to us. ACF has also agreed to indemnify us for any cost
that might be incurred with those existing issues. However, if
ACF fails to honor its obligations to us, we would be
responsible for the cost of such remediation. We have been
advised that, for the remainder of 2005, ACF estimates that it
will spend approximately $0.1 million on environmental
investigation and, in each of 2006 and 2007, it will spend
approximately $0.2 million on environmental investigation,
relating to contamination that existed at properties prior to
their transfer to us and for which ACF has retained liability
and agreed to indemnify us. We believe that our operations and
facilities are in substantial compliance with applicable laws
and regulations and that any noncompliance is not likely to have
a material adverse effect on our operations or financial
condition.
Future events, such as new environmental regulations or changes
in or modified interpretations of existing laws and regulations
or enforcement policies, or further investigation or evaluation
of the potential health hazards of products or business
activities, may give rise to additional compliance and other
costs that could have a material adverse effect on our financial
conditions and operations. In addition, ACF has in the past
conducted investigation and remediation activities at properties
that we now own to address historic contamination. Although we
believe that ACF has satisfactorily addressed all known material
contamination, there can be no assurance that ACF has addressed
all historical contamination. The discovery of historical
contamination or the release of hazardous substances into the
environment at our current or formerly owned or operated
facilities could require ACF or us in the future to incur
investigative or remedial costs or other liabilities that could
be material or that could interfere with the operation of our
business.
We are currently a member of a controlled group that includes
ACF, an entity in which Mr. Icahn has an indirect ownership
of at least 80%. ACF is the sponsor of several pension plans
that are underfunded, as of December 31, 2004, by a total
of approximately $24.1 million on an ongoing actuarial
basis and $172.4 million if those plans were terminated, as
most recently reported by the plans' actuaries. The
liabilities could increase or decrease, depending on a number of
factors, including future changes in promised benefits,
investment returns and the assumptions used to calculate the
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Management's discussion and analysis of financial
condition and results of operations
liability. As members of the controlled group, we would be
jointly and severally liable for any failure of ACF to pay the
unfunded liabilities upon a termination of the ACF pension
plans. Upon completion of this offering, we believe that we
should no longer be a member of the ACF controlled group. As a
result, we should no longer be subject to ACF's pension
liabilities, unless it were determined that we were otherwise a
member of the ACF controlled group or that a principal purpose
of the offering or other transactions that resulted in our
ceasing to be a member of the ACF controlled group was to evade
pension liabilities and the termination date of the underfunded
plan was within five years after the offering or other
transactions. If such a determination were made and upheld by a
court, we could remain jointly and severally liable for pension
plan obligations of ACF, which could have a material adverse
effect on our financial condition and results of operations.
In connection with Trans World Airlines, Inc.'s (or TWA)
1992 bankruptcy proceedings under Chapter 11 of the Bankruptcy
Code, the Pension Benefit Guarantee Corporation (or the PBGC)
asserted that ACF as well as the other entities in which Mr.
Icahn had a controlling interest were obligated along with TWA
to satisfy any underfunding of obligations under TWA's
defined benefit plan. Subsequently, and in response to a
petition of another member of the Icahn control group, the PBGC
terminated the TWA pension plan and obligated an affiliate of
ARI, Highcrest Investors Corp (or Highcrest) to make eight
annual termination payments of $30 million, totaling $240
million. We have been advised that as of December 31, 2004,
Highcrest had made termination payments totaling $130 million
and still owed $110 million on this obligation. The obligation
to make termination payments is non-recourse except to the
common stock of ACF Industries Holding Corp., which is also a
member of the Icahn control group. The authority of the PBGC to
enter into the settlement agreement is currently being
contested. Although ARI is a controlled entity of Mr. Icahn,
management believes this obligation will have no adverse effect
on the future liquidity, results of operations, or financial
position of ARI. See "Risk Factors — Risks
related to our business — We could be liable for
liabilities associated with pension plans sponsored by companies
controlled by Carl C. Icahn."
We have been named a party to a suit in which the plaintiff
alleges we were responsible for the malfunction of a valve which
we manufactured, and that was negligently remanufactured in 2004
by a third party. We believe we have no responsibility for this
malfunction and have meritorious defenses against any liability.
It is not possible to estimate the expected settlement, if any,
at this time as the case is in its early stages.
We have been named the defendant in a law suit in which the
plaintiff, OCI Chemical Company, claims we were responsible
for the damage caused by allegedly defective railcars that were
manufactured by us. The lawsuit was filed on September 19,
2005 in the United States District Court, Eastern District of
Missouri. The plaintiff seeks unspecified damages in excess of
$75,000. The plaintiffs allege that the failures in certain
components caused the contents transported by these railcars to
spill out of the railcars causing property damage, clean-up
costs, monitoring costs, testing costs and other costs and
damages. We believe that we are not responsible for the damage
and have meritorious defenses against liability.
REPORT ON INTERNAL CONTROLS
Our management and auditors have identified three significant
deficiencies in our internal controls as of December 31,
2004, which, if not properly remediated could result in
misstatements in our financial statements in future periods.
Our independent auditors, Grant Thornton LLP, issued a letter to
our board of directors in which they identified three
significant deficiencies in the design and operation of our
internal controls as of December 31, 2004. A significant
deficiency is a control deficiency, or combination of control
deficiencies, that results in more than a remote likelihood that
a misstatement of the financial
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Management's discussion and analysis of financial
condition and results of operations
statements that is more than inconsequential will not be
prevented or detected. A control deficiency exists when the
design or operation of a control does not allow management or
employees, in the normal course of performing their assigned
functions, to prevent or detect misstatements on a timely basis.
Specifically, the significant deficiencies noted were:
4
Inventory
    cut-off.
Our
    manufacturing locations recorded inventory shipped by our
    vendors to us on the date we received the inventory in our
    facility, rather than on the date of shipment.
4
Construction in
    process.
We
    transferred assets from construction in process to fixed assets
    on a quarterly basis rather than at the time assets are actually
    placed into service. There was insufficient documentation
    authorizing the movement of assets from construction in process
    to fixed assets. Certain assets were still being classified as
    construction in process even though the asset was in service.
4
Fixed asset recording and
    reconciliation.
Our
    fixed asset subsidiary ledgers were not updated in a timely
    manner. Supporting ledgers for depreciation schedules were
    tracked using Microsoft Excel. The schedules were not reconciled
    on a timely basis. The procedures surrounding the compilation of
    the data was manual and subject to error.
In light of the noted significant deficiencies, we have
instituted control improvements that we believe will reduce the
likelihood of similar errors to less than remote or to an
inconsequential amount in the specific areas that are judged to
be most vulnerable. See "Risk factors— Our management
and auditors have identified three significant deficiencies in
our internal controls as of December 31, 2004, which, if
not properly remediated could result in misstatements in our
financial statements in future periods." These control
improvements include:
4
Inventory
    cut-off.
Effective
    March 31, 2005, we implemented procedures to track the
    inventory in transit and record the receipt of such inventory
    properly in our general ledger. We now follow this procedure
    monthly.
4
Construction in
    process.
We are
    developing a process for plant and corporate management approval
    to authorize assets to be placed in service. This procedure will
    entail a threshold dollar amount requiring corporate controller
    approval that will include a review of the asset clarification
    and depreciation rate. Under this plan, assets will be moved
    from construction in process in the month the asset is placed in
    service.
4
Fixed asset recording and
    reconciliation.
We
    expect to implement a new fixed asset tracking system before the
    end of 2005.
We do not expect to incur material incremental staffing costs
associated with these corrective actions. However, in connection
with becoming a public company, we expect to incur significant
additional staffing and infrastructure costs.
RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board
(FASB) issued Interpretation No. (FIN) 46,
Consolidation of Variable Interest Entities
, which was
later amended on December 24, 2003 (FIN 46R).
FIN 46R explains how to identify variable interest entities
and how an enterprise assesses its interest in a variable
interest entity to decide whether to consolidate that entity.
FIN 46R requires unconsolidated variable interest entities
to be consolidated by their primary beneficiaries if their
entities do not effectively disperse the risks and rewards of
ownership among their owners and other parties involved. The
provisions of FIN 46R are generally effective for periods
after December 31, 2003. The adoption of this pronouncement
has not had a material effect on us.
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Management's discussion and analysis of financial
condition and results of operations
In May 2003, the FASB issued Statement of Financial Accounting
Standards No. 150,
Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity
(SFAS 150), which establishes standards for how
companies classify and measure certain financial instruments
with characteristics of both liabilities and equity. It requires
companies to classify a financial instrument that is within its
scope as a liability (or an asset in some circumstances). We
classified our mandatorily redeemable payment-in-kind preferred
stock as a liability in accordance with SFAS 150 in 2003.
In November 2004, the FASB issued SFAS No. 151,
Inventory Costs-An Amendment of ARB No. 43
,
Chapter 4
, which requires the recognition of costs
of idle facilities, excessive spoilage, double freight, and
rehandling costs as a component of current-period expenses. The
provisions of SFAS No. 151 are effective for inventory
costs incurred during fiscal years beginning after June 15,
2005. Since we produce railcars based upon specific customer
orders, management does not expect the provisions of
SFAS No. 151 to have a material impact on our
financial statements.
In December 2004, the FASB issued SFAS 123R,
Share-Based
Payments.
SFAS 123R is a revision of SFAS 123,
Accounting for Stock Based Compensation
, and supersedes
APB 25. Among other items, SFAS 123R eliminates the
use of APB 25 and the intrinsic value method of accounting,
and requires companies to recognize the cost of employee
services received in exchange for awards of equity instruments,
based on the grant date fair value of those awards, in the
financial statements. The effective date of SFAS 123R is
currently the beginning of the next fiscal year that begins
after June 15, 2005, which is the first quarter of our year
ending December 31, 2006.
In March 2005, the FASB issued FIN 47 as an interpretation
of FASB Statement 143,
Accounting for Asset Retirement
Obligations
(FASB 143). This interpretation clarifies that
the term conditional asset retirement obligation as used in FASB
143 and refers to a legal obligation to perform an asset
retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not
be within the control of the entity. The obligation to perform
the asset retirement activity is unconditional even though
uncertainty exists about the timing and/or method of settlement.
Accordingly, an entity is required to recognize a liability for
the fair value of a conditional asset retirement obligation if
the fair value of the liability can be reasonably estimated.
This interpretation also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of
an asset retirement obligation. FIN 47 is effective no
later than the end of fiscal years ending after
December 15, 2005. We believe that the adoption of
FIN 47 will not result in a material change in our
financial statements.
On June 1, 2005, the FASB issued Statement No. 154,
Accounting Changes and Error Corrections, a replacement of
APB Opinion No. 20 and FASB Statement No. 3
(SFAS 154)
. The Statement applies to all voluntary
changes in accounting principle, and changes the requirements
for accounting for and reporting of a change in accounting
principle. We will adopt SFAS 154 at December 31, 2005
and do not anticipate any material change to our operating
results as a result of this adoption.
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OVERVIEW OF NORTH AMERICAN RAILCAR MANUFACTURING INDUSTRY
Many diverse industries depend on the railroad system to
transport items such as plastic pellets, chemicals and related
products, non-metallic minerals, grains and other farm products,
food products, metals and ores, coal, lumber and other building
products, petroleum products, oils, ethanol related products,
paper products, vehicles, equipment and associated parts. Demand
for railcars reflects their importance for the North American
economy in moving goods and raw materials. In periods of rising
economic activity, fleet utilization typically increases,
driving an increase in demand for new railcars, which also
increases backlog for new railcars. Conversely, during economic
slowdowns, fleet utilization typically declines, resulting in
reduced demand, deliveries and backlog for new railcars.
According to Global Insight's Freight Car Outlook Third
Quarter 2005, orders for new railcars are expected to be strong
with deliveries projected to average 59,400 railcars per
year from 2005 through 2010. This compares to deliveries of
17,714 railcars in 2002, 32,184 railcars in 2003 and
46,871 railcars in 2004, as reported by the Railway Supply
Institute, or RSI. RSI reported that at the end of 2004, the
total backlog for the railcar manufacturing industry reached
58,677 railcars. This growth trend has continued through
the first nine months of 2005, with 54,134 new railcars
ordered and 50,682 railcars delivered, with total backlog
increasing to 60,986 railcars.
The primary purchasers of railcars in North America are leasing
companies, shippers and railroads. Leasing companies are
financial institutions that buy railcars from manufacturers like
us and lease these railcars to end users that include railroads
and shippers. Shippers include a variety of industrial companies
that purchase railcars for freight transport. Railroads purchase
railcars to transport goods for industrial companies and others
on their lines. The primary source of railcar orders has shifted
over time as leasing companies and shippers replace railroads as
the largest purchasers of new railcars. From 1990 to 2003,
leasing companies and shippers have increased their collective
share of the total North American railcar fleet from 37% to 53%,
respectively.
The major railcar types and primary uses of these railcars in
North America are summarized below.
Railcar Type
Primary Use
Covered Hopper Railcar
Transport of cargo in the plastics, chemical, oil and food
    industries
Tank Railcar
Transport of liquids and gaseous materials, including chemicals,
    petroleum products and fertilizers
Intermodal Flat Railcar
Transport of cargo in containers and trailers that may also be
    used by trucks or ships
Gondola Railcar
Transport of coal and other commodities including steel products
    and scrap metals
Open-Top Hopper Railcar
Transport of coal
Box Railcar
Transport of auto parts, food products, wood products and paper
    products
Flat Railcar
Transport of bulky items including machinery, automobiles and
    forest products
Although a railcar can be used for up to 50 years under
existing regulations in North America, we believe that the
average life of a railcar is approximately 30 to 35 years.
After that point, most railcars must either be refurbished or
replaced. Railcar designs change over time, incorporating
technical and quality improvements while adapting to the
functions required by customers. As the industry advances,
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we generally expect that railcars will become more efficient and
capable of carrying larger loads with better ride quality and
lower repair and operating costs. We believe that as customers
replace aging fleets and expand the number of railcars in use to
meet higher shipping demand, they make new railcar purchasing
decisions based not only on price and delivery time, but also on
key performance characteristics.
The following chart identifies the composition, by percentage,
of the U.S. railcar fleet in 2003, and indicates that among
all the different railcar types, covered hopper railcars and
tank railcars represented the two largest categories of the
U.S. railcar fleet.
Composition of 2003 U.S. Railcar Fleet
Source:
Association of American Railroads
NORTH AMERICAN RAILCAR COMPONENTS AND SERVICES INDUSTRIES
Manufacturers of railcar components are primarily comprised of
railcar manufacturers, some of which produce components solely
for internal use, while others produce railcar components for
sale to outside customers, as well as non-railcar manufacturers.
Railcar support services are an important part of the railcar
industry. Railcar services include maintenance and repair,
cleaning, painting and lining, engineering services and the
management of customers' railcar fleets. Maintenance and
repair facilities may be fixed locations near railroad lines or
operate as mobile units designed to service railcars at customer
locations.
NORTH AMERICAN RAILCAR INDUSTRY DYNAMICS AND TRENDS
The 1980 Staggers Rail Act ended more than 100 years of
government rail industry regulation and dramatically transformed
the railcar industry in North America. The deregulation enabled
railroads to regain market share lost to the trucking industry
over the years and resulted in a wave of industry consolidation.
The number of Class I railroads, the grouping of the
largest railroads based on operating revenue, dropped from 22 in
1980 to seven today while the volume of goods transported on the
U.S. rail system increased from 1.5 billion tons in
1980 to 1.8 billion tons in 2003, according to the
Association of American Railroads.
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Railroad industry deregulation also prompted a series of
consolidations among railcar manufacturers and more efficient
fleet management, which resulted in a reduction of the total
U.S. railcar fleet size from 1.7 million railcars in
1980 to 1.2 million railcars in 1995.
The following chart reflects the size of the railcar fleet in
the United States, which represents the majority of the North
American railcar fleet, from 1994 to 2003.
Historical U.S. Railcar Fleet
Source:
Association of American Railroads— Railroad Facts 2004
Cyclical nature of the North American railcar market and
outlook for North American railcar demand
The North American railcar market is highly cyclical and trends
in the railcar manufacturing industry are directly affected by
the level of activity in the North American economy. When the
economy is in a period of sustained growth, railcar users
generally tend to increase the size of their fleets and replace
older railcars with newer railcars or railcars with greater
capacity and durability. Conversely, when the economy slows
down, these companies generally delay investment in new railcars
and increase the utilization rates of railcars already in use,
keeping them in service for longer periods. The North American
railcar market is also affected by the level of international
trade activity, as railroads are also used to transport imported
and exported goods to and from ports. In addition, supplies of
materials, such as steel, as well as key railcar components,
such as heavy castings and wheels, are constrained from time to
time, which limits the production capacity of companies in the
railcar manufacturing industry and results in further cyclical
fluctuations.
As illustrated by the chart below, railcar demand was at a high
in the late 1970s due, in particular, to the preferential tax
treatment attributed to railcars under then-existing tax laws.
The Tax Reform Act of 1981, which eliminated the preferential
tax treatment of railcars beginning in 1983, as well as the
economic recession in the early 1980s, led to low levels of
railcar production through most of the 1980s. However, during
most of the 1990s, increased general economic activity and
higher import levels led to an increase in railcar deliveries.
In addition, after a period of consolidation in the railroad
industry, railroads suffered from integration difficulties, poor
railcar utilization and aging fleets. We believe that railroads
responded by ordering additional railcars, which led to a
significant increase in railcar deliveries in 1998 and 1999.
This period of peaking orders ended in 2000 and 2001 as slowing
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economic growth, a recovery in railroad operating efficiency and
transportation disruption related to the
September 11
th
terrorist attacks pushed 2002 deliveries of new railcars down to
17,714 railcars, according to the Railway Supply Institute.
In 2003, the industry began to recover from the downturn and
demand for new railcars started to increase. A total of 46,871
railcars were delivered in 2004 and industry backlog stood at
58,677 railcars at December 31, 2004. A total of
50,682 railcars have been delivered during the first nine
months of 2005 and industry backlog stands at 60,986 railcars as
of September 30, 2005. The following chart illustrates
annual North American deliveries of railcars since 1978 and
projected annual North American railcar deliveries through 2010,
according to the Railway Supply Institute and Global
Insight's Freight Car Outlook Third-Quarter, 2005,
respectively.
Railcar Annual Deliveries
Source:
Railway Supply Institute and Global Insight's Freight Car
    Outlook Third-Quarter 2005
Strong near term demand for railcars
Following a period of economic weakness from 2001 to 2003, we
believe leasing companies, shippers and railroads that have
deferred new railcar purchases and equipment maintenance are
poised to expand and service their fleets in response to growing
demand for railroad shipping. Global Insight's Freight Car
Outlook Third-Quarter, 2005 anticipates delivery of 66,043 new
railcars in 2005 and average annual deliveries of 59,400
railcars per year from 2005 through 2010.
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The following chart sets forth the historical backlog for the
North American railcar industry:
Historical North American Railcar Backlog by Quarter
Source:
Railway Supply Institute
Positive long term demand fundamentals
Over the long term, we expect increased U.S. economic
activity to drive growth in railroad shipment and new railcar
purchases. Global Insight's Freight Car Outlook
Third-Quarter 2005 forecasts continued gains in rail freight
usage, with 1.6% growth in railcar loads during 2005, 1.7%
growth in railcar loads in 2006 and 1.7% to 0.8% annual growth
in railcar loads from 2007 to 2010. Under normal circumstances,
railcars generally need to be refurbished or replaced after 30
to 35 years of use. We believe that, historically, the
useful life of tank railcars has been shorter, ranging from 25
to 30 years of use. Railcars used at a higher than average
rate may require replacement in a shorter period of time. In
some cases, advances in technology and efficiency or new
regulations may require railcars with remaining useful life to
be replaced. We believe demand for replacement railcars will be
strong over the long term as approximately 50% of all railcars
in use are over 20 years old.
Trends impacting covered hopper railcars
Covered hopper railcars constitute the largest of all railcar
segments in terms of numbers of railcars in use. Covered hopper
railcars are used primarily to transport cargo such as cement,
plastic pellets, grain and dry fertilizer. Demand for covered
hopper railcars has shown renewed strength due to increased
shipments of a variety of products including plastics, chemicals
and foods. According to the Railway Supply Institute, 5,602
covered hopper railcars were delivered in 2004. We believe
manufacturing activity across a variety of sectors will continue
to drive demand for covered hopper railcars through 2005 and
2006. In addition, we believe increasing ethanol production will
continue to drive the volume of corn shipments transported in
covered hopper railcars. The U.S. Department of
Agriculture's Baseline Projections to 2014 dated February
2005 forecasts a 9% increase in corn production from 2005 to
2010, largely attributable to demand for corn in ethanol
production.
Over the long term, Global Insight's Freight Car Outlook
Third-Quarter 2005 forecasts strong demand for covered hopper
railcars driven by continued growth of the U.S. economy,
higher production for a number of consumer and business durable
goods, increasing domestic and international demand for
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U.S. agricultural products, increasing ethanol production
and replacement of aging railcars. As shown by the chart below,
Global Insight's Freight Car Outlook Third-Quarter 2005
forecasts deliveries of covered hopper railcars will reach
14,927 in 2005 and 16,926 in 2006, and will average more than
15,800 deliveries per year from 2007 through 2010. These
forecasts illustrate a significant projected increase from the
5,602 covered hopper railcars delivered in 2004 and the 3,801
covered hopper railcars delivered in 2003.
Historical and Projected Covered Hopper Railcar Deliveries
Source:
Railway Supply Institute and Global Insight Freight Car Outlook
    Third-Quarter 2005
Trends impacting tank railcars
Orders of tank railcars are being driven in part by the advanced
age of the current North American tank railcar fleet. In 2004,
8,939 tank railcars were delivered, according to Global
Insight's Freight Car Outlook Third-Quarter 2005. Tank
railcars primarily are used to transport liquid and gaseous
products, such as chemicals, liquid fertilizers and petroleum
products. Tank railcars, like covered hopper railcars, are also
in higher demand in North America as manufacturing activity, and
the need for liquids and gases used in manufacturing, increases.
We believe expansion of the ethanol sector as well as strong
consumer demand for petrochemicals, edible oils, lubricating
oils, liquid propane and liquid food products also positively
impact tank railcar shipments.
Based on Global Insight's Freight Car Outlook Third-Quarter
2005 projections, tank railcar deliveries are expected to
increase to 11,069 railcars in 2005 and
11,075 railcars in 2006 and will average approximately
9,900 deliveries per year from 2007 through 2010. In
comparison, the number of tank railcars delivered in North
America was 8,939 in 2004 and 8,176 in 2003.
The tank railcar market is a more difficult market to enter
compared to other railcar types. The manufacturing of tank
railcars is highly regulated and their production requires a
specially trained workforce and dedicated manufacturing
facilities. As a result, competition in the tank railcar market
is concentrated. Production of tank railcars is also very labor
intensive compared to production of other railcars. Due to
domestic supply constraints, tank railcar manufacturers have
experienced difficulties in obtaining normalized steel plate,
which is an essential specialty material used in the production
of many types of tank railcars.
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The following chart shows historical tank railcar deliveries in
2003 and 2004 and projected tank railcar deliveries through 2010.
Historical and Projected Tank Railcar Deliveries
Source:
Railway Supply Institute and Global Insight Freight Car Outlook
    Third-Quarter 2005
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Business
OVERVIEW
We are a leading North American manufacturer of covered hopper
and tank railcars. We also repair and refurbish railcars,
provide fleet management services and design and manufacture
certain railcar and industrial components used in the production
of our railcars as well as railcars and non-railcar industrial
products produced by others. We provide our railcar customers
with integrated solutions through a comprehensive set of high
quality products and related services.
Our primary customers include companies that purchase railcars
for lease by third parties, or leasing companies, industrial
companies that use railcars for freight transport, or shippers,
and Class I railroads. Over the past five years, our
largest leasing company customers included ACF Industries
LLC, ARL, CIT, GATX Rail Corporation, GE Capital
Corporation, The Greenbrier Companies and Union Tank Car Company
and our largest shipper customers included Dow Chemical Company,
Engelhard Corporation, Exxon Mobil Corporation, Lyondell
Chemical Company and Solvay America, Inc. Our major railroad
customers over the past five years included TTX and Union
Pacific. In servicing this customer base, we believe our
integrated railcar repair and refurbishment and fleet management
services and our railcar components manufacturing business help
us further penetrate the general railcar manufacturing market.
These products and services provide us with significant
cross-selling opportunities and insights into our
customers' railcar needs that we use to improve our
products and services and enhance our reputation for high
quality. Although we build, service and manage railcars through
an integrated, complementary set of products and services, we
have chosen not to offer railcar leasing services so that we do
not compete with our leasing company customers, which represent
a significant portion of our revenues.
For the years ended December 31, 2003 and 2004, we
generated total revenues of $218.0 million and
$355.1 million and net earnings of $1.1 million and
$1.9 million, respectively. For the nine months ended
September 30, 2004 and 2005, we generated revenues of
$254.3 million and $442.1 million and net earnings of
$2.9 million and $14.5 million, respectively. As of
September 30, 2005, our total railcar backlog was
15,567 railcars, compared to a total railcar backlog of
5,653 railcars as of September 30, 2004. On
July 29, 2005, we entered into an agreement with CIT, under
which CIT has agreed to purchase from us, during the 2006 to
2008 period, 9,000 to 12,000 railcars, subject to
negotiated terms and conditions. See "—Backlog."
OUR HISTORY
Since our formation in 1988, we have grown our business from
being a small provider of railcar components and maintenance
services to one of North America's leading integrated
providers of railcars, railcar components, railcar maintenance
services and fleet management services. In October 1994, we
acquired railcar components manufacturing and railcar
maintenance assets from ACF Industries, Incorporated (now
known as ACF Industries, LLC), or ACF, a company controlled
by Carl C. Icahn, our principal beneficial stockholder and the
chairman of our board of directors. Through this acquisition, we
also hired members of ACF's management, many of whom,
including our president, remain a significant part of our
current management team. These executives brought with them
established relationships with important customers and suppliers
and extensive industry knowledge, as ACF and its predecessor
companies have roots in the railcar manufacturing industry that
trace back to 1873. Led by this management team, we entered the
railcar manufacturing business through the construction of new
manufacturing facilities.
In October 1995, we produced our first railcar at our Paragould,
Arkansas manufacturing facility. We primarily manufacture
covered hopper railcars at our Paragould facility, but we have
the ability to
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manufacture many other types of railcars at this facility. The
Paragould facility initially had two railcar manufacturing
lines. We added painting and lining capabilities to this
facility in 1999 and a third manufacturing line in December
2004. We are currently constructing additional painting and
lining capabilities at our Paragould facility to increase
efficiency, which we expect to open at the end of 2005. Our
Paragould facility also features component manufacturing
capabilities. We manufactured 20,455 railcars at our
Paragould facility, mostly covered hopper railcars, through
September 30, 2005. We can manufacture up to 30 railcars a
working day at this facility.
In January 2000, we produced our first railcar at our Marmaduke,
Arkansas manufacturing facility. We manufacture tank railcars at
this facility. The design of this facility enables us to
manufacture many different types of tank railcars at the same
time. We manufactured 6,373 tank railcars at our Marmaduke
facility through September 30, 2005. We can manufacture up
to 10 railcars a working day at this facility.
Since 1994, we have significantly expanded our components
manufacturing and railcar services operations. Our operations
now include three railcar assembly, sub-assembly and fabrication
facilities, three railcar and industrial component manufacturing
facilities, six railcar repair plants and four mobile repair
units. Our services business has grown to include online access
by customers, remote fleet management, expanded painting, lining
and cleaning offerings, regulatory consulting and engineering
support. Additionally, members of our management team helped
found and develop, and continue to operate, a joint venture,
Ohio Castings Company, LLC, which we refer to as Ohio Castings,
in which we own a one-third interest and that manufactures and
sells sideframes, bolsters, couplers and yokes for distribution
to third parties and to us. We believe that our involvement in
this joint venture helps us maintain our levels of production at
competitive prices, despite industry-wide shortages of these
potentially capacity constraining components. See
"—Certain relationships and related party
transactions."
OUR BUSINESS STRENGTHS AND COMPETITIVE ADVANTAGES
We believe that the following key business strengths and
competitive advantages will contribute to our growth:
Leading railcar manufacturer with focus on the covered hopper
and tank railcar markets
We are a leading North American manufacturer of covered hopper
and tank railcars. Over the last three years, we believe we have
produced an estimated 33% of the covered hopper railcars and an
estimated 16% of the tank railcars delivered in North America.
Based on the Association of American Railroads Railroad Facts
2004 Report, these represent the two largest segments of the
North American railcar industry, with covered hopper railcars
representing approximately 30% and tank railcars representing
approximately 19% of the total North American railcar fleet,
based on the number of railcars in service. We believe our
railcars are differentiated by their superior quality,
innovation and reliability.
Modern non-union, low cost railcar manufacturing facilities
in strategic locations
Unlike many of our competitors, we manufacture all of our
railcars in modern facilities built in the last ten years. We
believe our Paragould and Marmaduke, Arkansas railcar production
facilities to be the newest covered hopper and tank railcar
production plants in North America. We designed these facilities
to provide manufacturing flexibility and allow for the
production of a variety of railcar sizes and types. We
strategically located these facilities in close proximity to our
main customers and suppliers. This reduces freight time and
costs for the components we purchase and the time for delivery
of completed railcars. Over the past several years, we have
increased our production capacity
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and efficiency and reduced our costs per railcar through a
number of targeted operational improvements, which has also
reduced the amount of raw materials necessary for production of
railcars. We emphasize flexibility in our employees'
training and, consequently, our employees frequently move both
between locations on manufacturing lines and among our different
manufacturing facilities. Currently, none of our over 1,100
employees at our Paragould and Marmaduke facilities are
represented by a union. However, employees of three of our
repair facilities and one of our component manufacturing
facilities, representing 16% of our total workforce as of
September 30, 2005, are represented by a union.
Preferred access to components through in-house production, a
joint venture and strategic sourcing arrangements
We produce many of the components necessary to our railcar
manufacturing business ourselves and we own a one-third interest
in, and our management team operates, our Ohio Castings joint
venture from which we obtain certain other components. We
believe our in-house production capabilities and our involvement
in this joint venture help us maintain access to components at
competitive prices, despite industry-wide shortages of these
potentially capacity constraining components. We also have
developed and actively maintain strategic sourcing arrangements
and strong relationships with our suppliers. These arrangements
and relationships help ensure our continued access to critical
components and raw materials we use to produce railcars,
including steel, wheels and heavy castings. We also have
recently entered into an agreement to diversify our supply of
steel. We believe our attention to strengthening our supply
chain helps us maintain operational continuity and high
production levels.
Integrated railcar repair and refurbishment and fleet
management services complement railcar manufacturing
We provide a wide array of complementary products and services
to the railcar industry. Unlike some other railcar
manufacturers, we also repair, maintain and provide fleet
management services for existing railcars, including railcars
built by others, and manufacture railcar components for third
parties and us. We believe this diverse product and service
offering provides us with a competitive advantage relative to
other railcar manufacturers, primarily in the form of
cross-selling opportunities with respect to our repair and fleet
management services. For example, customers of our repair
business that have experienced problems with our
competitors' railcars have transferred railcar orders to us
after our repair workers were able to identify the benefits of
our railcars compared to our competitors'. We also believe
that our ability to address the needs of our customers
throughout the lifecycle of a railcar enhances our customer
relationships and provides us with additional growth
opportunities and unique insights into industry trends. As of
September 30, 2005, we have approximately
57,000 railcars under management.
Strong relationships with a long-term customer base
We believe that our customers value our products and services.
Many of our major customers have been doing business with us for
a number of years, including CIT, Dow Chemical Company,
GE Capital Corporation and Solvay America, Inc. Many of our
customers have demonstrated a willingness to purchase several
different types of our products and services over time. For
example, GE Capital Corporation purchases pressure and
non-pressure tank railcars, covered hopper railcars and fleet
management services from us and The CIT Group, Inc.
purchases our tank railcars as well as cement, grain, sugar and
plastic pellet covered hopper railcars. We believe we deliver
high quality products and services to our customers with low
operating and maintenance costs, while maintaining what we
believe are low levels of warranty claims.
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Strong management team with long-standing industry
experience
We have an experienced senior operations management team that
has an average of over 25 years of experience in the
railcar and related manufacturing industries. Our senior
operations management team, including our president, James J.
Unger, has been with us since we began manufacturing railcars.
This team conceived and built our Paragould and Marmaduke
railcar manufacturing facilities and has been responsible for
growing our revenues from $80.9 million in 1994 to
$355.1 million in 2004. We believe our management
successfully managed our business during the most recent
cyclical downturn in the railcar manufacturing industry while
positioning us to capitalize on the current upturn in our
industry. Members of our management, in particular our
president, Mr. Unger, have risen to leadership roles on a
number of prominent industry committees and associations, which
provide us with insight into the railcar industry, trends and
customer needs. We believe our active participation in industry
committees and associations strengthens our relationships with
our customers and suppliers and increases our profile and
reputation in the North American railcar market.
OUR STRATEGY
The key elements of our business strategy are as follows:
Maintain and expand presence in covered hopper and tank
railcar markets
We intend to maintain and expand our presence in the covered
hopper and tank railcar markets by continuing to deliver high
quality and innovative products. We believe our excellent
customer relationships have enabled us to identify market
demands that we then target through our product development and
marketing efforts. We intend to continue the close collaboration
between our customers and our engineering, marketing, operations
and management personnel to meet demand and, where appropriate,
to selectively expand production capacity.
Continue to improve operating efficiencies
We intend to build on the success of our production initiatives
at our Paragould and Marmaduke railcar manufacturing facilities
and plan to continue to identify opportunities to enhance
operating efficiencies across these and our other manufacturing
facilities. These opportunities include our continued
streamlining of our manufacturing processes and our quality
control initiatives. For example, we believe the additional
painting and lining capabilities we are currently constructing
at our Paragould facility will reduce costs and further increase
our manufacturing efficiency and will speed delivery of our
products to our customers. We also intend to continue the
efforts of our design cost reduction team, formed in 2003, which
has already significantly reduced our railcar production costs
through standardization of components used in our railcars,
implemented design changes to reduce the amount of raw material
required for our railcars, and improved manufacturing techniques
that reduce our labor requirements. These efforts should allow
us to reduce our costs and maintain competitive prices.
Continue to grow railcar service and fleet management
businesses and increase sales of railcar and industrial
components
As the existing North American railcar fleet continues to age,
we anticipate increased demand for maintenance and repair
services and railcar components used in the maintenance and
repair of railcars. Additionally, we expect growing demand for
our fleet management services as ownership of railcars continues
to shift away from the railroads and toward the shippers and
leasing companies, which often outsource their fleet management
activities to third-party service providers such as us. We
intend to
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capitalize on these trends and we believe we are well positioned
to provide increased services through our strategically located
network of railcar repair and service facilities.
Leverage manufacturing expertise to selectively expand
product portfolio
We may seek to expand our product portfolio to other selected
types of railcars. Our management designed and constructed our
Paragould manufacturing facility to be able to produce most
railcar types, and we believe our adaptive production lines and
flexible employees are able to shift production among various
railcar types with minimal interruption to our operations. For
example, we have in the past produced centerbeam platform
railcars and may in the future produce other types of railcars,
including various intermodal railcars, such as the innovative
platform railcar. In addition, as the existing fleet of North
American railcars is aging, expansion of our product portfolio
into new railcar types will allow us to grow our business by
capturing a portion of the natural replacement demand for
existing railcar types. Our ability to produce other types of
railcars positions us to respond to customer requests for
production outside of our traditional markets and provides us
additional manufacturing flexibility in the event the covered
hopper or tank railcar markets weaken.
Selectively pursue strategic external growth opportunities
By significantly reducing our debt through this offering and
with the establishment of a public market for our common stock,
we believe we will have increased financial flexibility to
supplement internal growth with select acquisitions, alliances
or joint ventures. We also believe our in-house fabrication of
railcar components and our Ohio Castings joint venture provide
us with competitive advantages and we intend to enhance these
advantages by selectively acquiring or establishing strategic
relationships with railcar components manufacturers and
suppliers of critical raw materials. Successful acquisitions of
or collaborations with these manufacturers and suppliers should
help mitigate the risk of supply shortages of key components and
raw materials we need for our business. While we have in the
past engaged in preliminary discussions with certain parties
regarding potential strategic acquisitions, alliances or joint
ventures, as of the date of this prospectus, we are not
currently engaged in any such discussions and do not have any
commitments to enter into any acquisition, alliance or joint
venture. We may also seek to expand our railcar components
business into international markets on an opportunistic basis.
OUR PRODUCTS AND SERVICES
We design and manufacture special, customized and general
purpose railcars and a wide range of components primarily for
the North American railcar and industrial markets. We also
support the railcar industry through a variety of integrated
railcar services, including repair, maintenance, consulting,
engineering and fleet management services.
Manufacturing
We manufacture two primary types of railcars, covered hopper
railcars and tank railcars. Our revenues attributable to our
railcar manufacturing operations were approximately
$108.2 million, $154.7 million and $265.8 million
in 2002, 2003 and 2004, respectively, and were approximately
$357.2 million for the nine months ended September 30,
2005. These revenues represented 64%, 71% and 75% of our total
revenues in 2002, 2003 and 2004, respectively, and represented
81% of our total revenues for the nine months ended
September 30, 2005.
Covered hopper railcars.
We believe we are a
leading manufacturer of covered hopper railcars in North
America. We manufacture both general service and specialty
covered hopper railcars. Our general service covered hopper
railcars have capacities ranging from 3,200 to 6,500 cubic
feet and
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primarily carry plastic pellets, cement, grain and other food
products, soda ash and other dry granular products. Our
specialty covered hopper railcars, which include our
Pressureaide covered hopper railcar, have capacities ranging
from 3,300 to 5,750 cubic feet and use air pressure to
assist unloading. Our specialty covered hopper railcars
primarily carry flour, clays, food and industrial grade corn
starches. Revenues attributable to sales of our covered hopper
railcars were approximately $61.9 million,
$82.2 million and $84.8 million in 2002, 2003 and
2004, respectively, and were approximately $190.8 million
for the nine months ended September 30, 2005. These
revenues represented 37%, 38% and 24% of our total revenues in
2002, 2003 and 2004, respectively, and represented 43% of our
total revenues for the nine months ended September 30,
2005. We sold 1,053, 1,343 and 1,507 covered hopper
railcars in 2002, 2003 and 2004, respectively, and
2,759 covered hopper railcars in the nine months ended
September 30, 2005.
All of our covered hopper railcars may be equipped with varying
combinations of hatches, discharge outlets and protective
coatings to provide our customers with a railcar designed to
perform in precise operating environments. The flexible nature
of our covered hopper railcar design allows it to be quickly
modified to suit changing customer needs. This flexibility can
continue to provide value after the initial purchase because our
railcars may be converted for reassignment to other services or
customers. We provide a range of coatings to protect the railcar
and the shipper's product against corrosion and product
contamination. We build carbon steel and stainless steel covered
hopper railcars.
Our covered hopper railcars are specifically designed for
shipping a variety of dry bulk products, from light density
products, such as plastic pellets, to high density products,
such as cement. Some of our covered hopper railcars have a three
curve cross section. Depending upon the equipment on the
railcars, they can operate in either a gravity or vacuum
pneumatic unloading environment. Since its introduction, we have
improved our Center Flow line of covered hopper railcars to
provide protection for a wide range of dry bulk products and to
enhance the associated loading, unloading and cleaning
processes. Examples of these improvements include new and better
design of the shape of the railcars, joint designs, outlet
mounting frames and loading hatches and discharge outlets, which
enhance the cargo loading and unloading processes.
We have several versions of our covered hopper railcar that
target specific customers and specific loads, including:
4
Plastic Pellet
    Railcars.
These
    railcars are designed to transport, load and unload plastic
    pellets under precise specifications to preserve the purity of
    the load. Slight imperfections in the railcars transporting such
    goods or in the components that load and unload them can ruin an
    entire load. If plastic pellets within a load become tainted,
    the imperfection will likely persist during the conversion of
    the plastic pellets into end-products. An example of such cargo
    would be food grade plastic pellets used in the production of
    milk bottles and other food containers.
4
Cement
    Railcars.
Cement loads
    are heavier than many other loads of comparable volume, and
    therefore cement railcars are smaller in size to compensate for
    the weight. As a consequence, we can build more cement covered
    hopper railcars per day than we can any other railcar we
    manufacture. Our cement railcars typically have capacities of
    3,250 cubic feet and are built with two lading
    compartments, compared to, for example, our plastic pellet
    railcars, which typically have capacities of up to
    6,224 cubic feet and are built with four compartments.
4
Pressureaide
    Railcars.
Our
    Pressureaide railcar is targeted towards the bulk powder
    markets. Pressureaide railcars typically handle products such as
    clays, industrial and food grade starches and flours. We build
    our Pressureaide railcars in capacities ranging from
    3,300 cubic feet to as large as 5,750 cubic feet. They
    operate with internal pressures up to 14.5 pounds per
    square inch, which expedites unloading, and are equipped with
    several safety devices, such as pressure relief valves, a
    rupture disc and a vacuum relief valve.
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Tank railcars.
We manufacture non-pressure and
high pressure tank railcars. Our non-pressure tank railcars have
capacities ranging from 14,000 to 30,000 gallons and are
flexibly designed to enable the handling of a variety of
commodities including petroleum products, ethanol, asphalt,
vegetable oil, corn syrup and other food products. Our high
pressure tank railcars have capacities ranging from 13,500 to
33,600 gallons and transport products that require a
pressurized state due to their liquid, semi-gaseous or gaseous
nature, including chlorine, anhydrous ammonia, liquid propane
and butane. Most of our pressure tank railcars feature a thicker
pressure retaining inner shell that is separated from a jacketed
outer shell by layers of insulation, thermal protection or both.
Our pressure tank railcars are made from specific grades of
normalized steel that are selected for toughness and ease of
welding. Most of our tank railcars feature a sloped bottom tank
that improves the flow rate of the shipped product and provides
improved drainage. Many of our tank railcars feature coils that
are steam-heated to decrease cargo viscosity, which improves the
transported product's flow rate and speeds unloading. We
can alter the design of our tank railcars to address specific
customer requirements. Revenues attributable to sales of our
tank railcars were approximately $46.2 million,
$72.2 million and $111.3 million in 2002, 2003 and
2004, respectively, and were $113.8 million for the nine
months ended September 30, 2005. These revenues represented
27%, 33% and 31% of our total revenues in 2002, 2003 and 2004,
respectively, and represented 26% of our total revenues for the
nine months ended September 30, 2005. We sold 713, 1,209
and 1,637 tank railcars in 2002, 2003 and 2004,
respectively, and 1,436 tank railcars in the nine months ended
September 30, 2005.
Component
manufacturing.
We believe
we are an industry leader in the design and manufacture of
custom and standard railcar components. We manufacture over
300 different components for the North American railcar
industry. Our products include hitches for the intermodal
market, tank railcar components and valves, discharge outlets
for covered hopper railcars, manway covers and valve body
castings, and outlet components and running boards for
industrial and railroad customers. We manufacture a variety of
outlet types for our covered hopper railcars that we also sell
to other railcar manufacturers. We use these components in our
own railcar manufacturing and also sell them to third parties,
including our competitors. Sales of our railcar components to
third parties were approximately $9.2 million,
$9.8 million and $15.0 million in 2002, 2003 and 2004,
respectively, and were approximately $21.3 million for the
nine months ended September 30, 2005. Revenues attributable
to these sales represented 5%, 4% and 4% of our total revenues
in 2002, 2003 and 2004, respectively, and represented 5% of our
total revenues for the nine months ended September 30, 2005.
We also manufacture aluminum and special alloy steel castings
that we sell primarily to industrial customers. These products
include castings for the trucking, construction, mining and oil
and gas exploration markets, as well as finished, machined
aluminum castings, other custom machined products and commercial
mixing bowls. Sales of our industrial components were
approximately $21.1 million, $23.7 million and
$35.6 million in 2002, 2003 and 2004, respectively and were
approximately $30.4 million for the nine months ended
September 30, 2005. Revenues attributable to these sales
represented 13%, 11% and 10% of our total revenues in 2002, 2003
and 2004, respectively, and represented 7% of our total revenues
for the nine months ended September 30, 2005.
Railcar services
Our primary railcar services are railcar repair and
refurbishment and railcar fleet management services. Our primary
customers for these services are leasing companies and shippers.
We can service the entire railcar fleets of our customers,
including railcars manufactured by other companies. Some of our
customers use both our railcar repair and refurbishment business
and our fleet management services. We often provide these
preferred customers with expedited repair services to strengthen
our overall customer relationships. Our railcar services provide
us insights into our customers' railcar needs that we can
use to improve our products. These services create new customer
relationships and enhance
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relationships with our existing customers. Our revenues from our
railcar services operations were approximately
$30.4 million, $29.9 million and $38.6 million in
2002, 2003 and 2004, respectively, and were approximately
$32.9 million for the nine months ended September 30,
2005. These revenues represented 18%, 14% and 11% of our total
revenues in 2002, 2003 and 2004, respectively, and represented
7% of our total revenues for the nine months ended
September 30, 2005.
Railcar repair and refurbishment.
Our railcar
repair and refurbishment services include light and heavy
railcar repairs, exterior painting, interior lining application
and cleaning, tank and safety valve testing, railcar
inspections, wheel replacement and conversion or reassignment of
railcars from one purpose to another. We support our railcar
repair and refurbishment services customers through a
combination of full service repair shops, mobile repair units
and mini-shop locations. Our repair shops, like our
manufacturing facilities, are strategically located near major
rail lines used by our customers and suppliers and close to some
of the major industries we serve. Revenues attributable to our
railcar repair and refurbishment service operations were
approximately $28.0 million, $26.6 million and
$33.6 million in 2002, 2003 and 2004, respectively, and
were approximately $27.6 million for the nine months ended
September 30, 2005. These revenues represented 17%, 12% and
10% of our total revenues in 2002, 2003 and 2004, respectively,
and represented 6% of our total revenues for the nine months
ended September 30, 2005.
Railcar fleet management.
As of September 30,
2005, we manage approximately 57,000 railcars for various
customers, including approximately 22,000 for ARL, a leasing
company controlled by affiliates of Carl C. Icahn. Revenues
attributable to our fleet management services were approximately
$2.4 million, $3.3 million and $5.0 million in
2002, 2003 and 2004, respectively, and were approximately
$5.3 million for the nine months ended September 30,
2005. These revenues represented 1%, 2% and 1% of our total
revenues in each of 2002, 2003 and 2004, respectively, and
represented 1% of our total revenues for the nine months ended
September 30, 2005. Some of the principal features of our
railcar fleet management services business include:
4
Mileage
    accounting.
Some
    customers elect to receive mileage payments to offset freight
    charges. Mileage is paid for loaded miles moved and calculated
    based on published rates. We collect and audit the
    railroads' mileage calculations to ensure our customers
    receive the funds they are due.
4
Rolling stock
    taxes.
States and
    localities impose taxes on railcars calculated based upon
    mileage reporting. We file the required tax forms with the state
    and local taxing authorities. We audit the tax invoices received
    to determine whether the assessments are accurate.
4
Regulatory
    compliance.
Our
    regulatory compliance support services help customers maintain
    their railcar fleets in compliance with applicable regulations.
    As regulations change, we help our customers manage the
    associated requirements and costs. We analyze new fleets for
    which we provide fleet management services to identify areas of
    noncompliance with applicable U.S. rail regulations and
    determine corrective actions.
4
Engineering
    services.
Our
    engineering support services help customers manage their
    regulatory compliance and documentation. We provide procedures
    and consultation for railcar repairs to address integrity and
    compliance.
4
Field engineering
    services.
We provide
    on-site evaluation and implementation of significant engineering
    design changes for our customers.
4
Online service
    access.
Our web-based
    systems allow our customers to view information on their railcar
    fleet online. The data we maintain includes mechanical and
    regulatory information, historical costs and repair detail and
    the status of repairs.
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4
Maintenance
    planning.
We forecast
    our customers' railcar maintenance needs and suggest
    schedules for repair service and refurbishment. This helps to
    ensure better fleet utilization and more effective maintenance
    cycles.
MANUFACTURING
Our principal railcar manufacturing facilities are located in
Paragould and Marmaduke, Arkansas. We built these facilities in
1995 and 1999, respectively, on previously undeveloped sites.
These facilities employ non-unionized work forces and are
strategically located in close proximity to our major customers
and suppliers, which decreases our freight costs and railcar
delivery times. These facilities provide us the flexibility to
produce a variety of railcars and enable us to quickly shift
production from one railcar type to another railcar type.
Through September 30, 2005, we have manufactured
20,455 railcars at our Paragould facility and
6,373 railcars at our Marmaduke facility.
We manufacture all of our covered hopper railcars at our
Paragould facility. We successfully launched a third
manufacturing line at Paragould in December 2004. Based on our
current backlog, we plan to produce an average of approximately
24 railcars a working day at this facility. We manufacture
all of our tank railcars at our Marmaduke, Arkansas facility.
Based on our current backlog, we plan to produce an average of
approximately 7.5 railcars a working day at this facility.
Our actual daily production at both of these facilities will
depend on the mix of railcar types being manufactured and the
availability of raw materials and components. In 2004, we
manufactured 2,747 railcars at our Paragould facility and
1,637 railcars at our Marmaduke facility. We also have the
manufacturing ability to produce other types of railcars. For
example, in the past we have manufactured centerbeam platform
railcars used to transport building products.
We believe that we sustain product quality throughout each
railcar manufacturing facility by employing uniform, quality
tools and equipment. Our production lines are able to produce a
variety of railcars to satisfy changing customer preferences and
our tooling and plant layouts were constructed to enable quick
changeover. We currently can manufacture up to three different
types of railcars simultaneously at our Paragould facilities and
many different types of tank railcars simultaneously at our
Marmaduke facility. We believe our quality products and modern
manufacturing processes contribute to our low incidence of
warranty claims. Our warranty claims for railcars produced at
our Paragould and Marmaduke facilities were approximately
$0.3 million, $0.4 million and $0.1 million in
2002, 2003 and 2004, respectively, and were approximately
$0.5 million for the nine months ended September 30,
2005.
We designed our Paragould and Marmaduke facilities to provide
manufacturing flexibility and allow for the production of a
variety of railcar sizes and types. Examples of our production
flexibility include:
4
our ability to manufacture several
    types of railcars at our Paragould facility; for example, the
    Paragould facility recently finished an order of centerbeam
    platform railcars, and quickly converted to covered hopper
    railcar production upon completion of that order;
4
our two parallel,
    vertically-tiered manufacturing tracks at Paragould allow
    workers on these two tracks to share tools and equipment and
    allow multiple components of the same railcar to be produced
    simultaneously;
4
our welding machines, which are
    purposefully smaller than many other industrial welding
    machines, allow our welders greater freedom of movement, which,
    in turn, we believe increases production speed;
4
our automated painting lance helps
    ensure proper interior coating in a single application and we
    believe is faster and produces greater consistency than manual
    coating;
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4
our grit-blasting is conducted by
    automated, oscillating machinery, which we believe is superior
    to and more efficient than alternative techniques, including
    static manual blasting;
4
our ability to rotate railcars
    360 degrees eases and speeds specific steps in the
    production line, such as complicated welding steps that would
    otherwise need to be performed from difficult and possibly
    dangerous angles;
4
our horizontal manufacturing lines
    at our Marmaduke facility allow individual tank railcars to be
    taken in and out of the production line for additional
    attention, without the need to stop the plant's entire
    production process;
4
our proprietary outer-jacket
    coiling process allows us to insulate our tank railcars at our
    facility;
4
our force curing technique helps
    eliminate impurities, smell and residue remaining in railcars
    following the painting and lining steps, which we use primarily
    for railcars designed to transport food products;
4
our tracked loading and unloading
    points decrease the indirect labor required to move raw
    materials and components into our facilities and finished
    products out of our facilities; and
4
our integrated painting, railcar
    truck assembly and fabrication shops eliminate downtime in our
    production process.
In addition, we believe our management and operation of these
facilities help reduce our operating costs, some examples of
which include:
4
our decentralized management,
    including a salaried-to-hourly employee ratio of one to 14;
4
our proactive safety program,
    which features weekly meetings of safety sub-committees on which
    our hourly and salaried employees participate and voluntarily
    establish safety rules that frequently exceed regulatory and
    industry minimum requirements; our safety program has helped
    contribute to low incidences of accidents requiring lost
    production time at our facilities; and
4
our flexible workforce allows our
    employees to frequently move both between locations on
    production lines, such as welding and small components
    fabricating positions, and among our different manufacturing
    facilities.
CUSTOMERS
We have strong long-term relationships with many large
purchasers of railcars. Long-term customers are particularly
important in the railcar industry, given the limited number of
buyers and sellers of railcars, and railcar manufacturers'
desire constantly to maintain adequate backlog and manufacture
at full capacity.
Our railcar customer base consists mostly of U.S. shippers,
leasing companies and railroads. Over the past five years, our
largest leasing company customers included
ACF Industries LLC, The CIT Group, Inc., GATX
Rail Corporation, GE Capital Corporation, The Greenbrier
Companies and Union Tank Car Company and our largest shipper
customers included Solvay America, Inc., Dow Chemical Company,
Engelhard Corporation, Exxon Mobil Corporation and Lyondell
Chemical Company. Our major railroad customers over the past
five years included TTX and Union Pacific. Over the last five
years, our largest customers of railcar repair and refurbishment
services included ACF and ARL, affiliates of Carl C. Icahn, The
CIT Group, Inc., Lyondell Chemical Company and
PPG Industries, Inc. Over the last five years, our largest
fleet management services customers included ACF, ARL and
PLM Transportation. Over the last five years, our largest
customers for railcar components included ACF, GE Capital
Railcar, Olin Corporation, Trinity Industries, Inc. and
TTX Company. Over the last
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five years, our largest customers for industrial parts included
ABB Vetco Gray, Dresser Industries, Inc.,
KF Industries, Inc., McKissick Products and Stream Flo
Industries, Ltd.
In 2004, The CIT Group, Inc. accounted for approximately
16% of our revenues, The Greenbrier Companies accounted for
approximately 20% of our revenues, and ACF and ARL collectively
accounted for approximately 23% of our revenues. In 2004, sales
to our top ten customers accounted for approximately 79% of our
revenues. Sales to The Greenbrier Companies, another railcar
manufacturer, were under a contract for centerbeam platform
railcars that is now complete. We do not anticipate significant
sales to The Greenbrier Companies in the future. ARL and ACF are
affiliates of Carl C. Icahn, our principal beneficial
stockholder and the chairman of our board of directors.
While we maintain strong relationships with our customers, many
customers do not purchase railcars from us every year because
railcar fleets are not necessarily replenished or augmented
every year. The size and frequency of railcar orders often
results in a small number of customers representing a
significant portion of our sales in a given year. See "Risk
factors— Risks related to our business— We depend upon
a small number of customers that represent a large percentage of
our revenues— The loss of any single customer, or a
reduction in sales to any such customer, could have a material
adverse effect on our business, financial condition and results
of operations."
SALES AND MARKETING
We sell and market our products in North America through our
sales and marketing staff, including sales representatives who
sell directly to customers, catalogs through which our customers
have access to our railcar components, and our web site, through
which customers can order specialty components. We have seven
employees devoted to sales and marketing efforts for our railcar
manufacturing, components manufacturing and fleet management
services who operate from our corporate headquarters in
St. Charles, Missouri and, for our railcar repair business,
from a service office located in Houston, Texas. In addition,
ARL and ACF, affiliates of Carl C. Icahn, in connection with
their own leasing sales activities have, from time to time,
referred their customers and contacts to us that prefer to
purchase, rather than lease, railcars. At this time, there is no
formal arrangement with, or compensation of, ARL and ACF for any
referrals that result in sales of railcars.
The sales process for our products and services is often
multi-level, involving a team comprised of individuals from
sales, marketing, engineering, operations and senior management.
Each significant customer is assigned a team that engages the
customer at different organizational levels to provide planning
and product customization and to assure open communications and
support. Our marketing activities also include participation in
trade shows, publication of articles in trade journals,
participation in industry forums and distribution of sales
literature.
There is significant overlap between our railcar manufacturing,
railcar components and fleet services customers. Our presence in
each market increases our opportunities to gain market share in
each of the other markets. Our access to competitors'
railcars through our components and railcar repair and
maintenance businesses further increases our opportunities to
identify and address customer needs.
PRODUCT DEVELOPMENT
Our engineering, marketing, operations and management personnel
have developed collaborative relationships with many of their
customer counterparts and have used these relationships to
identify market demands and target our product development to
meet those demands. Our product development costs are reflected
in our general, selling and administrative expenses. From time
to time, we hire additional engineers or contract projects to
outside firms to work on specific product development projects.
Our current product development efforts focus on the development
of railcars equipped with outlets specifically designed to
target certain industries, including a through sill general
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service covered hopper railcar designed for the sugar industry
and the grain and cement markets. We also have developed a
bulkheadless covered hopper railcar to address the needs of
customers that are more focused on loading, rather than
unloading, efficiency. We have built prototypes of some of these
railcars, which are currently being field tested by target
customers. With input from our customers, we continually monitor
product performance following delivery. Observation of our
products and our competitors' products at various stages of
a railcar's lifecycle and feedback from our repair shops,
has led to product innovations, including proprietary bulkhead
reinforcements and changes to our basic design platform. We
cannot guarantee that we will be able to develop new products
effectively, to enhance our existing products, or to respond
effectively to technological changes or new industry standards
or developments on a timely basis if at all.
BACKLOG
Our total backlog as of September 30, 2004 was
$365.1 million and as of September 30, 2005 was
$1,133 million. We estimate that approximately 12% of our
September 30, 2005 backlog will be converted to revenues in
the year ended December 31, 2005. Although we believe these
orders to be firm, customer orders may be subject to
cancellation, customer requests for delays in railcar delivery,
inspection rights and other customary industry terms and
conditions.
On July 29, 2005, we entered into a multi-year purchase and
sale agreement with CIT to manufacture and sell to CIT covered
hopper and tank railcars. Under this agreement, CIT has agreed
to buy a minimum of 3,000 railcars from us in each of 2006, 2007
and 2008 and we have agreed to offer to sell to CIT up to 1,000
additional railcars in each of those years. CIT may choose to
satisfy its purchase obligations from among a variety of covered
hopper and tank railcars described in the agreement. CIT may
reduce its future purchase obligations or cancel pending
purchase orders, upon prior written notice to us, under certain
conditions, including a reduction of the then current American
Railway Car Institute's most recently reported quarterly
backlog below specified levels. As of September 30, 2005, the
American Railway Car Institute reported a quarterly backlog of
in excess of 60,900 railcars. If during the term of the
agreement, the levels of quarterly backlog reported by American
Railway Car Institute fall below 45,000 railcars but remains
above 35,000 railcars, CIT has the right, on 240 days prior
written notice, to cancel pending purchase orders or reduce
subsequent purchase obligations for the then current agreement
year, in either case such that actual purchases by CIT would not
fall below 50% of that agreement year's original minimum
purchase requirements. If the American Railway Car
Institute's reported quarterly backlog falls below 35,000
railcars, CIT has the right to cancel or suspend all, or any,
pending purchase orders or remaining purchase obligations under
the Agreement upon at least 180 days prior written notice.
If CIT elects to cancel any pending purchase order under these
provisions within at least 120 days of the delivery date of
the order, we may require that CIT purchase from us, at our
cost, all material which we had purchased and identified to such
cancelled purchase order. CIT also has the right to reduce its
railcar orders from us if market prices for the railcars subject
to our agreement are reduced significantly below our quoted
prices and we fail to meet such price reductions. Under the
agreement, purchase prices for railcars are subject to steel
surcharges and certain other material cost increases applicable
at the time of production.
Our backlog consists of orders for railcars. We define backlog
as the number and sales value of railcars that our customers
have committed in writing to purchase from us that have not been
recognized as revenues. Although we generally have one to three
year contracts with most of our fleet management customers,
neither orders for our railcar repair and refurbishment services
business nor our fleet management business are included in our
backlog because we generally deliver our services in the same
period in which orders are received. Similarly, orders for our
component manufacturing
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business are not included in our backlog because we generally
deliver components to our customers in the same period in which
orders for the components are received.
Due to the large size of railcar orders and variations in the
number and mix of railcars ordered in any given period, the size
of our reported backlog at the end of any such period may
fluctuate significantly. See "Risk factors— Risks
related to our business— The variable purchase patterns of
our railcar customers and the timing of completion, delivery and
acceptance of customer orders may cause our revenues and income
from operations to vary substantially each quarter, which could
result in significant fluctuations in our quarterly
results."
The following table shows our reported railcar backlog, and
estimated future revenue value attributable to such backlog, at
the end of the periods shown. This reported backlog includes
9,000 railcars relating to CIT's minimum purchase
obligations under its agreement with us based upon an assumed
product mix consistent with CIT's orders for railcars.
Changes in product mix from that assumed would affect the dollar
amount of our backlog from CIT.
Nine months ended
Year ended December 31,
September 30,
2002
2003
2004
2004
2005
Railcar backlog at start of period
317
412
2,287
2,287
7,547
New railcars delivered
(1,766
)
(2,557
)
(4,384
)
(3,260
)
(4,980
)
New railcar orders
1,861
4,432
9,644
6,626
13,000
Railcar backlog at end of period
412
2,287
7,547
5,653
15,567
Estimated railcar backlog value at end of period (in
    thousands)(1)
$
26,906
$
129,850
$
494,107
$
365,097
$
1,132,798
(1)
Estimated backlog value reflects the total revenues expected to
    be attributable to the backlog reported at the end of the
    particular period as if such backlog were converted to actual
    revenues. Estimated backlog does not reflect potential price
    increases and decreases under certain customer contracts that
    provide for variable pricing based on changes in the cost of
    certain raw materials and railcar components or the cancellation
    or delay of railcar orders that may occur.
Historically, we have experienced little variation between the
number of railcars ordered and the number of railcars actually
delivered, however, our backlog is not necessarily indicative of
our future results of operations. As orders may be canceled or
delivery dates extended, we cannot guarantee that our reported
railcar backlog will convert to revenue in any particular
period, if at all, nor can we guarantee that the actual revenue
from these orders will equal our reported backlog estimates or
that our future revenue efforts will be successful. See
"Risk factors— Risks related to our business— The
level of our reported railcar backlog may not necessarily
indicate what our future revenues will be and our actual
revenues may fall short of the estimated revenue value
attributed to our railcar backlog."
SUPPLIERS AND MATERIALS
We employ a just-in-time supply strategy for our manufacturing.
We believe this strategy improves working capital efficiency,
reduces operating costs and improves our flexibility to adjust
rapidly to production capacity. Our business depends on the
adequate supply of numerous railcar components, such as railcar
wheels, brakes, sideframes, axles, bearings, yokes, tank railcar
heads, bolsters and other heavy castings, and raw materials,
such as steel and normalized steel plate, used in the production
of railcars. Over the last few years, many components and raw
materials suppliers have been acquired or ceased operations,
which has caused the number of alternative suppliers of railcar
components and raw materials to decline. The combination of
industry consolidation and high demand has caused recent
industry-wide shortages of many critical components and raw
materials as reliable suppliers are
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frequently at or near production capacity. In some cases, such
as those described below, as few as one significant supplier
produces the type of component or raw material we use in our
railcars. See "Risk factors— Risks related to our
business— Fluctuations in the supply of components and raw
materials we use in manufacturing railcars could cause
production delays or reductions in the number of railcars we
manufacture, which could materially adversely affect our
business and results of operations."
The cost of raw materials and railcar components represents
approximately 80% to 85% of the direct manufacturing costs of
most of our railcar product lines. Prices for steel, the primary
component in railcars and railcar components, rose sharply in
2004 as a result of strong demand, limited availability of scrap
metal for steel processing, reduced capacity and import trade
barriers. As of September 30, 2005, most of our railcar
manufacturing contracts contain price variability provisions
that track fluctuations in the prices of certain raw materials
and railcar components, including steel, so that increases in
our manufacturing costs caused by increases in the prices of
these raw materials and components are passed directly on to our
customers. Conversely, if the price of those materials or
components decreases, a discount is applied to reflect the
decrease in cost. In our component manufacturing business, we
add a surcharge to every product to account for increases in
steel costs. Though we do not have similar contractual
protections in connection with the aluminum we use in our
manufacturing processes, we believe the risks are much less
significant primarily due to the overall lower amounts of
aluminum we use in our manufacturing, the relative price of
aluminum to steel and the historical range of aluminum prices.
Our customers often specify particular railcar components and
the suppliers of such components. We continually monitor
inventory levels to ensure adequate support of production. We
periodically make advance purchases to avoid possible shortages
of material due to capacity limitations of railcar component
suppliers and possible price increases. We do not typically
enter into binding long-term contracts with suppliers because we
rely on established relationships with major suppliers to ensure
the availability of raw materials and specialty items.
In 2004, no single supplier accounted for more than 12% of our
total purchases and our top ten suppliers accounted for 63% of
our total purchases. See "Risk factors—Risks related
to our business—The cost of the raw materials that we use
to manufacture railcars, particularly steel, are high and these
costs are expected to increase. Any increase in these costs or
delivery delays of these raw materials may materially adversely
affect our business, financial condition and results of
operations."
In October 2005, we entered into two vendor supply contracts
with minimum volume commitments with suppliers of materials used
at our railcar manufacturing facilities. These agreements relate
to railcar components, and have terms of two and three years,
respectively. We have agreed to purchase a combined total of
$67.6 million from these two suppliers over the next three
years. In 2006, 2007 and 2008 we expect to purchase
$16.0 million, $27.1 million and $24.5 million
respectively under these agreements.
Steel.
We use both regular and normalized steel plate to
manufacture railcars. Currently, there is only one domestic
supplier of the form and size of normalized steel plate that we
need for our manufacturing operations, and that supplier is our
only source of this product. We believe we can acquire regular
steel from other suppliers. Normalized steel plate is a special
form of heat treated steel that is stronger and can withstand
puncture better than regular steel. Normalized steel plate is
required by Federal regulations to be used in tank railcars
carrying certain types of hazardous cargo, including liquefied
petroleum gas. We use normalized steel plate in the production
of many of our tank railcars.
In June 2005, we entered into an agreement with another supplier
that is constructing a facility to manufacture normalized steel
plate, including normalized steel plate of the form and size we
need for our manufacturing operations to supply us with a
portion of our normalized steel plate requirements. We believe
construction of this normalized steel production facility is
scheduled for completion by
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early 2006. Although our arrangements with this supplier will
not satisfy all of our normalized steel requirements, we expect
this facility will provide us an alternative source of
normalized steel plate and decrease our reliance on the current
sole supplier of this critical raw material.
We also have entered into a supply agreement with this supplier
for the purchase of regular steel plate. Both agreements have a
term of five years and may be terminated by either party at any
time after two years, upon twelve months prior notice. Each
agreement requires us to purchase the lesser of a fixed volume
or 75% of our requirements for the steel plate covered by that
agreement at prices that fluctuate with the market.
Tank heads and floor sheet reinforcements.
ACF supplies
us with tank railcar heads, head blocks, head pads, floor sheet
reinforcements, wheel sets, mounting frames and sheared panels.
ACF is our sole supplier of tank railcar heads and floor sheet
reinforcements. See "Risk Factors—Risks related to our
business—After this offering, companies affiliated with
Carl C. Icahn will continue to be important suppliers and
customers."
Castings.
Heavy castings we use in our railcar
manufacturing primarily include bolsters, sideframes, couplers
and yokes. These castings form part of the truck assemblies upon
which railcars must be placed. The companies that supply the
railcar industry with heavy castings are unable to meet current
demands of all the railcar manufacturers and, as such, the
production capacity of many railcar manufacturers is limited by
the restricted availability of these components. In 2003, our
management team helped found and develop, and continues to
operate Ohio Castings, a joint venture, in which we own a
one-third interest. The joint venture leased a foundry in
Cicero, Illinois and acquired a foundry in Alliance, Ohio and
produces sideframes, bolsters, couplers and yokes. We also have
entered into supply agreements with an affiliate of one of our
Ohio Castings joint venture partners to purchase up to 25% and
33%, respectively, of the car sets, consisting of sideframes and
bolsters, produced at each of these foundries. Our purchase
commitments under these supply agreements are dependent upon the
number of car sets manufactured by these foundries, which are
jointly controlled by us and the other two members of Ohio
Castings. We believe that our involvement in this joint venture
helps us maintain our levels of production at competitive
prices, despite industry-wide shortages of these potentially
capacity constraining components. See "Risk factors—
Risks related to our business— Our relationships with our
partners in our Ohio Castings Company, LLC joint venture may not
be successful, which could materially adversely affect our
business," and "—Certain relationships and
related party transactions."
Wheels and brakes.
There also have been supply
constraints and shortages of wheels and brakes used in railcars.
Currently, there are only two domestic suppliers of each of
these components. For both wheels and brakes, we primarily rely
on one supplier. We also obtain limited quantities of
refurbished wheels from scrapped railcars. If necessary, we
believe we can also obtain railcar wheels from a Chinese
supplier at a significantly higher cost.
COMPETITION
The railcar manufacturing business is extremely competitive. We
compete primarily with Trinity Industries, Inc. and National
Steel Car Limited in the covered hopper railcar market and with
Trinity Industries and, to a lesser degree, Union Tank Car
Company in the tank railcar market. Both Trinity Industries, and
Union Tank Car Company have substantially greater resources and
produce substantially more tank railcars than us. However, Union
Tank primarily produces tank railcars for its own leased fleet.
Trinity Industries produces substantially more covered hopper
railcars than we do. For example, according to Trinity
Industries, Inc.'s annual report for the year ended
December 31, 2004 and its quarterly report for the nine
months ended September 30, 2005, Trinity delivered a total
of approximately 15,100 and 17,016 railcars, respectively,
during those periods in North America. By
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comparison, for the year ended December 31, 2004 and for
the nine months ended September 30, 2005, we delivered a
total of approximately 4,384 and 4,980 railcars, respectively,
during those periods in North America.
Some of our competitors have greater financial and technological
resources than we do. They may increase their participation in
the railcar markets in which we compete and other railcar
manufacturers that currently do not manufacture covered hopper
railcars or tank railcars may choose to compete directly with
us. Railcar purchasers' sensitivity to price and strong
price competition within the industry have historically limited
our ability to increase prices to obtain better margins on our
railcars.
We face intense competition in our other markets as well. Our
competition for the sale of railcar components includes our
competitors in the railcar manufacturing market as well as a
concentrated group of companies whose primary business focus is
the production of one or more specialty components. In addition,
new competitors, or alliances among existing competitors, may
emerge and rapidly gain market share. We compete with numerous
companies in our railcar services and fleet management
businesses, ranging from companies with greater resources than
we have to small, local companies. Our principal competitors in
these businesses include Rescar and Millennium Rail.
In addition to price, competition in all our markets is based on
quality, reputation, reliability of delivery, customer service
and other factors. Any of these factors as well as technological
innovation by any of our existing competitors, or new
competitors entering any of the markets in which we do business,
could put us at a competitive disadvantage. We may be unable to
compete successfully or retain our market share in our
established markets. Increased competition for the sales of our
railcar products and services could result in price reductions,
reduced margins and loss of market share, which could negatively
affect our prospects, business, financial condition and results
of operations.
INTELLECTUAL PROPERTY
We rely on a combination of investments, copyrights and patents
to protect our intellectual property. Due to the change that has
historically characterized the railcar manufacturing industry,
we believe that the improvement of existing technology and the
development of new products may be more important than patent
protection in establishing and maintaining a competitive
advantage. Nevertheless, we have obtained patents and will
continue to make efforts to obtain patents, when available, in
connection with product developments and designs. We cannot
guarantee that any patent obtained will provide protection or be
of commercial benefit to us, or that its validity will not be
challenged.
We have ten U.S. and two non-U.S. patents, two pending
non-U.S. patent applications, seven registered trademarks,
and numerous unregistered copyrights and trade names. Our
patents expire at various times from 2005 to 2021.
EMPLOYEES
As of September 30, 2005, we had 2,336 full-time employees
in various locations throughout the United States and Canada,
including 2,217 engaged in our manufacturing, railcar repair and
railcar fleet management operations and 119 in various corporate
support functions. At our Longview, Texas and North Kansas City,
Missouri repair facilities, and at our Longview, Texas steel
foundry and components manufacturing facility, 50, 45 and 289
employees, respectively, are covered by collective bargaining
agreements. These agreements expire in January 2008, September
2007 and April 2008, respectively. We are also party to a
collective bargaining agreement at our Milton, Pennsylvania
repair facility, which is currently idle. Employees at our other
locations are not covered by collective bargaining agreements.
We believe that our relations with our employees are generally
good.
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REGULATION
The Federal Railroad Administration, or FRA, administers and
enforces U.S. federal laws and regulations relating to
railroad safety. These regulations govern equipment and safety
compliance standards for railcars and other rail equipment used
in interstate commerce. The Association of American Railroads,
or AAR, promulgates a wide variety of rules and regulations
governing safety and design of equipment, relationships among
railroads with respect to railcars in interchange and other
matters. The AAR also certifies railcar manufacturers and
component manufacturers that provide equipment for use on
railroads in the United States. New products must generally
undergo AAR testing and approval processes. As a result of these
regulations, we must maintain certifications with the AAR as a
railcar manufacturer, and products that we sell must meet AAR
and FRA standards. We must comply with the rules of the
U.S. Department of Transportation, or DOT, and we are also
subject to oversight by Transport Canada. To the extent that we
expand our business internationally, we will increasingly be
subject to the regulations of other non-U.S. jurisdictions.
Due to the health and safety risks posed by several types of
hazardous cargo transported by pressure tank railcars, including
liquefied petroleum gas, chlorine and anhydrous ammonia,
pressure tank railcars are subject to regulations to which many
other types of railcars are not subject. For example, in
response to general safety and homeland security concerns, there
are currently proposals pending by governmental and
non-governmental railcar authorities that address, among other
things, the impact resistance of the steel used in the
manufacture of pressure tank railcars. These proposals may
result in additional regulation concerning the required use of
normalized steel, and the testing of its impact resistance, in
pressure tank railcars. Prior to 1989, normalized steel was not
typically used in the manufacture of pressure tank railcars and,
according to AAR and DOT data, approximately 28,000 pressure
tank railcars currently in the U.S. railcar fleet were not
manufactured with normalized steel. Because normalized steel is
used to form railcars' shells, it is generally not feasible
to retrofit railcars with normalized steel. We believe we are
well positioned to take advantage of any increased demand for
new pressure tank railcars that could result from regulations
requiring the increased use of normalized steel in pressure tank
railcars or the removal of any pre-1989 pressure tank railcars
from the U.S. railcar fleet.
ENVIRONMENTAL MATTERS
We are subject to comprehensive federal, state, local and
international environmental laws and regulations relating to the
release or discharge of materials into the environment, the
management, use, processing, handling, storage, transport or
disposal of hazardous materials and wastes, or otherwise
relating to the protection of human health and the environment.
These laws and regulations expose us to liability for the
environmental condition of our current or formerly owned or
operated facilities and our own negligent acts, and also may
expose us to liability for the conduct of others or for our
actions that were in compliance with all applicable laws at the
time these actions were taken. In addition, these laws may
require significant expenditures to achieve compliance, and are
frequently modified or revised to impose new obligations. Civil
and criminal fines and penalties and other sanctions may be
imposed for non-compliance with these environmental laws and
regulations. Our operations that involve hazardous materials
also raise potential risks of liability under the common law.
Environmental operating permits are, or may be, required for our
operations under these laws and regulations. These operating
permits are subject to modification, renewal and revocation. We
regularly monitor and review our operations, procedures and
policies for compliance with permits, laws and regulations.
Despite these compliance efforts, risk of environmental
liability is inherent in the operation of our businesses, as it
is with other companies engaged in similar businesses. Many of
our properties were transferred to us by ACF in 1994. We are
involved in investigation and remediation activities at
properties that we now own or lease to address historic
contamination and potential contamination by
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third parties. We are also involved with state agencies in the
cleanup of two sites under these laws. These investigations are
at a preliminary stage, and it is impossible to estimate, with
any certainty, the timing and extent of remedial actions that
may be required, and the costs that would be involved in such
remediation. Substantially all of the issues identified relate
to the use of the properties prior to their transfer to us in
1994 by ACF and for which ACF has retained liability for
environmental problems that may have existed at the time of
their transfer to us and ACF has also agreed to indemnify us for
any cost that might be incurred with those existing problems.
However, if ACF fails to honor its obligations to us, we would
be responsible for the cost of such remediation.
In connection with its ongoing obligations, ACF, in consultation
with us, is investigating and, as appropriate, remediating those
sites that it transferred to us. We have been advised that, for
the remainder of 2005, ACF estimates that it will spend
approximately $0.1 million on environmental investigation and,
in each of 2006 and 2007, it will spend approximately $0.2
million on environmental investigation, relating to
contamination that existed at properties prior to their transfer
to us and for which ACF has retained liability and agreed to
indemnify us. We believe that our operations and facilities are
in substantial compliance with applicable laws and regulations
and that any noncompliance is not likely to have a material
adverse effect on our operations or financial condition.
Future events, such as new environmental regulations or changes
in or modified interpretations of existing laws and regulations
or enforcement policies, or further investigation or evaluation
of the potential health hazards of products or business
activities, may give rise to additional compliance and other
costs that could have a material adverse effect on our financial
conditions and operations. In addition, we have in the past
conducted investigation and remediation activities at properties
that we own to address historic contamination. To date such
costs have not been material. Although we believe we have
satisfactorily addressed all known material contamination
through our remediation activities, there can be no assurance
that these activities have addressed all historic contamination.
The discovery of historic contamination or the release of
hazardous substances into the environment at our current or
formerly owned or operated facilities could require us in the
future to incur investigative or remedial costs or other
liabilities that could be material or that could interfere with
the operation of our business.
In addition to environmental laws, the transportation of
commodities by railcar raises potential risks in the event of a
derailment or other accident. Generally, liability under
existing law in the United States for a derailment or other
accident depends on the negligence of the party, such as the
railroad, the shipper or the manufacturer of the railcar or its
components. However, for certain hazardous commodities being
shipped, strict liability concepts may apply.
PROPERTY
Our headquarters are located in St. Charles, Missouri. ARL, an
affiliate of Carl C. Icahn, leases this facility and permits us
to occupy it for a fee pursuant to a service agreement. Either
party may terminate this agreement on six months notice.
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The following table presents information about our railcar
manufacturing and components manufacturing facilities as of
September 30, 2005:
Leased or
Lease
Location
Use
Size
Owned
Expiration Date
Paragould, Arkansas
Covered hopper railcar manufacturing
546,680 square feet on 82 acres
Owned(1)
—
Marmaduke, Arkansas
Tank railcar manufacturing
441,075 square feet on 55 acres
Owned
—
St. Charles, Missouri
Aluminum foundry and machining
128,626 square feet on 3 acres
Leased
February 28, 2006
Jackson, Missouri
Railcar components manufacturing
110,240 square feet on 8 acres
Owned(1)
—
Kennett, Missouri
Covered hopper and tank railcar subassembly and small components
    manufacturing
78,375 square feet on 9 acres
Owned(1)
—
Longview, Texas
Steel foundry and machining
155,030 square feet on 31 acres
Owned
—
(1)
Our manufacturing facility located in Paragould, Arkansas is
    subject to a mortgage that secures the $9,500,000 industrial
    revenue bonds issued on April 27, 1995 by Paragould,
    Arkansas. As of September 30, 2005, approximately
    $4.5 million of these bonds remain outstanding. Our
    manufacturing facility located in Jackson, Missouri is subject
    to a mortgage that secures the approximately $2.5 million
    industrial development revenue bonds issued on July 1, 1996
    by Jackson, Missouri. As of September 30, 2005,
    approximately $1.5 million of these bonds remain
    outstanding. Our manufacturing facility located in Kennett,
    Missouri is subject to a mortgage that secures the approximately
    $5.5 million industrial development revenue bonds issued on
    June 22, 1995 by Kennett, Missouri. As of
    September 30, 2005, approximately $2.6 million of
    these bonds remain outstanding. We occupy the real property at
    these facilities through lease-back arrangements. We intend to
    repay all of these bonds in full with the proceeds of this
    offering. Each of these properties will be re-conveyed to us
    when the bonds secured by the properties are paid in full. The
    industrial revenue bonds are guaranteed by affiliates of
    Mr. Icahn, and these affiliates will be released from such
    guarantees upon repayment of the industrial revenue bonds. In
    addition, James J. Unger, our president and chief executive
    officer, and his wife own $0.4 million of the industrial
    revenue bonds issued by Paragould, Arkansas. Mr. Unger and
    his wife will receive approximately $0.4 million upon our
    repayment in full of the amounts due under the industrial
    revenue bonds. See "Use of proceeds," "Certain
    relationships and related party transactions—Guarantees of
    indebtedness by ACF and other related parties—Industrial
    revenue bonds" and "Certain relationships and related
    party transactions—Certain transactions involving James J.
    Unger—Industrial revenue bonds" for more details.
We also provide railcar repair, cleaning, maintenance and other
services at facilities we own in Longview and Goodrich, Texas;
North Kansas City, Missouri; and Tennille, Georgia; and at
facilities we lease in Gonzales, Louisiana; Green River,
Wyoming; Deer Park, Texas; Bude, Mississippi; and Sarnia,
Ontario. We also own a repair facility in Milton, Pennsylvania
that has been idle since 2003. Our facility located in Tennille,
Georgia is secured by a $0.6 million mortgage due
February 10, 2008. As of September 30, 2005,
approximately $0.2 million remained outstanding on this
mortgage.
INSURANCE
We maintain insurance on terms typical of our industry. Our
policies cover standard industry risks, including general and
products liability, workers compensation, automobile liability
and other casualty and property risks.
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LEGAL PROCEEDINGS
We have been named the defendant in a law suit in which the
plaintiff, OCI Chemical Company, claims we were responsible
for the damage caused by allegedly defective railcars that were
manufactured by us. The lawsuit was filed on September 19,
2005 in the United States District Court, Eastern District of
Missouri. The plaintiff seeks unspecified damages in excess of
$75,000. The plaintiffs allege that the failures in certain
components caused the contents transported by these railcars to
spill out of the railcars causing property damage, clean-up
costs, monitoring costs, testing costs and other costs and
damages. We believe that we are not responsible for the damage
and have meritorious defenses against liability.
We are from time to time party to various other legal
proceedings arising out of our business. Such proceedings, even
if not meritorious, could result in the expenditure of
significant financial and managerial resources. We believe that
there are no proceedings pending against us which, if determined
adversely, would have a material adverse effect on our business,
financial condition and results of operations.
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DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information concerning our current directors
and executive officers, including their ages as of
September 30, 2005.
Name
Age
Position
Carl C. Icahn
69
Chairman of the Board
James J. Unger
57
President, Chief Executive Officer and Director
James A. Cowan
48
Executive Vice President and Chief Operating Officer
William P. Benac
59
Senior Vice President and Chief Financial Officer
Alan C. Lullman
50
Senior Vice President Sales, Marketing and Services
Vincent J. Intrieri
49
Senior Vice President, Treasurer, Secretary and Director
Jon F. Weber
46
Director
Keith Meister
32
Director
James C. Pontious*
67
Director
James M. Laisure*
53
Director
*
Mr. Pontious and Mr. Laisure have each consented to
    serve as a director at such time as our common stock is listed
    on the Nasdaq National Market.
Carl C. Icahn, chairman of the board
Mr. Icahn has been our principal beneficial stockholder and
has served as our chairman of the board and as a director since
1994. Mr. Icahn has served as chairman of the board and a
director of Starfire Holding Corporation, or Starfire, (formerly
Icahn Holding Corporation), a privately-held holding company,
and chairman of the board and a director of various subsidiaries
of Starfire, since 1984. Mr. Icahn has also been chairman
of the board and president of Icahn & Co., Inc., a
registered broker-dealer and a member of the National
Association of Securities Dealers, since 1968. Since November
1990, Mr. Icahn has been chairman of the board of American
Property Investors, Inc., the general partner of American Real
Estate Partners, L.P., a public limited partnership that invests
in real estate and holds various other interests, including the
interests in its subsidiaries that are engaged, among other
things, in the oil and gas business and casino entertainment
business. Mr. Icahn has been a director of Cadus
Pharmaceutical Corporation, a firm that holds various
biotechnology patents, since 1993. From August 1998 to August
2002, Mr. Icahn served as chairman of the board of
Maupintour Holding LLC (f/k/a/ Lowestfare.com, LLC), an
Internet travel reservations company. From October 1998 through
May 2004, Mr. Icahn was the president and a director of
Stratosphere Corporation, which operates the Stratosphere Hotel
and Casino. Since September 29, 2000, Mr. Icahn has
served as the chairman of the board of GB Holdings, Inc.,
which owns all of the outstanding stock of Atlantic Coast
Entertainment Holdings, Inc., which owns an interest in The
Sands Hotel and Casino in Atlantic City, New Jersey. In
January 2003, Mr. Icahn became chairman of the board
and a director of XO Communications, Inc., a
telecommunications company. In May 2005, Mr. Icahn became a
director of Blockbuster Inc., a provider of in-home movie rental
and game entertainment. Mr. Icahn received his B.A. from
Princeton University.
James J. Unger, president, chief executive officer and
director
Mr. Unger has served as our president and chief executive
officer since March 1995. Prior to joining us, he served ACF as
its president from 1988 to 1995, as its senior vice president
and chief financial
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Management
officer from 1984 to 1988 and on its board of directors from
August 1993 to March 2005. After he joined us in 1995,
Mr. Unger simultaneously continued to serve as the vice
chairman of ACF until March 2005. ACF is controlled by
Mr. Icahn. Mr. Unger has served as president of Ohio
Castings, the joint venture in which we have a one-third
interest, since June 2003. Mr. Unger has been on the board
of directors of Aspen Resources Group, an oil and gas
exploration company since May 2002. Mr. Unger participates
in several industry organizations, including as an executive
committee member and board member for the Railway Supply
Institute, Inc., or "RSI". He also is a board member
of the American Railway Car Institute, a member of the project
review committee for the RSI-AAR Railroad Tank Car Safety
Research Test Project, a steering committee member of the RSI
Committee on Tank Railcars, and a member of the National Freight
and Transportation Association. Mr. Unger served as a
member of the board of directors of Ranken Technical College
from 1990 to 2002. Mr. Unger received a B.S. in accounting
from the University of Missouri, Columbia and is a certified
public accountant.
James A. Cowan, executive vice president and chief operating
officer
Mr. Cowan has served as our executive vice president and
chief operating officer since December 2005. Prior to joining
us, he spent the last 26 years in various positions
involving the engineering, construction and manufacturing of
multiple steel and tubular products. From March 2003 to August
2005, Mr. Cowan served as president and chief operating
officer of Maverick Tube Corporation, a North American
manufacturer of welded tubular steel products used in the energy
industry. Prior to this position, from June 2002 to March 2003,
Mr. Cowan served as president and chief operating officer
of Vallourec & Mannesmann Star, a French, German and
Japanese joint venture and seamless manufacturer of tubular
steel products. From January 1992 to June 2002, he served as
general manager responsible for all sales and operations of
three different steel manufacturing facilities for North Star
Steel, a business previously owned by Cargill. Mr. Cowan
was responsible for the complete greenfield development,
construction and start-up of one of these facilities. From July
1979 to January 1992, he served in differing operational
capacities for Cargill's steel group, North Star Steel. For
two years, during 2000 and 2001, Mr. Cowan served as the
Chairman of the Governor of Ohio's Steel Council.
Mr. Cowan received his B.S. in Metallurgical Engineering
from Michigan Technological University.
William P. Benac, senior vice president and chief financial
officer
Mr. Benac has served as our senior vice president and chief
financial officer since January 2005. Prior to joining us, he
spent the last 32 years in various corporate finance,
turnaround and value creation positions. Mr. Benac
co-founded bpmx, a financial services and consulting
restructuring company, where he served as senior managing
director and chief financial officer from December 2003 to
January 2005. From August 2002 to February 2003, Mr. Benac
served Kinko's Inc., a print services company, as senior
vice president and chief financial officer. From November 2000
to November 2001, Mr. Benac was the executive vice
president and chief financial officer of Grass Valley Group, a
manufacturer of digital broadcast technology. Mr. Benac
served simultaneously as an executive vice president and chief
financial officer of UICI, a diversified financial services
company, and as chief executive officer of United Credit
National Bank, a subsidiary of UICI and a credit card bank, from
May 1999 to November 2000. Mr. Benac has held a variety of
other financial management positions, including serving
Electronic Data Systems Corporation from February 1992 to
October 1997 as global vice president and treasurer, and
numerous positions with Verizon Corporation and its predecessor
companies from 1973 to 1990, including as president of GTE
Finance Corp. from 1986 to 1990. Mr. Benac is a certified
public accountant and a certified management accountant. He has
served on the National Advisory Council of the Marriott School
of Management—Brigham Young University since 1997.
Mr. Benac received his B.A. and his M.B.A. from Brigham
Young University and his J.D. from Pace University School of Law.
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Alan C. Lullman, senior vice president sales, marketing and
services
Mr. Lullman has served as our senior vice president sales,
marketing and services since October 2004. From August 1998 to
September 2004, he served as our vice president sales and
marketing. Prior to joining us, he served as a regional sales
manager at the Houston office of ACF from March 1989 to July
1998, where he was responsible for sales across 22 states.
From August 1987 to February 1989, Mr. Lullman was a
district sales manager at ACF. He held numerous other sales
positions at ACF sales offices in the Southwest, Midwest and
Northeast from October 1978 to July 1987. Mr. Lullman is a
member of the Transportation and Logistics Committee of the
American Plastics Council. He received a B.A. from Westminster
College. He also served in the U.S. Marine Corps Reserve
from 1973 to 1976, when he received an honorable discharge.
Vincent J. Intrieri, senior vice president, treasurer,
secretary and director
Mr. Intrieri has served as our senior vice president,
treasurer and secretary since March 2005 and has served on
our board of directors since August 2005. Mr. Intrieri is a
senior managing director of Icahn Partners LP and Icahn Partners
Master Fund LP, private investment funds controlled by
Mr. Icahn. Since January 1, 2005, Mr. Intrieri
has been senior managing director of Icahn Associates Corp. and
High River Limited Partnership, which is primarily engaged in
the business of holding and investing in securities. From March
2003 to December 2004, Mr. Intrieri served as a managing
director and from 1998 to March 2003, he served as a portfolio
manager of Icahn Associates Corp. and High River. Each of Icahn
Associates Corp. and High River are under the control of
Mr. Icahn. From 1995 to 1998, Mr. Intrieri served as
portfolio manager for distressed investments with Elliott
Associates L.P., a New York investment fund. Prior to 1995,
Mr. Intrieri was a partner at the Arthur Andersen
accounting firm. Mr. Intrieri is a certified public
accountant. Mr. Intrieri is chairman of the board of
directors and a director of Viskase Companies, Inc., a publicly
owned producer of cellulose and plastic casings used in
preparing and packaging meat products, in which Mr. Icahn
has an interest through the ownership of securities. In
addition, Mr. Intrieri has served on the board of directors
of XO Communications, Inc., a telecommunications services
company controlled by Mr. Icahn, since January 2003.
Mr. Intrieri received a B.S. in Accounting from The
Pennsylvania State University.
Jon F. Weber, director
Mr. Weber has served on our board of directors since August
2005. Since April 2005, Mr. Weber has served as the
president of American Property Investors, Inc., which is the
general partner of American Real Estate Partners, L.P., a public
limited partnership controlled by Mr. Icahn that invests in
real estate and holds various other interests, including the
interests in its subsidiaries that are engaged, among other
things, in the oil and gas business and casino entertainment
business. Mr. Weber has, since April 2003, been head of
portfolio company operations and chief financial officer at
Icahn Associates Corp., an entity controlled by Mr. Icahn.
Since May 2003, Mr. Weber has been a director of Viskase
Companies, Inc. and was the chief executive officer of Viskase
Companies, Inc. from May 2003 to October 2004. Since March 2003,
he has served as chief executive officer and a director of
Philip Services Corporation, a metal recycling and industrial
services company affiliated with Mr. Icahn. He served as
chief financial officer of venture-backed companies QuantumShift
Inc. and Alchemedia Ltd. from October 2001 to July 2002 and
November 2000 to October 2001, respectively. From May 1998 to
November 2000, Mr. Weber served as managing
director—investment banking for JP Morgan Chase and its
predecessor, Chase Manhattan Bank, in São Paulo, Brazil. He
has served as a director of XO Communications, Inc., since May,
2005. Previously, Mr. Weber was an investment banker at
Morgan Stanley and Salomon Brothers.
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Keith Meister, director
Mr. Meister has served on our board of directors since
August 2005. Since June 2002, Mr. Meister has been a senior
investment analyst of High River, a company owned and controlled
by Mr. Icahn that is primarily engaged in the business of
holding and investing in securities. Mr. Meister is also a
senior investment analyst of Icahn Partners LP and Icahn
Partners Master Fund LP. He is also a director of Icahn
Fund Ltd., which is the feeder fund of Icahn Partners
Master Fund LP. Icahn Partners LP and Icahn Partners Master
Fund L.P. are private investment funds controlled by
Mr. Icahn. Since August 2003, Mr. Meister has served
as the chief executive officer of American Property Investors,
Inc., or API, which is the general partner of American Real
Estate Partners, L.P., a public limited partnership controlled
by Mr. Icahn that invests in real estate and holds various
other interests, including the interests in its subsidiaries
that are engaged, among other things, in the oil and gas
business and casino entertainment business. Mr. Meister
served API as its president from August 2003 to April 2005. From
March 2000 through the end of 2001, Mr. Meister co-founded
and served as co-president of J Net Ventures, a venture capital
fund focused on investments in information technology and
enterprise software businesses. From 1997 through 1999,
Mr. Meister served as an investment professional at
Northstar Capital Partners, an opportunistic real estate
investment partnership. Prior to his work at Northstar,
Mr. Meister served as an investment analyst in the
investment banking group at Lazard Freres. Mr. Meister is a
director of XO Communications, Inc., a telecommunications
services company controlled by Mr. Icahn. Mr. Meister
also is a director of American Entertainment Properties Corp.
and American Casino & Entertainment Properties Finance
Corp., which are gaming companies, and Scientia Corporation, a
private health care venture company, all of which are companies
controlled by American Real Estate Partners, L.P. In August
2005, Mr. Meister also became a director of ADVENTRX
Pharmaceuticals, Inc., a biopharmaceutical company.
Mr. Meister received his A.B. in Government cum laude from
Harvard College.
James C. Pontious, director
Mr. Pontious has agreed to serve on our board of directors
at such time as our common stock is listed on the Nasdaq
National Market. Since May 2005, Mr. Pontious has been a
consultant in the areas of business development and acquisitions
to Wabtec Corporation, a public company that supplies air brakes
and other equipment for locomotives, freight cars and passenger
transit vehicles. In 2005, Mr. Pontious helped Wabtec found
Intermodal Trailer Express Corp, an intermodal operating company
established to focus on hauling highway trailers over the
nation's railroads. Mr. Pontious is a principal of
this newly founded company. Mr. Pontious served Wabtec as
vice president of special projects from January 2003 through
April 2005 and as vice president of sales and marketing from
April 1990 to January 2003. Mr. Pontious also served as
vice president of sales and marketing at New York Air Brake
Company, a unit of General Signal Corporation, from 1977 to
1990. Prior to this, Mr. Pontious served the
Pullman-Standard division of Pullman, Inc., a freight and
passenger railcar manufacturer, from 1961 to 1977 in various
management positions in the areas of sales, marketing and
operations. Mr. Pontious currently serves as a director of
the Intermodal Transportation Institute at the University of
Denver. Mr. Pontious holds a B.B.A. from the University of
Minnesota.
James M. Laisure, director
Mr. Laisure has agreed to serve on our board of directors
at such time as our common stock is listed on the Nasdaq
National Market. Since May 2005, Mr. Laisure has been
consulting as an independent contractor for the automotive and
industrial manufacturing space. Prior to this, he spent
32 years in various corporate accounting, sales,
engineering and operational positions with Dana Corporation, a
publicly held corporation that designs, manufactures and
supplies vehicle components and technology, and its
predecessors. Mr. Laisure served as president of
Dana's Automotive Systems Group from
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March 2004 to May 2005. From December 2001 to February 2004,
Mr. Laisure served as president of Dana's engine and
fluid management group and, from December 1999 to November 2001,
he served as president of Dana's fluid management group. In
addition, he served on the board of directors of various Dana
Corporation joint ventures, including joint ventures in Germany,
Indonesia, Mexico and Turkey. Mr. Laisure served as
director of finance of P.T. Spicer Indonesia, a manufacturer of
axles and driveshafts, from 1982 to 1984. Also, he served as
accountant, internal auditor and controller at Perfect Circle, a
manufacturer of automotive engine components, from 1973 to 1981.
Mr. Laisure received a B.A. degree in Accounting from Ball
State University and an M.B.A. from Miami (Ohio) University, and
has completed the Harvard Advanced Management Program.
KEY EMPLOYEES
Set forth below is information concerning our key employees,
including their ages as of September 30, 2005.
Jackie R. Pipkin, 56, director of railcar manufacturing
Mr. Pipkin has served as our director of railcar
manufacturing since July 1996, after serving as plant manager of
our Paragould and Kennett manufacturing facilities. Prior to
joining us, Mr. Pipkin served Thrall Car Manufacturing, a
railcar manufacturer, as manufacturing manager from January 1992
to March 1994 and as general superintendent from December 1989
to December 1992. He served ACF in various roles from February
1969 to December 1989. Mr. Pipkin has supervised or helped
supervise the launch of several new railcar manufacturing
facilities during his employment with ACF and with us, including
the original construction of our Paragould and Marmaduke
facilities and the addition of the third manufacturing line at
our Paragould facility.
Michael R. Williams, 44, vice president engineering and
manufacturing
Mr. Williams has served as our vice president engineering
and manufacturing since October 2004 and in various product and
account management roles since April 1997. Prior to joining us,
Mr. Williams served ACF as a strength analyst of covered
hopper and tank railcars from January 1991 to March 1997.
Mr. Williams served as an airframe designer and analyst at
McDonnell Douglas Corporation from May 1983 to December 1990.
Mr. Williams received his B.S. in mechanical engineering
from the University of Illinois and a M.S. in Mechanical
Engineering and a M.B.A. from Washington University.
BOARD OF DIRECTORS
Our board of directors presently consists of five members. Upon
the listing of our common stock on the Nasdaq National Market we
will expand the size of our board of directors to seven members
with the addition of Mr. Pontious and Mr. Laisure as
independent directors. Our directors are expected to serve until
the next annual meeting of our stockholders and until their
respective successors have been duly elected and qualified. We
believe that, within the one-year transition period available to
us following the completion of this offering, we will comply
with all applicable requirements of the SEC and the Nasdaq
National Market relating to director independence and the
composition of the committees of our board of directors,
including the designation of an "audit committee financial
expert."
We have been advised that in December 2005 an affiliate of Carl
C. Icahn, our principal beneficial stockholder and the chairman
of our board of directors, entered into a stock purchase
agreement with our other principal stockholder, the Foundation
for a Greater Opportunity, or the Foundation, to acquire all of
our common stock held by the Foundation. The consummation of
this acquisition requires the completion of this offering and
the approval of applicable authorities of the State of New
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York. If the parties obtain this approval, we have been advised
that the parties expect that the purchase would be completed in
the first three months of 2006. Pending the closing of this
purchase, and for so long as the stock purchase agreement has
not been terminated, the Foundation has granted the affiliate of
Mr. Icahn purchasing the shares owned by the Foundation an
irrevocable proxy to vote all of the shares of our common stock
held by the Foundation. The stock purchase agreement may be
terminated by either party if the purchase does not occur by May
2006. As a result of these contemplated arrangements, we expect
that Mr. Icahn will control
approximately      % of the voting
power of our outstanding common stock following the offering.
Consequently, we would be a "controlled company"
within the meaning of the listing standards governing companies
with stock quoted on the Nasdaq National Market. Under these
rules, a "controlled company" may elect not to comply
with certain Nasdaq National Market corporate governance
requirements, including requirements that (1) a majority of
the board of directors consist of independent directors,
(2) compensation of officers be determined or recommended
to the board of directors by a majority of its independent
directors or by a compensation committee that is composed
entirely of independent directors and (3) director nominees
be selected or recommended for selection by a majority of the
independent directors or by a nominating committee composed
solely of independent directors. If, at the time of this
offering, we are a "controlled company" under the
listing standards of the Nasdaq National Market, we intend to
avail ourselves of those exemptions and will not have a majority
of independent directors on our board. See "Risk
factors—Risks related to the purchase of our common stock
in this offering—Upon the closing of this offering we may
be a "controlled company" within the meaning of the
Nasdaq National Market rules and you will not have the same
protections afforded to shareholders of companies that are not
"controlled companies" and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements."
COMMITTEES OF OUR BOARD OF DIRECTORS
If we are a "controlled company" following this
offering, we intend to use exemptions available to us under the
corporate governance listing standards of the Nasdaq National
Market. In that circumstance, we expect that we would not have a
compensation committee and we would not have a nominating
committee. If we are not a "controlled company"
following this offering, we intend to comply with all applicable
corporate governance requirements of the Nasdaq National Market
within the transition periods allowed companies following their
initial public offering of common stock. Accordingly, if we are
not a "controlled company" at the time this offering
is completed, the standing committees of our board of directors
will consist of an audit committee, a compensation committee and
a nominating committee. See "Risk factors—Risks
related to the purchase of our common stock in this
offering—Upon the closing of this offering we may be a
"controlled company" within the meaning of the Nasdaq
National Market rules and you will not have the same protections
afforded to shareholders of companies that are not
"controlled companies" and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements."
In any event, we may establish special committees under the
direction of the board of directors when necessary to address
specific issues.
Audit committee
Our Audit Committee will be responsible for oversight of the
qualifications, independence, appointment, retention,
compensation and performance of the Company's independent
registered public accounting firm and for assisting the board of
directors in monitoring the Company's financial reporting
process, accounting functions and internal controls. It also
will be responsible for oversight of "whistle-blowing"
procedures and certain other compliance matters.
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The composition of the Audit Committee following the completion
of this offering will comply with applicable SEC and Nasdaq
National Market requirements, including the requirement that at
least one member of the Audit Committee qualify as a
"financial expert" under SEC rules and the stricter
definition of independence for audit committee members under the
rules of the Nasdaq National Market. Our board of directors will
adopt a written charter for our Audit Committee. That charter
will conform to recently adopted rules and regulations of the
SEC and the Nasdaq National Market.
Corporate governance
We believe that shortly after completion of this offering, we
will comply with all applicable Nasdaq National Market corporate
governance and listing requirements. In the interim, we will
rely on transition periods available to companies following
their initial public offering of common stock. See "Risk
factors—Risks related to the purchase of our common stock
in this offering—Upon the closing of this offering we may
be a "controlled company" within the meaning of the
Nasdaq National Market rules and you will not have the same
protections afforded to shareholders of companies that are not
"controlled companies" and, therefore, are subject to
all of the Nasdaq National Market corporate governance
requirements," "Management—Board of
directors" and "Management—Committees of our
board of directors."
Codes of conduct and ethics
Upon completion of this offering, we will have adopted written
codes of conduct and ethics applicable to all of our directors,
executive officers and employees including, without limitation,
all of our senior financial officers, that will be designed to
deter wrongdoing and to promote:
4
honest and ethical conduct;
4
full, fair, accurate, timely and
    understandable disclosure in reports and documents that we file
    with the SEC and in our other public communications;
4
compliance with applicable laws,
    rules and regulations, including insider trading
    compliance; and
4
accountability for adherence to
    the code and prompt internal report of violations of the code,
    including illegal or unethical behavior regarding accounting or
    auditing practices.
Our codes of conduct and ethics will also comply with applicable
requirements of the Nasdaq National Market. The Audit Committee
of our board of directors will review our codes of conduct and
ethics on a regular basis and will propose or adopt additions or
amendments as it considers required or appropriate.
Director compensation
Each director is entitled to reimbursement for out-of-pocket
expenses incurred for each meeting of the full board or a
committee of the board attended. The annual compensation for our
independent directors is $30,000. In addition, each independent
director is entitled to receive $1,000 for each board or
committee meeting attended and an annual stipend of $5,000 if he
is a chairperson of a committee.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation of our chief
executive officer and each of our other most highly compensated
executive officers during the year ended December 31, 2004.
We refer to these officers as the named executive officers. We
did not maintain any option plans through December 31,
2004, and no options were granted to or exercised by any of our
named executive officers during the year ended December 31,
2004.
Annual Compensation
Other Annual
All Other
Compensation
Compensation
Name and principal position
Salary
Bonus
(4)
(5)
James J. Unger
President and Chief Executive Officer
$
350,000
—
$
48,532
$
13,918
James A. Cowan(1)
Executive Vice President and Chief Operating Officer
—
—
—
—
William P. Benac(2)
Senior Vice President and Chief
Financial Officer
—
—
—
—
Alan C. Lullman
Senior Vice President Sales,
Marketing and Services
$
140,000
$
20,000
$
9,431
$
574
William L. Finn(3)
Senior Vice President Operations
$
172,917
—
$
25,287
$
8,218
(1)
Mr. Cowan started his employment with us on
    December 5, 2005.
(2)
Mr. Benac started his employment with us on
    January 31, 2005.
(3)
Mr. Finn retired effective May 1, 2005.
(4)
Includes the following payments we made on behalf of
    Messrs. Unger, Lullman and Finn:
Car
Country
Allowances
Club Dues
Mr. Unger
$
39,651
$
8,881
Mr. Lullman
8,820
611
Mr. Finn
19,576
5,711
(5)
Includes the following payments we made on behalf of
    Messrs. Unger, Lullman and Finn.
Life Insurance*
401(k) Matching
Premiums
Contributions**
Mr. Unger
$
7,768
$
6,150
Mr. Lullman
574
—
Mr. Finn
3,030
5,188
*
These amounts represent the taxable income related to payment of
    premiums for group term life insurance and executive survivor
    insurance for the benefit of the employee.
**
These amounts represent matching contributions to each
    employee's 401(k) plan equal to 50% of the employee's
    deferrals up to a maximum of 6% of each employee's
    compensation.
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Management
Employment agreements
James J. Unger.
In November 2005, we entered
into a new employment agreement with Mr. Unger. Upon the
closing of this offering, this new employment agreement will
supersede our original agreement with Mr. Unger which we entered
into in 1994. The original agreement with Mr. Unger,
provided that Mr. Unger shall be granted an option to
purchase 2.0% of our outstanding common shares at a price equal
to 2.0% of the common equity contribution by Carl C. Icahn
at our formation. The agreement provided that this option shall
be exercisable at the time of our initial public offering, and
should we be sold to parties other than in a public offering,
Mr. Unger shall receive 2.0% of the sales price, net of the
preferred interest established at our formation, and net of the
contribution for common stock. The original agreement further
provided that the above options and or rights shall remain in
effect as long as Mr. Unger is employed by us, and that
should we go public with an offering and Mr. Unger exercise
his stock option, Mr. Unger will agree, if we or our board
of directors so desires, to a three-year employment contract
providing no reductions in salary or fringe benefits.
Mr. Unger's term as our president and chief executive
officer under the new employment agreement is effective for one
year following the completion of this offering and may be
extended for two additional one-year terms at the sole option of
our board of directors.
Under the terms of the new employment agreement, Mr. Unger
receives a base salary of $350,000. In addition, Mr. Unger is
eligible to receive an annual bonus, as determined by our board
of directors from year to year. The new employment agreement
also provides that Mr. Unger is entitled to receive healthcare,
vacation, 401(k) participation, transportation and other similar
benefits we offer our senior employees.
Under the terms of the new employment agreement, if Mr. Unger is
terminated without cause (as defined in the new employment
agreement) or resigns for good reason (as defined in the new
employment agreement), then we shall pay him, in addition to any
unpaid and earned base salary and bonus, the base salary Mr.
Unger would have earned through the end of his term, as
extended, if applicable, by our board of directors.
Mr. Unger's new employment agreement contains
non-competition, non-solicitation and confidentiality
provisions. The non-competition and non-solicitation provisions
prohibit Mr. Unger from directly or indirectly competing with
us, or soliciting our employees as long as he is our employee
and generally for a one-year period thereafter.
In connection with the new employment agreement, we also entered
into a letter agreement with Mr. Unger that replaces any
option grants to Mr. Unger under the original agreement. Upon
the closing of this offering, we are required to issue Mr. Unger
such number of shares of our common stock obtained by dividing
$6 million by the public offering price per share as set
forth on the cover page of this prospectus (assuming an initial
public offering price of
$                    ,
which represents the midpoint of the range on the cover page of
this prospectus, Mr. Unger will
receive                      shares
of our common stock). Of these shares, 40% will be transferable
without contractual restrictions by Mr. Unger after
180 days from the closing of this offering, 30% will be
transferable without contractual restrictions by Mr. Unger one
year after the closing of this offering and the remaining 30%
will be freely transferable 540 days after the closing of this
offering. If Mr. Unger is terminated for cause (as defined in
the letter agreement), or resigns without good reason (as
defined in the letter agreement) within one year from the
closing date of this offering, Mr. Unger shall return to us 60%
of the shares of our common stock we granted to him. We have
agreed to use commercially reasonable efforts to file a
registration statement on Form S-8 with the SEC to cover the
registration of 40% of these shares. We have agreed to include
the balance of these shares in any registration statement we
file on behalf of Mr. Icahn with regard to the registration for
sale of our shares held by Mr. Icahn, provided the contractual
restrictions and applicable lock-up period of these shares have
lapsed.
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Management
William P. Benac.
In July 2005, we entered into an
employment agreement with William P. Benac to serve as our chief
financial officer for a period of one year. The agreement is
effective as of April 22, 2005, and automatically renews
for successive one-year terms unless terminated by either party
at least 180 days before the expiration of the then
applicable term.
Under the terms of the agreement, Mr. Benac will receive a
minimum annual base salary of $250,000. Mr. Benac is also
entitled to a non-prorated cash bonus of at least $150,000 for
the 2005 fiscal year. Criteria for cash bonuses that may be
awarded for each year the agreement is extended are subject to
negotiation and will be determined during the first quarter of
each calendar year the agreement is renewed. It is expected that
the target bonus amounts during such years will not be less than
$150,000.
In addition to the salary and bonus compensation described
above, Mr. Benac will receive a one-time special cash bonus
of $500,000 on April 22, 2007 if, prior to that date, we
issue common stock to the public in an offering registered with
the SEC or Mr. Icahn sells his controlling interest in us
to a third party in a private transaction. If at any time on or
before April 22, 2007, we terminate Mr. Benac's
employment without cause, he resigns for good reason, or a
change in control occurs, he will be entitled to receive the
special cash bonus of $500,000 upon the occurrence of such
event. In addition, if we terminate Mr. Benac's
employment other than for cause, death or disability, or if he
terminates his employment for good reason, he is entitled to
receive a lump sum severance payment of $200,000.
Mr. Benac's right to the special cash bonus of
$500,000 and any severance immediately terminates if his
employment is terminated for cause or he resigns without good
reason.
Mr. Benac will be reimbursed for reasonable and necessary
business related expenses, including those expenses associated
with commuting from Dallas to our headquarters in St. Charles,
Missouri, such as air and car travel and reasonable living
expenses. He is eligible to participate in all health, medical,
retirement and other employee benefit plans we generally provide
to our senior executives. Mr. Benac's employment
agreement also contains provisions requiring him to protect our
confidential information during his employment and at all times
thereafter.
Mr. Benac may terminate his employment for good reason upon
at least 30 days prior written notice to us, or without
good reason upon at least 60 days prior written notice to
us. We may terminate Mr. Benac's employment without
cause upon 30 days written notice or immediately for cause
or upon his death or disability.
James A. Cowan.
In December 2005, we entered into
an employment agreement with Mr. Cowan to serve as our
chief operating officer through December 31, 2008, unless
earlier terminated pursuant to the agreement.
Under the terms of the agreement, Mr. Cowan receives a base
salary at an annual rate of $300,000 per year.
Mr. Cowan is also entitled to an annual bonus for each
calendar year of employment ending on or after December 31,
2006 of up to 50% of his then applicable base salary, provided
certain performance targets established by our board of
directors are achieved.
In addition to the compensation described above, we have agreed
to grant to Mr. Cowan, on the closing date of our initial
public offering of common stock registered with the SEC, an
option to purchase 1.25% of our outstanding shares of
common stock immediately following the offering, assuming the
over-allotment option is not exercised. The exercise price of
the option will be equal to the fair market value of the common
stock at the time of grant.
Mr. Cowan is eligible to participate in all health,
medical, retirement and other employee benefit plans we
generally provide to our senior executives. In addition, he will
be reimbursed for the reasonable use of an automobile and for
the payment of reasonable country club dues (excluding
initiation fees) on terms consistent with our other senior
executives.
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Management
Mr. Cowan may terminate the agreement upon 30 days
written notice. We may terminate Mr. Cowan's
employment at any time, with or without cause. If
Mr. Cowan's employment is terminated due to death or
disability, he is entitled to receive earned and accrued base
salary and unreimbursed business expenses due and unpaid as of
the date of his termination, bonus compensation earned and due
with respect to a completed calendar year but not paid as of the
date of termination, and a pro-rated portion of his bonus
compensation payable for any incomplete calendar year. If
Mr. Cowan is terminated without cause, he is entitled to
receive earned and accrued base salary and unreimbursed business
expenses due and unpaid as of the date of his termination, bonus
compensation earned and due with respect to a completed calendar
year but not paid as of the date of termination, a pro-rated
portion of his bonus compensation payable for any incomplete
calendar year and, in addition, a continuation of the payment of
the base salary he would have earned through December 31,
2008 had he continued to be employed by us through such date. If
Mr. Cowan resigns or if we terminate Mr. Cowan for
cause, he is entitled to receive earned and accrued base salary
and unreimbursed business expenses due and unpaid as of the date
of his termination.
Mr. Cowan's employment agreement contains
non-competition and non-solicitation provisions that prohibit
Mr. Cowan from directly or indirectly competing with us
during the term of his employment and generally for a one-year
period thereafter. Mr. Cowan's employment agreement
also contains provisions requiring him to protect confidential
information during his employment and at all times thereafter.
Equity incentive plan
2005 Equity Incentive Plan.
We expect to adopt prior to
the completion of this offering, our 2005 equity incentive plan
to provide long-term incentives and rewards to our employees,
officers, directors, consultants and advisors. The 2005 plan
permits us to issue stock and grant stock options, restricted
stock, stock units and other equity interests to purchase or
acquire up
to            shares
of our common stock. Awards covering no more
than            shares
may be granted to any person during any fiscal year. If any
award expires, or is terminated, surrendered or forfeited, then
shares of common stock covered by the award will again be
available for grant under the 2005 plan. The 2005 plan is
administered by our board of directors or a committee of the
board. The board or committee has broad discretion to determine
the terms of an award granted under the 2005 plan, including, to
the extent applicable, the vesting schedule, purchase or grant
price, option exercise price, or the term of the option or other
award; provided that the exercise price of any options granted
under the 2005 plan may not be less than the fair market value
of the common stock on the date of grant. The board or committee
also has discretion to implement an option exchange program,
whereby outstanding stock options are exchanged for stock
options with a lower exercise price, substitute another award of
the same or different type for an outstanding award, and
accelerate the vesting of, including, as applicable, lapse of
restrictions with respect to, stock options and other awards at
any time. The terms and conditions of stock options or other
awards granted under the 2005 plan will be set forth in a
separate agreement between us and the recipient of the award.
Concurrently with the closing of this offering, we intend to
grant a total of
approximately           options
to purchase shares of our common stock under our 2005 equity
incentive plan, including the following estimated number of
shares to our executive officers and key employees:
Estimated
Number of
Executive Officer/Key Employee
Shares
James A. Cowan
Jackie R. Pipkin
Alan C. Lullman
Michael R. Williams
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Management
Under the terms of his employment agreement, James A. Cowan
is entitled to receive an option to purchase 1.25% of our
outstanding shares of common stock immediately following the
offering (excluding the shares that may be issued upon the
exercise, if any, of the over-allotment option). As a result,
the actual number of shares subject to the option granted to
Mr. Cowan will be proportionately adjusted if the number of
shares to be issued by us in this offering is increased or
decreased. The actual number of shares to be subject to the
options granted to Mssrs. Pipkin, Lullman and Williams will
be determined by dividing the dollar value of the shares
allocated to each of them by the exercise price as so
determined. For the purpose of estimating the number of shares
to be subject to these options, the table above assumes an
exercise price of $       per
share, which represents the midpoint of the range on the cover
of this prospectus. All of the options will be issued at an
exercise price equal to the fair market value of the shares on
the date of the grant. The options will have a term of five
years and vest in equal annual installments over a three year
period.
Retirement plans
Supplemental Executive Retirement Plan.
Mr. Unger is
entitled to benefits from a supplemental executive retirement
plan, or SERP. The SERP benefit is generally equal to the
benefit that would be provided under the Employees'
Retirement Plan of ACF Industries LLC, if certain Internal
Revenue Code limits and exclusions from compensation under the
retirement plan did not apply, less the actual benefit payable
under the ACF retirement plan. ACF is responsible for payment of
that portion of Mr. Unger's SERP benefit related to
service with ACF prior to the 1994 ACF asset transfer and we are
responsible for payment of that portion of the benefit related
to service with us after that transfer. The SERP benefits were
frozen effective as of March 31, 2004. As a result, no
further benefits are accruing under the SERP. These benefits are
generally paid at the same time and in the same form as the
participant's benefit under the retirement plan. No funds
have been set aside for the benefits payable under the SERP. The
estimated annual SERP benefit for Mr. Unger is $117,799, of
which $106,769 is payable by us and $11,030 is payable by ACF.
Pension Plan.
We provide pension benefits to certain of
our salaried employees, including Mr. Unger, Mr. Finn
and Mr. Lullman, under the Employees' Retirement Plan
of ACF Industries, LLC. Each executive's benefit under the
retirement plan is based on 2.25% of average annual compensation
for each year of service after April 30, 1981; plus the
highest of the executive's annual compensation for five
consecutive years of employment prior to May 1, 1981 that
results in the highest such average multiplied by number of
years of service completed prior to May 1, 1981; plus a
fixed dollar amount. This fixed dollar amount is $12,800 for
Mr. Unger, $15,600 for Mr. Finn and $6,108 for
Mr. Lullman. For purposes of this plan, years of service
include years of service with both ACF and us. This total is
then reduced by an amount equal to 0.5% of the executive's
final average compensation multiplied by the number of years of
service up to 35. The benefits under this plan were frozen
effective as of March 31, 2004. As a result, no additional
benefits are accruing under this plan.
The benefits under the ACF retirement plan are generally paid
monthly for the life of the executive, following retirement in
the form of a joint and survivor annuity. As most recently
determined by the actuaries for the retirement plan, based on
current years of service with us and ACF, the estimated annual
pension commencing at age 65 for each of the named
executives is as follows: Mr. Unger: $99,633;
Mr. Finn: $72,966; and Mr. Lullman: $49,752. These
named executives are fully vested in their retirement plan
benefits.
Postretirement Obligations.
We also provide
postretirement health and life insurance benefits for certain of
our salaried employees under plans sponsored by ACF. Our named
executive officers may become eligible for these benefits if
they retire after attaining specified age and service
requirements. In anticipation of this offering, we will be
assuming sponsorship of these benefits for our employees.
Executive Survivor Insurance Plan.
We provide an
executive survivor insurance plan for certain of our salaried
employees, including the named executive officers. This plan
provides life insurance
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Management
benefits to the qualified spouse of a named executive officer
upon his death during his employment or following retirement at
or after age 55. We have purchased a group term life
insurance policy to off-set the cost of providing this benefit.
Benefits payable under this plan are separate from any benefit
payable under our retirement plans. If the named executive
officer retires and dies after attaining age 55, then his
qualified spouse is entitled to a monthly benefit equal to what
would have been payable under our retirement plan if the named
executive officer had retired with a 50% joint and survivor
benefit. If the named executive officer dies while actively
employed and before attaining age 55, then his qualified
spouse is entitled to a monthly benefit equal to 20% of the
named executive officer's salary, reduced by any amount
payable under the survivor provisions of our retirement plan. If
the named executive officer dies while actively employed and on
or after attaining age 55, then his qualified spouse is
entitled to a benefit equal to the greater of (a) the
benefit described in the preceding sentence (for death while
employed and not yet 55) and (b) the amount determined as
if the named executive officer had retired on the first day of
the month coincident with or next following the date of death.
In no event may the amounts paid under this plan exceed
$6,500 per month. We have reserved the right to amend,
modify or terminate this plan.
Executive incentive plan
2005 Executive Incentive Plan.
We established our 2005
executive incentive plan to provide additional compensation to
eligible participants for their contribution to the achievement
of our objectives, to encourage and stimulate superior
performance, and to assist in attracting and retaining highly
qualified key employees. Our key managers, other than James J.
Unger and William P. Benac, are eligible to participate in the
2005 executive incentive plan. The plan permits us to make cash
awards to participants based upon a percentage of each
participant's base salary, as measured against each
participant's personal performance and our financial
performance. Personal performance goals are established by each
participant and his or her supervisor at the beginning of each
fiscal year. Our financial performance goals are based on
certain EBITDA targets relating to our performance at each of
our facilities, Ohio Castings and us as a whole, as established
by our board of directors based on our annual business plan.
Participants are entitled to payment of a partial award if,
during a fiscal year, a participant, among other things, dies,
retires or becomes permanently disabled, provided that the
participant was an active employee for a minimum of 30
consecutive calendar days during such fiscal year. The plan is
subject to the control and supervision of our chief executive
officer and our board of directors.
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Certain relationships and related party transactions
Other than the transactions described below, for the last three
full fiscal years there has not been, nor is there currently
proposed, any transaction or series of similar transactions to
which we are or will be a party:
4
in which the amount involved
    exceeded or will exceed $60,000; and
4
in which any director, executive
    officer, holder of more than 5% of our common stock on an
    as-converted basis or any member of their immediate family has
    or will have a direct or indirect material interest.
We believe that each of the transactions described below that is
to remain in effect following the completion of this offering is
on terms no less favorable to us than could have been obtained
from unaffiliated third parties. Although we do not have a
separate conflicts policy, we intend to comply with Delaware law
with respect to transactions involving potential conflicts.
Delaware law requires that all transactions between us and any
director or executive officer are subject to full disclosure and
approval of the majority of the disinterested members of our
board of directors, approval of the majority of our stockholders
or the determination that the contract or transaction is
intrinsically fair to us.
TRANSACTIONS WITH CARL C. ICAHN AND ENTITIES AFFILIATED WITH
CARL C. ICAHN
Overview
Our company was formed in 1988 as a company beneficially owned
by Carl C. Icahn. Mr. Icahn is our principal beneficial
stockholder and is the chairman of our board of directors. We
grew our company through the transfer of certain assets to us
from ACF, a company also beneficially owned by Mr. Icahn.
Since our formation, we have entered into agreements relating to
the acquisition of assets from and disposition of assets to
entities controlled by Mr. Icahn, the provision of goods
and services to us by entities controlled by Mr. Icahn, the
provision of goods and services by us to entities affiliated
with Mr. Icahn and other matters involving entities
controlled by Mr. Icahn. We receive substantial benefit
from these agreements and we expect that in the future, we will
continue to conduct business with entities affiliated with or
controlled by Mr. Icahn. In addition, we receive other
benefits from our affiliation with Mr. Icahn and companies
controlled by Mr. Icahn, such as financial and advisory
support, sales support and our participation in buying groups
and other arrangements with entities controlled by
Mr. Icahn. Until recently, most of our capital needs have
been provided by entities controlled by Mr. Icahn. Lease
sales agents of ARL, a company beneficially owned by
Mr. Icahn, and ACF, in connection with their own leasing
sales activities, have, from time to time, referred their
customers or contacts to us that prefer to purchase rather than
lease railcars, which has, in some cases, led to us selling
railcars to these customers or contacts. At this time there is
no formal arrangement under which these referrals are provided
and we do not compensate ARL, ACF or any of their leasing sales
agents for any railcar sales that we make as a result of these
referrals. As an accommodation to some of their customers and
contacts that they referred to us, ARL and ACF from time to time
accepted orders to purchase our railcars and then assigned those
orders to us. ARL and ACF have discontinued accepting orders to
sell railcars on our behalf. See "Risk factors—Risks
related to our business—After this offering, companies
affiliated with Carl C. Icahn will continue to be important
suppliers and customers," "Risk factors—Risks
related to our business—Services being provided to us by
ARL, an entity controlled by Carl C. Icahn, may not be
sufficient to meet our needs, which may require us to incur
additional costs," "Risk factors—Risks related to
our business—After this offering, we may have reduced
access to resources of, and benefits provided by, entities
affiliated with Carl C. Icahn" and "Risk
factors—Risks related to our business—We could be
liable for liabilities associated
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Certain relationships and related party transactions
with pension plans sponsored by companies controlled by Carl C.
Icahn" for a description of certain risks associated with
our affiliation with Mr. Icahn and entities affiliated with
Mr. Icahn.
We describe below the material arrangements and other
relationships that we are, or have been, a party to with
Mr. Icahn and entities affiliated with Mr. Icahn since
January 1, 2002. As noted below, some of these arrangements
and relationships have been terminated or otherwise will no
longer be in effect following the completion, and the
application of the net proceeds of, this offering.
Application of the net proceeds of this offering
We intend to use the net proceeds of this offering to, among
other things, repay certain indebtedness that we owe to entities
controlled by Mr. Icahn and to redeem all of the
outstanding shares of our preferred stock, all of which are held
by Mr. Icahn and his affiliates. As of September 30,
2005, the total amount of this indebtedness outstanding was
approximately $60.1 million, including accrued interest of
$1.3 million. As a result, entities controlled by Mr. Icahn
will receive approximately $20.0 million of the net
proceeds of this offering. We also intend to use the net
proceeds of this offering to repay in full amounts due under our
industrial revenue bonds. As of September 30, 2005, the
total amount of this indebtedness outstanding was approximately
$8.3 million in principal amount and $0.3 million in
accrued interest. The industrial revenue bonds are guaranteed by
affiliates of Mr. Icahn and these affiliates will be
released from such guarantees upon the repayment of the bonds.
In addition James J. Unger, our president and chief executive
officer, and his wife own $0.4 million of the industrial
revenue bonds. See "Use of proceeds,"
"—Guarantees of indebtedness by ACF and other related
parties—Industrial revenue bonds" and "Certain
transactions involving James J. Unger—Industrial revenue
bonds" and the transactions described below for more
information.
REDEMPTION OF NEW PREFERRED STOCK
Concurrently with the closing of this offering, we intend to use
approximately $91.3 million of the net proceeds of this
offering to redeem our new preferred stock, including all
accumulated and unpaid dividends due on our new preferred stock.
See "—Certain Transactions Involving American Railcar
Leasing LLC—The ARL exchange" for more information. We
will redeem each outstanding share of new preferred stock for an
amount equal to the liquidation preference of each share of new
preferred stock, which is $1,000 per share, plus all
accumulated and unpaid dividends on each share of new preferred
stock through the date of the redemption. Assuming the
redemption occurred on September 30, 2005, the aggregate
amount required to redeem all of the outstanding shares of our
new preferred stock, including accumulated and unpaid dividends,
would have been $91.3 million. All of our new preferred
stock is held by entities beneficially owned and controlled by
Mr. Icahn.
REDEMPTION OF MANDATORILY REDEEMABLE PREFERRED STOCK
On or before the closing of this offering, we intend to redeem
our one outstanding share of mandatorily redeemable preferred
stock, which is held by Mr. Icahn. As of September 30,
2005, there was $770 of accumulated and unpaid dividends on that
stock. This share became mandatorily redeemable for $1,000 on
February 1, 2005.
CERTAIN TRANSACTIONS WITH ACF INDUSTRIES LLC AND AMERICAN
RAILCAR LEASING LLC
Overview
We have entered into a variety of agreements and transactions
with ACF Industries LLC (which we refer to, along with its
predecessor ACF Industries, Inc., as ACF), American Railcar
Leasing LLC (which we refer to as ARL) and certain other parties
related to these companies. These transactions and agreements
are described in further detail below. During the periods
discussed, ACF and ARL
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Certain relationships and related party transactions
were beneficially owned and controlled by Mr. Icahn, and
they continue to be so owned and controlled.
On October 1, 1994, under an asset transfer agreement with
ACF, we acquired from ACF, properties and assets used in its
railcar components manufacturing business and its railcar
servicing business at specified locations, and certain
intellectual property rights associated with the transferred
assets and businesses, as well as specified assets used in the
manufacture and sale of industrial size mixing bowls. We refer
to this transaction as the 1994 ACF asset transfer.
In 2004, ACF and its subsidiaries, through a series of
transactions, transferred some of the railcar fleets that they
then owned and held primarily for lease to third parties, to ARL
and its subsidiaries. At the time, we owned all the common
interests of ARL. As of June 30, 2005, we transferred our
entire interest in ARL in exchange for the redemption of shares
of our new preferred stock, in a transaction we refer to as the
ARL exchange. All of our shares of new preferred stock were and
continue to be owned by entities beneficially owned and
controlled by Mr. Icahn.
Manufacturing Operations
Prior to the transfer of ACF's and its subsidiaries'
railcar fleets to ARL and its subsidiaries in 2004, we sold
railcars and railcar components to ACF and its subsidiaries for
use in their railcar fleets. Since the transfer of these fleets
to ARL, we sell railcars to ARL. We believe that since
ARL's formation in 2004, we have been the only supplier of
railcars to ARL, although ARL is not precluded from purchasing
railcars from others. In 2002, 2003 and 2004, our revenues from
manufacturing operations included $63.6 million,
$62.9 million and $64.4 million, respectively, from
transactions with affiliates. In the nine months ended
September 30, 2005, our revenues from manufacturing
operations included $44.5 million from transactions with
affiliates. Most of these revenues were attributable to railcars
and railcar components that we sold to ACF, ARL and their
respective subsidiaries. As of September 30, 2005, our
backlog included $44.1 million for railcar orders by ARL.
These orders are on substantially the same terms as we provide
to our other customers.
ACF has also been a significant supplier of components for our
business. Components supplied to us by ACF include tank railcar
heads, wheel sets and various structural components. In 2002,
2003 and 2004, we purchased inventory of $15.7 million,
$19.0 million, and $31.3 million, respectively, of
components from ACF. In the nine months ended September 30,
2005, we purchased inventory of $56.2 million from ACF. As
of September 30, 2005, we had outstanding purchase orders
for $8.7 million of inventory from ACF.
During 2003 and 2004, Castings LLC, a joint venture partner in
Ohio Castings, was a wholly owned subsidiary of ACF Industries
Holding Corp., an indirect parent of ACF that is beneficially
owned and controlled by Mr. Icahn. Effective
January 1, 2005, we acquired Castings LLC from ACF
Industries Holding Corp. as described under "—Certain
Transactions Involving Ohio Castings." Our cost of railcar
manufacturing for the years ended December 31, 2003 and
2004, and the nine months ended September 30, 2005 included
$3.0 million, $19.9 million and $14.0 million,
respectively, in railcar components produced by Ohio Castings.
Expenses of $0.4 million and $3.2 million paid to
Castings LLC under a supply agreement are also included in the
cost of railcar manufacturing for the years ended
December 31, 2003 and 2004, respectively. We also have been
charged $0.2 million in the year ended December 31,
2003 relating to certain costs incurred by Castings LLC in the
establishment of Ohio Castings. In the first nine months of
2005, we purchased $15.0 million in railcar components
produced by Ohio Castings. Inventory at December 31, 2003,
2004 and September 30, 2005 includes approximately
$0.3 million, $5.3 million and $2.3 million,
respectively, of purchases from Ohio Castings. In September
2003, Castings LLC loaned Ohio Castings $3.0 million under
a promissory note which was due in January 2004. The note was
renegotiated for $2.2 million and bears interest at
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4.0%. Payments are made in quarterly installments with the last
payment due in November 2008. As of September 30, 2005,
$2.2 million was outstanding under this note.
Railcar services
We have provided railcar repair and maintenance services and
fleet management services to ACF and ARL and we continue to
provide these services to ARL. As of September 30, 2005, we
managed approximately 22,000 railcars for ARL, and we also
provide repair and maintenance services for these railcars. In
2002, 2003 and 2004, our revenues from railcar repair and
refurbishment and fleet management services included
$12.8 million, $11.0 million and $18.2 million,
respectively, from transactions with affiliates. In the nine
months ended September 30, 2005, our revenues from railcar
repair and refurbishment and fleet management services included
$16.0 million from transactions with affiliates. Almost all
of these revenues were attributable to services we provided to
ACF, ARL and their subsidiaries.
Cost of railcar services
Through September 30, 2005, ACF and ARL have provided
certain leasing and other fleet management services that we were
required to provide to subsidiaries of ARL, under management
agreements we entered into with those companies in July and
October 2004. Through March 31, 2005, we paid to ACF and,
from March 31, 2005 through September 30, 2005, we
paid to ARL, the leasing and management fees we received under
those management agreements. In 2004 and the nine months ended
September 30, 2005, we incurred $1.2 million and
$2.0 million, respectively, of cost of railcar services in
connection with these arrangements. These arrangements were
terminated on June 30, 2005, when we assigned our
management agreements to ARL.
Administrative and other support expenses
During the current and last three fiscal years, ACF and ARL have
provided us outsourced services related to our information
technology needs as well as other administrative and support
services. We incurred $0.3 million of expenses in each of
2002, 2003 and 2004 in connection with these arrangements, and
in the first nine months of 2005, we incurred $1.1 million
of such expenses. The increased expenses in 2005 reflect
additional information technology services not provided in
previous years. Until October 2004, ACF received the majority of
our cash receipts and disbursed our cash on our behalf. We
maintained a receivable/payable from affiliates bearing interest
at ACF's internal cost of funds in accordance with an
administration agreement between ACF and us, which is described
below. Under this arrangement, ACF provided financing to us
based on our cash flow needs. We have also subleased our
headquarters facility which is located in St. Charles, Missouri,
from affiliates. The St. Charles property is owned by an
affiliate of James Unger, our chief executive officer. In each
of 2002, 2003 and 2004, our expenses included $0.1 million
of rent and $0.4 million of related facility expense
payments required to be made to affiliates associated with our
lease of the St. Charles headquarters facility. In the nine
months ended September 30, 2005, our expenses included
$0.1 million of rent and $0.2 million of related
expense for these facilities.
Amounts due to affiliates
As of September 30, 2005, net amounts due to affiliates
were $22.1 million relating to the above referenced
transactions and included:
4
an amount payable to ACF of
    $2.1 million;
4
an amount payable of
    $7.4 million to Arnos Corp., a company beneficially owned
    and controlled by Mr. Icahn, representing the principal and
    interest due under a demand note in the principal amount of
    $7.0 million that we issued in connection with a working
    capital loan from Arnos Corp.; and
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4
an amount payable of
    $12.6 million to ACF Industries Holding Corp., a company
    beneficially owned and controlled by Mr. Icahn,
    representing the principal and interest due under a demand note
    in the principal amount of $12.0 million that we issued in
    connection with our purchase of Castings LLC from ACF Industries
    Holding Corp.
We intend to use a portion of the net proceeds of this offering
to repay in full the notes to Arnos Corp. and ACF Industries
Holding Corp.
CERTAIN TRANSACTIONS WITH ACF INDUSTRIES LLC
1994 ACF asset transfer
On October 1, 1994, under an asset transfer agreement with
ACF, we acquired properties and assets used in ACF's
railcar components manufacturing business and its railcar
servicing business at specified locations, and certain
intellectual property rights associated with the transferred
assets and businesses, as well as specified assets used in the
manufacture and sale of industrial size mixing bowls. We refer
to this transaction as the 1994 ACF asset transfer. The
properties covered by this agreement included the following:
Component manufacturing
Repair plants
plant and warehouse
Mobile units
Bude, Mississippi
Jackson, Missouri
Addis, Louisiana
Milton, Pennsylvania
Convent, Louisiana
Tennille, Georgia
Ingleside, Texas
North Kansas City,
Deer Park, Texas
Missouri
Taft, Louisiana
Longview, Texas
Pursuant to the 1994 ACF asset transfer, ACF retained and agreed
to indemnify us for certain liabilities and obligations relating
to ACF's conduct of business and ownership of the assets at
these locations prior to their transfer to us, including
liabilities relating to employee benefit plans, subject to
exceptions for transferred employees described below, workers
compensation, environmental contamination and third-party
litigation. As part of the 1994 ACF asset transfer, we agreed
that the ACF employees transferred to us would continue to be
permitted to participate in ACF's employee benefit plans
for so long as we remained a part of ACF's controlled
group, and we further agreed to assume the ongoing expense for
such employees' continued participation in those plans. In
the event that we cease to be a member of ACF's controlled
group, ACF is required to terminate the further accrual of
benefits by our transferred employees under its benefit plans,
and we and ACF are required to cooperate to achieve an
allocation of the assets and liabilities of the benefits plans
accrued after the 1994 ACF asset transfer with respect to each
of our and ACF's employees as we and ACF deem appropriate.
Upon completion of the offering, we will no longer be a part of
ACF's controlled group. As of December 31, 2004, we
estimate that the total retained liabilities of ACF under the
asset transfer agreement were $11.1 million, primarily
relating to pension and postretirement liabilities. In 2002,
2003 and 2004, ACF paid $0.7 million, $0.6 million and
$1.4 million, respectively, relating to the retained
liabilities. In the nine months ended September 30, 2005,
ACF paid $0.8 million relating to the retained liabilities.
In anticipation of our no longer being a part of ACF's
controlled group upon completion of this offering, we have been
discussing with ACF an appropriate arrangement for allocating
the assets and liabilities of the pension benefit plans retained
by ACF in the 1994 ACF asset transfer in which some of our
employees continue to participate, and for relieving us of our
further employee benefit reimbursement obligations to ACF under
the 1994 ACF asset transfer agreement. The principal employee
benefit plans affected by this arrangement are two ACF sponsored
pension plans, known as
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the ACF Employee Retirement Plan and the ACF Shippers Car Line
Pension Plan, and certain ACF sponsored retiree medical and
retiree life insurance plans.
Under the proposed arrangement, in exchange for our agreement to
pay ACF approximately $9.2 million and to become the
sponsoring employer under the ACF Shippers Car Line Pension
Plan, including the assumption of all obligations for our and
ACF's employees under that plan, we will cease to be a
participating employer under the ACF Employee Retirement Plan
and will be relieved of all further reimbursement obligations,
including for our employees, under that plan. We estimate that
as of December 1, 2005, the ACF Shippers Car Line Pension
Plan had $4.0 million of unfunded liabilities on an
accounting basis, that will be assumed by us in connection with
this arrangement. The payment of approximately $9.2 million
to be made by us to ACF represents our and ACF's estimate
of the payment required to be made by us to achieve an
appropriate allocation of the assets and liabilities of the
benefit plans accrued after the 1994 ACF asset transfer, with
respect to each of our and ACF's employees in connection
with the two plans. This allocation will be determined in
accordance with the actuarial calculations that would be
required to used by us and ACF in allocating plan assets and
liabilities at such time as we cease to be a member of
ACF's controlled group.
As part of this arrangement, we will also assume sponsorship of
a retiree medical and retiree life insurance plan for active and
identified former ARI employees that are covered by the ACF
sponsored medical and retiree life insurance plans, and ACF will
be relieved of all further liability under those plans with
respect to those employees. We estimate that as of
December 1, 2005, the post-retirement liability related to
this obligation was approximately $3.9 million. ACF will
pay us approximately $2.9 million to assume the pre-1994
portion of this liability.
In connection with the foregoing, we anticipate that we will
record an expense of approximately $10.4 million during the
period in which these transactions are completed, including
$6.3 million for the net cash payment to ACF,
$4.0 million for the unfunded liability assumed under the
Shippers Car Line pension plan and $3.9 million for the
assumption and sponsorship of an unfunded post retirement
medical and retiree life insurance plan for our employees. We
have previously accrued an estimated liability related to this
settlement of $3.8 million.
In connection with the 1994 ACF asset transfer, certain of our
employees, including Mr. Unger, our president, continued to
participate in the ACF supplemental executive retirement plan,
or SERP. The SERP benefit is generally equal to the benefit that
would be provided under the Employees' Retirement Plan of
ACF Industries LLC, if certain Internal Revenue Code limits and
exclusions from compensation under the retirement plan did not
apply, less the actual benefit payable under the ACF retirement
plan. ACF remained responsible for payment of that portion of
those employees' SERP benefit related to service with ACF
prior to the 1994 ACF asset transfer and we are responsible for
payment of that portion of the benefit related to service with
us after that transfer. The SERP benefits were frozen effective
as of March 31, 2004. As a result, no further benefits are
accruing under the SERP. In anticipation of our no longer being
a part of ACF's control group upon completion of this
offering, we are adopting a separate SERP to cover our allocable
portion of the SERP obligations to those of our employees who
participated in ACF's SERP. ACF will remain obligated to
pay that portion of any liability associated with the SERP
related to service of those employees performed prior to the
1994 ACF asset transfer. See "Management —
Retirement plans."
Also in connection with the 1994 ACF asset transfer, we entered
into the following administrative and operating agreements with
ACF, effective as of October 1, 1994:
4
manufacturing services agreement;
4
license agreement from ACF;
4
license agreement to ACF;
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4
administration agreement;
4
railcar servicing
    agreement; and
4
supply agreement.
Only the manufacturing services agreement and the two license
agreements remain in effect. The other agreements were all
terminated as of April 1, 2005.
Manufacturing Services Agreement.
Under the
manufacturing services agreement, ACF has agreed to manufacture
and, upon our instruction, to distribute various railcar
components and industrial size mixing bowls, using assets that
we acquired pursuant to the 1994 ACF asset transfer, but were
retained by ACF at its Milton, Pennsylvania and Huntington, West
Virginia manufacturing facilities. This equipment included
presses and related equipment that were impracticable to move to
our premises. ACF transferred its Milton, Pennsylvania repair
facility, but not its Milton, Pennsylvania manufacturing
facility, to us under the 1994 asset transfer. Under our
manufacturing services agreement, ACF is required to maintain
and insure the equipment during the term of the manufacturing
services agreement and is permitted to use the equipment for its
own purposes in the ordinary course of business, provided that
it does not interfere with ACF's timely performance of the
manufacturing services under this agreement. Upon termination of
the agreement, ACF is required, at our expense, to remove and
deliver the equipment to any site designated by us in the
continental U.S. As payment for these services, we agreed
to pay ACF its direct costs, including the cost of all raw
materials not supplied by us, and a reasonable allocation of
overhead expenses attributable to the services, including the
cost of maintaining employees to provide the services. We
believe that payments to ACF under this arrangement are
comparable to the cost we would have paid to an independent
third party to manufacture such components. This agreement
remains in effect and automatically renews on an annual basis
unless we provide six months prior written notice of
termination. There is no right of termination for ACF under this
agreement.
License Agreement from ACF.
Under a license
agreement with ACF, ACF granted us a non-exclusive, perpetual,
royalty-free license to the patents and other intellectual
property owned by it, which could be used by us in the conduct
of our business, but did not exclusively relate to our business,
including the 12 patents and one patent application, now issued
as a patent, listed in that agreement. Of these patents, ten
patents have expired and the remaining three patents have
expiration dates ranging from 2012 to 2013. These remaining
patents primarily relate to pneumatic outlets and railcar hopper
gaskets. Under this agreement, we could not use the licensed
patents for the production of railcar components for third
parties without the consent of ACF. In 1997, ACF transferred the
patents covered by this license to us. This license is not
assignable by either party, without the prior consent of the
other, except in connection with the sale of substantially all
of either party's business. This agreement remains in
effect.
License Agreement to ACF.
Under a license
agreement with ACF, we granted ACF a non-exclusive, perpetual,
royalty-free license to the intellectual property exclusively
relating to our business that was transferred to us in the 1994
asset transfer. There are no restrictions on ACF's use of
the information licensed under this agreement. This license is
not assignable by either party, without the prior consent of the
other, except in connection with the sale of substantially all
of either party's business. This agreement remains in
effect.
Administration Agreement.
Under an administration
agreement with ACF, ACF agreed to provide us information
technology services and other administrative services. We agreed
to pay ACF its direct costs, including a reasonable allocation
of overhead expenses attributable to providing the services,
including the cost of maintaining employees to provide the
services. Until October 2004, under this agreement, ACF received
the majority of our cash receipts and disbursed our cash on our
behalf. We maintained a receivable/payable from affiliates
bearing interest at ACF's internal cost of funds. Under
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this arrangement, ACF provided financing to us based upon our
cash flow needs. We also subleased our headquarters facility in
St. Charles Missouri from ACF under this agreement. This
agreement was terminated on April 1, 2005.
Railcar Servicing Agreement.
Under a railcar
servicing agreement with ACF, we agreed to provide railcar
repair and maintenance services for railcars owned or managed by
ACF and leased or held for lease by ACF, to provide ACF with
fleet management services, and to provide ACF with consulting
services on safety and environmental matters. For maintenance
services, ACF paid us for components at our actual costs plus
15% and for our labor at a fixed rate that has been adjusted
from time to time to reflect market conditions. Painting, lining
and cleaning services were billed at current market rates, and
fleet management services were billed at a monthly fee per
railcar serviced. Other services were billed at our direct costs
plus 5.0%. Our direct costs included a reasonable allocation of
overhead expenses attributable to providing the services,
including the cost of maintaining employees to provide the
services. This agreement was terminated on April 1, 2005.
Supply Agreement.
Under a supply agreement with
ACF, we agreed to manufacture and sell to ACF specified
components. In addition, under this agreement, we agreed to sell
ACF other components manufactured by us on terms not less
favorable than the terms on which we sell those products to
third parties. We sold specified components under the agreement
for a price equal to the then current market price or our cost
plus a gross profit percentage. This gross profit percentage has
been revised annually and has ranged from 5.0% to 25.0%,
depending upon the component and which one of our facilities
manufactured the product. This agreement was terminated on
April 1, 2005.
2005 Consulting agreements
On April 1, 2005, we entered into two business consultation
agreements with ACF, whereby each of us has agreed to provide
services to the other. ACF has agreed to assist us in labor
litigation, labor relations support and consultation, and labor
contract interpretation and negotiation. In 2005, we anticipate
that we will require the services of at least one ACF employee
for no more than 20 hours a week under this agreement. We
pay $150 per hour for these services. We have agreed to
provide ACF with engineering consultation and advice. In 2005,
we anticipate that ACF will require the services of at least one
of our employees for no more than 20 hours a week under
this agreement. ACF is required to pay $150 per hour for
these services. We do not believe that either party will be
required to pay more than $60,000 per year under either of
these agreements. These agreements remain in effect through
March 2015, subject to the right of either party to terminate
the agreement on 30 days notice.
1998 Loan to ACF
In October 1998, we loaned $57.2 million to ACF. This loan
accrued interest at a variable rate, adjusted quarterly, equal
to LIBOR plus 3.0% or the base rate of the Industrial Bank of
Japan plus 1.5%, as elected by ACF. This loan was repaid in full
in 2004 in connection with the formation and capitalization of
ARL. See "Certain Transactions Involving American Railcar
Leasing LLC—Formation of ARL and Related
Contributions." In 2002, 2003 and 2004, we recorded
interest income relating to this loan of $2.8 million,
$2.5 million and $1.8 million, respectively.
Guarantees of indebtedness by ACF and other related
parties
Industrial Revenue Bonds.
ACF and ACF Industries
Holding Corp., an indirect parent of ACF, have guaranteed our
obligations under our industrial revenue bonds. As of
September 30, 2005, $8.3 million was outstanding under
these bonds. These bonds are payable through 2011 and, as of
September 30, 2005, bear interest at rates ranging from
7.75% to 8.5%. We intend to use a portion of the net proceeds of
this offering to repay these bonds in full. ACF and ACF
Industries Holding Corp. will be released from their guarantees
upon the repayment of the bonds.
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Senior Secured Credit Facility.
In 1998, we
obtained a senior secured credit facility from the Industrial
Bank of Japan, as administrative agent, with a total
availability of $150 million. This facility was guaranteed
by ACF, ACF Industries Holding Corp., an indirect parent of ACF,
and NMI Holding Corp., a wholly owned subsidiary of ACF
Industries Holding Corp. This facility was repaid in full in
July 2004.
Subordinated Note.
In 1998, we obtained a
$10.0 million loan from Boeing Financial under a promissory
note. This note was guaranteed by ACF and ACF Industries Holding
Corp. and was repaid in full in July 2004.
CIT Equipment Lease.
In 1999, we entered into a
master equipment lease agreement with CIT that was guaranteed by
ACF. This lease relates to equipment that we use to manufacture
railcars and railcar components at our Paragould, Marmaduke,
Jackson and Kennett facilities. The interest rate on the lease
is LIBOR plus 2.75% (6.1% at September 30, 2005). As of
September 30, 2005, a balance of $7.4 million was
outstanding under this lease, including amounts subject to our
purchase option at the expiration of the lease term. The lease
expires in November 2005. While we are not committed to do so,
we currently intend to exercise our purchase option under this
lease.
Interest rate swap contract
In 2001, we entered into a derivative instrument in the form of
an interest rate swap contract with an underlying notional
amount of $49.0 million. We assigned this contract to ACF,
effective as of the date of its execution, and all rights and
obligations of this contract were passed through to ACF. This
contract expired on February 28, 2005.
Raw material and other product purchase agreements
We, together with ACF, have entered into agreements for the
purchase of products by each of us, including steel and gas.
Under these agreements, we and ACF are entitled to favorable
pricing based upon the aggregate amount of our purchases. We
allocate the benefits under these purchase agreements
proportionally based upon the amount of products that each of us
purchases during the applicable period.
Corbitt equipment lease and purchase
We leased from ACF, leasehold improvements and equipment that we
placed in service at our Corbitt manufacturing facility in St.
Charles, Missouri from July 1, 2001 through June 1,
2003. During 2002, 2003 and 2004, we paid ACF $0.3 million,
$0.3 million and $0.4 million, respectively, for the
use of these leasehold improvements and equipment. We did not
pay any rent for these assets in 2005. Rather, on March 31,
2005, we purchased these assets from ACF for $2.8 million.
CERTAIN TRANSACTIONS INVOLVING AMERICAN RAILCAR LEASING
LLC
Formation of ARL and related contributions
We formed ARL as our wholly owned subsidiary in June 2004. As
part of the formation of ARL and its further capitalization, ACF
and certain of its subsidiaries transferred to us and ARL
railcars and related leases, as well as equity in certain of
ACF's subsidiaries that supported ACF's leasing
business, in exchange for shares of our new preferred stock and
preferred interests of ARL. We, in turn, contributed the assets
we so received to ARL and made a cash investment in ARL of
$25.0 million.
In connection with these transactions, all of which occurred in
2004:
4
we were issued all of the common
    interests in ARL;
4
ACF and its subsidiaries were
    issued all of ARL's B-1 preferred interests;
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4
Vegas Financial Subsidiary Corp.,
    a company beneficially owned and controlled by Mr. Icahn,
    was issued all of ARL's B-2 preferred interests in exchange
    for an investment of $40 million;
4
we issued 34,500 shares of
    our new preferred stock to ACF and its subsidiaries; and
4
our $57.2 million loan to ACF
    was repaid in full.
The B-1 and B-2 preferred interests of ARL were convertible into
shares of our new preferred stock. On June 30, 2005, the
terms of these interests were modified, among other things, to
eliminate this conversion feature.
The ARL exchange
On June 30, 2005, we transferred all our interest in ARL,
consisting of all its outstanding common A units, pro rata, to
the holders of our new preferred stock in exchange for the
redemption of 116,116 shares of our new preferred stock
held by them, including all dividends accumulated on those
shares. The value of the total liquidation preference and
accumulated dividends on the shares of new preferred stock
redeemed in this transaction was $125.0 million. All of the
shares of our new preferred stock are held by companies
beneficially owned and controlled by Mr. Icahn. We refer to
this transaction as the ARL exchange.
Agreements relating to ARL and its subsidiaries
In 2004 and 2005, we entered into the following agreements
relating to ARL and its subsidiaries:
4
railcar management agreements with
    ARI First LLC and ARI Third LLC;
4
ACF administration agreement;
4
ARL railcar services agreement;
4
ARL railcar servicing agreement;
4
ARL services agreement; and
4
guarantee of ARI Second LLC loan
    agreement.
The ARL railcar servicing agreement and the ARL services
agreement remain in effect. All other agreements were terminated
or assigned to ARL at various times during 2005, as described
below.
Railcar Management Agreements with ARI First LLC and ARI
Third LLC.
On July 20, 2004, we entered into a
railcar management agreement with ARI First LLC and on
October 7, 2004, we entered into a railcar management
agreement with ARI Third LLC. ARI First LLC and ARI Third LLC
are wholly owned subsidiaries of ARL that hold railcars forming
a portion of the railcar lease fleet owned by ARL and its
subsidiaries. Under these railcar management agreements, we
provided ARI First and ARI Third with marketing, leasing,
administration, maintenance, recordkeeping and insurance
services for the railcars owned by ARI First and ARI Third. ARI
First and ARI Third paid us a monthly management fee, based upon
the number of railcars covered, and reimbursed us for all costs
incurred in performing these services. We assigned this
agreement to ARL effective June 30, 2005.
ACF Administration Agreement.
On July 20,
2004, we entered into an ACF administration agreement with ACF
and ARL. Under this agreement, ACF agreed to provide us with
railcar management services which we were required to provide
under the management agreements with ARI First LLC and ARI Third
LLC described above (except maintenance, insurance and risk
management services). In addition, ACF provided us with lease
administration services for the railcars owned by ARI First LLC
and ARI Third LLC, respectively. Under this agreement, we were
required to pay ACF a per railcar monthly fee equal to the per
railcar fee that we were receiving under our railcar
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management agreements with ARI First LLC and ARI Third LLC. This
Agreement terminated on March 31, 2005.
ARL Railcar Services Agreement.
On April 1,
2005, we entered into a railcar services agreement with ARL.
Under this agreement, ARL provided us with railcar services
which we were required to provide to ARI First LLC and ARI Third
LLC under our railcar management agreements with ARI First LLC
and ARI Third LLC. Under this agreement, we were required to pay
ARL all compensation that we received from ARI First LLC and ARI
Third LLC under our railcar management agreements with them.
This agreement was terminated July 1, 2005 when we assigned
our railcar management agreements with ARI First LLC and ARI
Third LLC to ARL.
ARL Railcar Servicing Agreement.
On April 1,
2005, we entered into a railcar servicing agreement with ARL.
Under this agreement, we provide ARL with substantially the same
services that we had previously provided to ACF under our 1994
railcar servicing agreement with ACF described above under
"Certain Transactions with ACF Industries, LLC—1994
ACF Asset Transfer—Railcar Servicing Agreement," for
railcars that ARL or its affiliates own or manage. Under the
agreement with ARL, ARL is required to pay us a monthly fee,
based upon the number of railcars covered, plus a charge for
labor, components and materials. For materials and components we
manufacture, ARL pays us our current market price, and for
materials and components we purchase, ARL pays us our purchasing
costs plus 15%. For painting, lining and cleaning services, ARL
pays the then current market rate. For other labor costs, ARL
pays us a fixed hourly fee. We have further agreed that the
charges for our services will be on at least as favorable terms
as our terms with any other party for similar purposes. The per
railcar fees paid to us through September 30, 2005 under
the railcar management agreements for ARI First LLC and ARI
Third LLC are credited against the amounts due us under the ARL
railcar servicing agreement. This agreement extends through
June 30, 2006, and is automatically renewable for
additional one year periods unless either party gives at least
six months prior notice of termination. If we elect to terminate
this agreement, we must pay a termination fee of
$0.5 million.
ARL Services Agreement.
On April 1, 2005, we
entered into a services agreement with ARL. Under this
agreement, ARL has agreed to provide us certain information
technology services, rent and building services and limited
administrative services. The rent and building services includes
our use of our headquarters space which is leased by ARL from an
affiliate of James J. Unger, our President and Chief Executive
Officer. See "Certain Transactions Involving James J.
Unger." Also under this agreement, we have agreed to
provide purchasing and engineering services to ARL. Each party
is required to pay the other a fixed annual fee for each of the
listed services under this agreement. The total annual fees that
we are required to pay ARL for all services that ARL is
providing us, under this agreement is $2.2 million, and the
total annual fees that ARL is required to pay us for all
services that we are providing ARL under this agreement is
$0.2 million. The annual fees under our services agreements
with ARI and ARL were determined in the following manner: first,
we allocated for the cost of each department of ARL providing
services to us; second, we calculated these costs based on the
number of employees providing these services and the attendant
cost associated with them; third, we applied the same formula to
value the services we provided to ARL; and finally, we
calculated the fee allocations relating to rent and building
services using an agreed upon percentage of space utilized and
headcount between the two companies. Either party may terminate
any of these services, and the associated costs for those
services, on at least six months prior notice at any time prior
to the termination of the agreement on December 31, 2007.
Guarantee of ARI Second LLC Loan Agreement.
On
July 20, 2004, ARI Second LLC, a subsidiary of ARL, entered
into a loan agreement with HSH Nordbank AG, under which ARI
Second borrowed $64.3 million. We guaranteed ARI Second
LLC's obligations under this loan agreement. This loan was
repaid in full in October 2004.
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Health and welfare benefit plans
Employees of ARL participate in our 401(k) plan and certain of
our health and welfare benefit plans. ARL is responsible for the
costs and benefits for its employees under these plans. As part
of the ARL Exchange, ARL is in the process of establishing its
own 401(k) and health and welfare benefit plans.
CERTAIN TRANSACTIONS INVOLVING OHIO CASTINGS
In February 2003, Castings LLC, a wholly owned subsidiary of ACF
Industries Holding Corp., a company beneficially owned and
controlled by Mr. Icahn, acquired a one-third ownership
interest in Ohio Castings Company, LLC, a joint venture with
affiliates of two established railcar industry companies, Amsted
Industries, Inc. and The Greenbrier Companies, Inc. Ohio
Castings operates two foundries that produce heavy castings.
Effective as of January 1, 2005, ACF Industries Holding
Corp. transferred its interest in Castings LLC to us for total
consideration of $12.0 million, represented by a promissory
note bearing an interest rate equal to the prime rate plus 0.5%,
payable on demand. In connection with this transfer, we agreed
to assume certain, and indemnify all liabilities related to and
arising from ACF Industries Holding Corp.'s investment in
Castings LLC, including the guarantee of Castings LLC's
obligations to Ohio Castings, the guarantee of bonds in the
amount of $10.0 million issued by the State of Ohio to one
of Ohio Castings' subsidiaries, of which $8.0 million
was outstanding as of September 30, 2005, and the guarantee
of a $2.0 million state loan that provides for purchases of
capital equipment, of which $0.8 million was outstanding as
of September 30, 2005. The two other partners of Ohio
Castings have made similar guarantees of these obligations.
We have entered into supply agreements with an affiliate of
Amsted Industries, Inc., an affiliate of one of our Ohio
Castings joint venture partners, to purchase up to 25% and 33%,
respectively, of the products produced at each of two foundries
being operated by Ohio Castings. We pay Castings LLC a fee in
connection with those purchases. Our purchases and payments
relating to these purchases and fees are set forth above under
"—Certain Transactions with ACF Industries LLC and
American Railcar Leasing LLC—Manufacturing Operations."
CERTAIN TRANSACTIONS WITH MR. ICAHN AND OTHER RELATED
ENTITIES
Carl C. Icahn and ARL loans
In October 2004, we advanced Mr. Icahn $165.0 million
under a secured promissory note due in 2007 and bearing interest
at the prime plus 1.75%. At the same time, we borrowed
$130.0 million from ARL represented by a promissory note
due in 2007 and bearing interest at the prime rate plus 1.5%. In
January 2005, we transferred our entire interest in the Icahn
note to ARL in exchange for additional common interests in ARL
and in satisfaction of our obligations under the ARL note. In
2004 and the nine months ended September 30, 2005, we
recorded interest income of $2.0 million and
$0.8 million, respectively, and interest expense of
$1.5 million and $0.6 million, respectively, relating
to these notes.
Arnos Corp. note payable
In December 2004, we borrowed $7.0 million from Arnos
Corp., a company beneficially owned and controlled by
Mr. Icahn, under a promissory note. The note bears interest
at the prime rate plus 1.75% (8.0% at September 30, 2005)
and is payable on demand. We intend to use a portion of the net
proceeds of this offering to repay this loan in full.
Transactions with Vegas Financial Corp.
Purchase of Mandatorily Redeemable Payment-in-Kind
Preferred Stock.
We issued to Vegas Financial Corp., a
company beneficially owned and controlled by Mr. Icahn,
15,000 shares of our
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mandatorily redeemable payment-in-kind preferred stock, known as
PIK preferred stock, for $15.0 million in June 2002, and
10,000 shares of PIK preferred stock for $10.0 million
in June 2003.
Conversion into and Purchase of New Preferred
Stock.
In July 2004, Vegas Financial Corp. converted all
of its PIK preferred stock, consisting of 95,517.04 shares
of PIK preferred stock, representing all of the shares of PIK
preferred stock outstanding, into 96,171 shares of our new
preferred stock. In addition, Vegas Financial Corp.
simultaneously purchased an additional 67,500 shares of new
preferred stock for $67.5 million. We intend to use the net
proceeds of this offering to, among other things, redeem all of
the outstanding shares and pay all accrued dividends on our new
preferred stock, including those held by Vegas Financial Corp.
As a result, Vegas Financial Corp, will receive
$89.2 million of the net proceeds of this offering. See
"Redemption of New Preferred Stock."
Transactions with Hopper Investments LLC
In 2004, Hopper Investments LLC, a company beneficially owned
and controlled by Mr. Icahn, paid $42.5 million for
195 shares of our common stock.
Transactions with Philip Environmental Services Corp.
We engaged Philip Environmental Services Corp., an environmental
consulting company beneficially owned and controlled by
Mr. Icahn, to provide environmental consulting services to
us. In the nine months ended September 30, 2005 we incurred
$0.2 million of expenses associated with that engagement.
We have continued to use Philip Environmental Services Corp. to
assist us in our environmental compliance.
CERTAIN TRANSACTIONS INVOLVING JAMES J. UNGER
Facilities leasing arrangements
Our headquarters facilities and our Corbitt manufacturing
facilities in St. Charles, Missouri are owned by St. Charles
Properties, an entity controlled by James J. Unger, our
President and Chief Executive Officer. Under two leases dated
May 1, 1995 and March 1, 2001, St. Charles Properties
leased these facilities to ACF. We reimbursed ACF for our
proportionate share of the cost of renting these facilities
through April 1, 2005. On that date, ACF assigned the
March 1, 2001 lease, covering our Corbitt manufacturing
facilities, to us and the May 1, 1995 lease, covering our
and ARL's headquarters facility, to ARL. We continue to
maintain our headquarters in the space that has been leased to
ARL. Under our services agreement with ARL, we pay ARL
$0.5 million per year, which represents the estimate of our
proportionate share of ARL's costs for the space that we
use under the lease, including rent and building services. The
terms of the underlying leases are as follows.
Under the terms of the lease agreement assigned to ARL, ARL has
leased approximately 78,000 square feet of office space.
The lease expires on December 31, 2005 with an option to
renew the lease for one additional five-year term. Rent is
payable monthly in the amount of $20,833. If ARL exercises its
option to renew the lease, the monthly rent will be $25,000.
Under the terms of the lease, ARL pays one-tenth of the property
tax and insurance expenses levied upon the property. In
addition, ARL must pay 17% and 54% of any increase in taxes and
property insurances costs, respectively. ARL is also required to
repair and maintain the facility at its costs and expense. We
use approximately 46% of the office space leased by ARL under
this agreement.
Under the terms of the lease agreement assigned to us, we occupy
approximately 128,000 square feet of space which we use for
our Corbitt manufacturing facility. The lease expires on
February 28, 2006 with an option to renew the lease for two
successive five-year terms. Rent is payable monthly in the
amount of $27,083. The maximum monthly rent for the first and
second renewal periods is $29,763
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Certain relationships and related party transactions
and $32,442 per month, respectively. We are required to pay
27% of all tax increases assessed or levied upon the property
and the cost of the utilities we use, as well as repair and
maintain the facility at our expense.
In 2002, 2003 and 2004, we incurred $0.8 million of costs
to affiliates in each of 2002, 2003 and 2004, under these two
leasing arrangements, and in the nine months ended
September 30, 2005, we incurred $0.6 million of such
costs.
Grant of common stock
Upon completion of this offering, we will issue Mr. Unger
that number of shares of our common stock obtained by dividing
$6.0 million by the public offering price set forth on the
cover page of this prospectus (assuming an initial public
offering price of $       ,
which represents the midpoint of the range on the cover page of
this prospectus, Mr. Unger will
receive         shares
of our common stock). See "Management— Executive
compensation— Employment agreements" for more
information.
Industrial revenue bonds
Mr. Unger and his wife own $0.4 million of the
industrial revenue bonds issued by Paragould, Arkansas.
Mr. Unger and his wife purchased these bonds at the time of
their original issuance on the same terms that all
non-affiliated entities purchased the bonds. We intend to use
the net proceeds of this offering to repay in full the amounts
due under all of our industrial revenue bonds. Mr. Unger
and his wife will receive approximately $0.4 million upon
our repayment of the amounts due under the industrial revenue
bonds.
REGISTRATION RIGHTS
We intend to enter into a new registration rights agreement,
which will become effective upon the completion of this
offering, with certain of our existing stockholders as of
immediately prior to the completion of this offering. The
stockholders that are party to the new registration rights
agreement will have the right to require us, subject to certain
terms and conditions, to register their shares of our common
stock under the Securities Act of 1933, as amended, at any time
following expiration of the lock-up period as described under
the caption "Shares eligible for future sale—Lock-up
Agreements". These stockholders collectively will have an
aggregate of five demand registration rights, three of which
relate solely to registration on a short-form registration
statement, such as a Form S-3. In addition, if we propose
to register any additional shares of our capital stock under the
Securities Act, these stockholders will be entitled to customary
"piggyback" registration rights, which will entitle
them to include their shares of common stock in a registration
of our securities for sale by us or by other security holders.
The registration rights granted under the new registration
rights agreement will be subject to customary exceptions and
qualifications and compliance with certain registration
procedures. Following completion of this offering,
shares
of common stock, representing
%
of our outstanding shares of common stock following completion
of this offering, will be entitled to the benefits of these
registration rights.
SHARES PURCHASED BY CERTAIN RELATED PARTIES IN THIS
OFFERING
The underwriters have reserved a portion of the shares of our
common stock for sale in this offering for purchase by certain
related parties through a directed share program. In connection
with the directed share program, any of our directors, officers,
nominees for election as director or an immediate family member
of any of these individuals may purchase shares of our common
stock with a value in excess of $60,000. See
"Underwriting— Directed Share Program" for more
information on the directed share program.
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FUTURE TRANSACTIONS
All future transactions, if any, between us and any of our
officers, directors and principal stockholders and their
affiliates, as well as any transactions between us and any
entity with which our officers, directors or principal
stockholders are affiliated, will be approved in accordance with
the then-current SEC rules and regulations, Nasdaq stock market
rules and applicable law governing the approval of the
transactions.
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Principal stockholders
The following table sets forth information known to us regarding
the beneficial ownership of our common stock calculated as of
September 30, 2005, and as adjusted to reflect the
Transactions and the sale of the common stock offered hereby, by:
4
each stockholder who is known by
    us to own beneficially more than 5% of our common stock;
4
our chief executive officer and
    our other most highly compensated executive officers;
4
each of our directors and director
    nominees; and
4
all of our executive officers and
    directors as a group.
The number of shares beneficially owned by each stockholder,
director or officer is determined according to the rules of the
SEC, and the information is not necessarily indicative of
beneficial ownership for any other purpose. The number of shares
and the percentage ownership of each stockholder prior to this
offering is calculated based
on                      shares
of our common stock outstanding immediately after the merger.
The percentage ownership of each stockholder after the offering
is calculated based
on                      shares
of our common stock outstanding, which is derived from
the                      shares
of our common stock outstanding after the merger and prior to
this offering, plus
the                      shares
of our common stock that we intend to issue in this offering
and                      shares
of our common stock that we expect to issue to James J. Unger,
our president and chief executive officer (based on an initial
public offering price of
$                    ,
which represents the midpoint of the range on the cover of this
prospectus), but without giving effect to the underwriters'
exercise of the over-allotment option. See
"Management— Executive compensation— Employment
agreements" for more information on the calculation of the
number of shares we will issue to Mr. Unger. To the extent
that the over-allotment is exercised, we will sell up to an
aggregate
of                      additional
shares of our common stock.
The underwriters have reserved a portion of the shares of our
common stock for sale in this offering for purchase by certain
related parties through a directed share program. In connection
with the directed share program, any of our directors, officers,
nominees for election as director or an immediate family member
of any of these individuals may purchase shares of our common
stock with a value in excess of $60,000. See "Certain
relationships and related party transactions— Shares
purchased by certain related parties in this offering" and
"Underwriting— Directed Share Program" for
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more information on the directed share program. The table below
does not reflect any potential purchases under the directed
share program.
Shares of Common
Stock Beneficially Owned
Shares of Common
Shares of Common
After this Offering
Stock Beneficially
Stock Beneficially
Assuming Full Exercise
Owned Prior to this
Owned After this
of the Over-Allotment
Offering
Offering
Option
Name of beneficial owner
Number
Percent
Number
Percent
Number
Percent
Carl C.
    Icahn
(1)(2)(3)
100.0%
Foundation for a Greater
    Opportunity
(1)(3)
38.5%
James J.
    Unger
(4)
—
—
James A.
    Cowan
(4)
—
—
William P.
    Benac
(4)
—
—
Alan C.
    Lullman
(4)
—
—
Vincent J.
    Intrieri
(1)
—
—
Jon F.
    Weber
(1)
—
—
Keith
    Meister
(1)
—
—
William L.
    Finn
(5)
—
—
James C.
    Pontious
(4)(6)
—
—
James M.
    Laisure
(4)(6)
—
—
All directors, director nominees and executive officers as a
    group
(7)
(10 persons)
100.0%
*   Represents beneficial ownership of less
than 1%.
(1) The address of such person is c/o Icahn Associates
Corp. and Affiliated Companies, 767 Fifth Avenue,
47th Floor, New York, New York 10153.
(2)
Mr. Icahn beneficially owns 540 of these shares directly
    and an additional 195 of these shares are owned by Hopper
    Investments, LLC, which is a Delaware limited liability company
    that is wholly owned by Barberry Corp., which is a Delaware
    corporation that is wholly owned by Mr. Icahn. The
    remaining shares are owned by the Foundation for a Greater
    Opportunity, or the Foundation, subject to certain agreements
    with an affiliate of Mr. Icahn as described in
    footnote 3.
(3)
In December 2005 Modal LLC, which is a Delaware limited
    liability company that is wholly owned by Mr. Icahn,
    entered into a stock purchase agreement with the Foundation to
    acquire all of our common stock held by the Foundation. Pending
    the closing of this acquisition, the Foundation has granted
    Modal LLC an irrevocable proxy to vote these shares. These
    agreements are described under "—Icahn agreement to
    purchase Foundation shares" set forth below. See also
    "Risk Factors—Risks related to the purchase of our
    common stock in the offering—Upon the closing of this
    offering we may be a "controlled company" within the
    meaning of the Nasdaq National Market rules and you will not
    have the same protections afforded to shareholders of other
    companies that are subject to all of the Nasdaq National Market
    corporate governance requirements."
(4)
The address of such person is c/o American Railcar
    Industries, Inc., 100 Clark Street, St. Charles, Missouri 63301.
(5)
Mr. Finn retired effective May 1, 2005.
(6)
Mr. Pontious and Mr. Laisure have each consented to
    serve as a director at such time as our common stock is listed
    on the Nasdaq National Market.
(7)
Includes Mr. Pontious and Mr. Laisure, each of whom
    has consented to serve as a director at such time as our common
    stock is listed on the Nasdaq National Market.
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Icahn agreement to purchase Foundation shares
We have been advised that in December 2005 Modal LLC, an
affiliate of Mr. Icahn, entered into a stock purchase
agreement with the Foundation to acquire the 460 shares of
our common stock held by the Foundation for a purchase price
equal to the greater of $100 million or the fair market
value of the shares on the date of purchase. If the purchase
takes place on the date of, or within five days of the closing
of this offering, the fair market value will be the initial
public offering price. If the purchase takes place after this
five day period, the fair market value will be equal to the
average of the closing price of our common stock on the Nasdaq
National Market for the five days immediately preceding the
acquisition. The purchase price will be payable
$10.0 million in cash and the balance in a five year
interest-only promissory note with monthly payments of interest
at the prime rate. The note may be prepaid without penalty and
will be secured by a pledge of all of the shares sold in the
transaction. The note also will be secured by the guarantee of
High Coast Limited Partnership, which is also an affiliate of
Mr. Icahn. The Foundation will be able to accelerate
repayment of the principal due under the note based on its cash
needs under terms outlined in the note.
The consummation of this acquisition requires the completion of
this offering and the approval of applicable authorities of the
State of New York. If the parties obtain this approval, we have
been advised that the parties expect that the acquisition would
be completed in the first three months of 2006. Pending the
closing of this acquisition, and for so long as the stock
purchase agreement has not been terminated, the Foundation has
granted Modal LLC an irrevocable proxy to vote all of the shares
of our common stock held by the Foundation. The stock purchase
agreement may be terminated by either party if the acquisition
does not occur by May 2006.
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Description of capital stock
The following description of our capital stock is only a
summary. You should refer to our certificate of incorporation
and bylaws as in effect upon the closing of this offering, which
are included as exhibits to the registration statement of which
this prospectus is a part. See "Where you can find more
information."
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Our authorized capital stock as of September 30, 2005
consisted of 12,000 shares of common stock, with a par
value of $0.01 per share, 99,000 shares of preferred
stock, with a par value of $0.01 per share, which we refer
to as our mandatorily redeemable preferred stock,
150,000 shares of payment-in-kind preferred stock, with a
par value of $0.01 per share, which we refer to as our PIK
preferred stock, and 500,000 shares of new preferred stock,
with a par value of $0.01 per share. As of
September 30, 2005, there were 1,195 shares of our
common stock outstanding, one share of our mandatorily
redeemable preferred stock outstanding, no shares of our PIK
preferred stock outstanding and 82,055 shares of our new
preferred stock outstanding. As of September 30, 2005, our
shares of common stock were held of record by a total of three
stockholders.
Prior to the closing of this offering, we will reincorporate in
Delaware through a merger with and into our wholly owned
Delaware subsidiary. Upon completion of that merger our
certificate of incorporation will authorize us to issue up
to                      shares
of common stock, with a par value of $0.01 per share, and
up
to                      shares
of preferred stock, with a par value of $0.01 per share.
In connection with this merger, we will exchange all of our
shares of common stock for shares of common stock on a
one-for-          basis.
Following this merger, and prior to our issuance of shares of
common stock in this
offering,                      shares
of our common stock will be outstanding.
After giving effect to our issuance
of                      shares
of common stock in this offering, we will
have                      shares
of common stock outstanding
and                      shares
of common stock outstanding if the underwriters exercise their
over-allotment option in full.
In connection with the merger, we will exchange one share of new
preferred stock, with substantially the same terms of our
existing new preferred stock, for each of the 82,055 shares of
new preferred stock then outstanding. We intend to use a portion
of the net proceeds of this offering to redeem all of the
outstanding shares of our new preferred stock. Immediately prior
to the merger, we will also redeem our one share of mandatorily
redeemable preferred stock. Following the closing of this
offering, we will be authorized to issue 1,000,000 shares of
preferred stock, with a par value of $0.01 per share, and there
will be no shares of any series of preferred stock designated or
outstanding.
Common stock
The holders of our common stock are entitled to one vote for
each share held of record on the applicable record date on all
matters voted on by our shareholders. Except as otherwise
required by law or provided in any resolution adopted by our
board of directors with respect to any series of preferred
stock, the holders of our common stock exclusively possess all
voting power. All holders of our common stock have the same
voting rights and vote together as a single class. Our
certificate of incorporation does not provide for cumulative
voting in the election of directors or any preemptive rights to
purchase or subscribe for any stock or other securities, and
there are no conversion rights or sinking fund or redemption
provisions with respect to our common stock. Consequently,
holders of more than 50% of the shares of our common stock are
able to elect all directors eligible for election each year.
Holders of our common stock are entitled to dividends and other
distributions out of assets legally available if and when
declared by our board of directors. Upon our liquidation,
dissolution or winding up, the holders of our common stock are
entitled to share pro rata in the distribution of all of
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Description of capital stock
our assets remaining available for distribution after
satisfaction of all liabilities, including any prior rights of
any preferred stock which may be outstanding.
Preferred stock
Upon completion of this offering, our board of directors,
subject to limitations prescribed by law, will be permitted to
establish one or more series of preferred stock and to
determine, with respect to any series of preferred stock, the
terms and rights of that series, including:
4
the designation of the series;
4
the number of shares of the
    series, which our board may, except where otherwise provided in
    the preferred stock designation, increase and decrease, but not
    below the number of shares then outstanding;
4
whether dividends, if any, will be
    cumulative or non-cumulative and the dividend rate of the series;
4
the dividend rate, if any, and the
    dates at which dividends, if any, will be payable;
4
the redemption rights and price or
    prices, if any, for shares of the series;
4
the terms and amounts of any
    sinking fund provided for the purchase or redemption of shares
    of the series;
4
the amounts payable on shares of
    the series in the event of any voluntary or involuntary
    liquidation, dissolution or winding-up of the affairs of our
    company;
4
whether the shares of the series
    will be convertible into shares of any other class or series, or
    any other security, of our company or any other corporation,
    and, if so, the specification of the other class or series or
    other security, the conversion price or prices or rate or rates,
    any rate adjustments, the date or dates as of which the shares
    will be convertible and all other terms and conditions upon
    which the conversion may be made;
4
restrictions on the issuance of
    shares of the same series or of any other class or series;
4
the voting rights, if any, of the
    holders of the series;
4
the limitations, if any, on
    payment of dividends or making contributions on and on purchase
    and redemption of, common stock or shares ranking junior to such
    series; and
4
restrictions, if any, on the
    creation of indebtedness.
The issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisition and other
corporate purposes, could have the effect of making it more
difficult for a third party to acquire, or discourage a third
party from acquiring, a majority of our outstanding voting
stock. Our board of directors may issue preferred stock with
voting and conversion rights that could adversely affect the
voting power of the holders of our common stock. There are no
current agreements or understandings for the issuance of
preferred stock, and our board of directors has no present
intention to issue any shares of preferred stock.
CORPORATE OPPORTUNITIES
Our certificate of incorporation provides that none of
Mr. Icahn or entities controlled by him (referred to as the
Founding Stockholders), or any director, officer, member,
partner, stockholder or employee of a Founding Stockholder (each
referred to as a Specified Party), will have any duty to refrain
from engaging directly or indirectly in the same or similar
business activities or lines of business as we do. In the event
that any Founding Stockholder or Specified Party acquires
knowledge of a potential transaction or matter that may be a
corporate opportunity for any Founding Stockholder or Specified
Party, as applicable, and us, none of the Founding Stockholders
or Specified Parties has any duty to communicate or offer such
corporate opportunity to us, and any Founding Stockholder or
Specified Party is entitled to pursue or acquire such corporate
opportunity for itself or to direct such corporate
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Description of capital stock
opportunity to another person or entity and we have no right in
or to such corporate opportunity or to any income or proceeds
derived therefrom.
In the event that one of our directors, officers or employees
who is also a Founding Stockholder or a Specified Party acquires
knowledge of a potential transaction or matter which may be a
corporate opportunity or otherwise is then exploiting any
corporate opportunity, subject to the following paragraph, we
will have no interest in such corporate opportunity and no
expectation that such corporate opportunity be offered to us, so
that such Specified Party will have no duty to communicate or
present such corporate opportunity to us, will have the right to
hold such corporate opportunity for its own account or to
recommend, sell, assign or transfer such corporate opportunity
to persons other than us and will not breach any fiduciary duty
to us by reason of the fact that such Specified Party pursues or
acquires such corporate opportunity for itself, directs, sells,
assigns or transfers such corporate opportunity to another
person or does not communicate information regarding such
corporate opportunity to us.
Notwithstanding the foregoing, our certificate of incorporation
will provide that we do not renounce any interest or expectation
we may have in any corporate opportunity that is offered to any
Founding Stockholder or Specified Party, if such opportunity is
expressly offered to such Founding Stockholder or Specified
Party solely in, and as a direct result of, his or her capacity
as our director, officer or employee.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND
DIRECTORS
Our bylaws will require us to indemnify each of our directors
and officers to the fullest extent permitted by law. Our bylaws
will also provide that an amendment to the indemnification
provisions of our bylaws will not affect the liability of any
director or officer for any act or omission occurring prior to
the effective time of such amendment.
OTHER PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND
BYLAWS
Board of directors
Our certificate of incorporation will provide that the number of
directors shall be determined in the manner specified by our
bylaws, and may be increased or decreased from time to time in
the manner prescribed by our bylaws. Our certificate of
incorporation will further provide that we may not adopt or
approve the classification of our directors for staggered terms
other than by an amendment to the certificate of incorporation
duly adopted by our stockholders. Currently, our board of
directors consists of five directors.
Prohibition against certain anti-takover defenses.
Our certificate of incorporation will provide that we shall not,
other than by an amendment to our certificate of incorporation
duly adopted by our stockholders, adopt or approve any so called
rights plan, poison pill or other similar plan, agreement or
device designed to prevent or make more difficult a hostile
takeover of us by increasing the cost to a potential acquirer of
such a takeover either through the issuance of new rights,
shares of common stock or preferred stock or any other security
or device that may be issued to our stockholders, other than all
our stockholders, that carry severe redemption provisions,
favorable purchase provisions or otherwise.
Amendment of bylaws
Our Board of Directors and stockholders will be authorized and
empowered to adopt, amend and repeal our bylaws.
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Inapplicability of Delaware's antitakeover statute
Our certificate of incorporation will make the anti-takeover
protection of Section 203 of The Delaware General
Corporation Law, which we refer to as the DGCL, inapplicable to
us. Generally, Section 203 of the DGCL provides that any
person who acquires direct or indirect beneficial ownership of
15% or more of the outstanding voting stock of a Delaware
corporation becomes an "interested shareholder."
Section 203 prohibits a corporation from engaging in any
"business combination" with an interested shareholder
for a period of three years following the date that such
interested shareholder becomes an interested shareholder, unless
certain conditions are satisfied. Generally, a business
combination includes a merger, asset or stock sale, or other
transaction resulting in a financial benefit to the interested
stockholder.
The listing requirements of the Nasdaq National Market, which
will apply to us while our common stock is listed on the Nasdaq
National Market, require stockholder approval of certain
issuances equal to or in excess of 20% of the voting power or
the number of shares of common stock. These additional shares
may be used for a variety of corporate purposes, including
future public offerings, to raise additional capital or to
facilitate acquisitions.
One of the effects of the existence of unissued and unreserved
common stock or preferred stock may be to enable our board of
directors to issue shares to persons friendly to current
management, which issuance could render more difficult or
discourage an attempt to obtain control of our company by means
of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management and possibly
deprive the stockholders of opportunities to sell their shares
of common stock at prices higher than prevailing market prices.
REGISTRATION RIGHTS
We intend to enter into a new registration rights agreement,
which will become effective upon the completion of this
offering, with certain of our existing stockholders as of
immediately prior to the completion of this offering. The
stockholders that are party to the new registration rights
agreement will have the right to require us, subject to certain
terms and conditions, to register their shares of our common
stock under the Securities Act of 1933, as amended, at any time
following expiration of the lock-up period as described under
the caption "Shares eligible for future sale—Lock-up
Agreements.". These stockholders collectively will have an
aggregate of five demand registration rights, three of which
relate solely to registration on a short-form registration
statement, such as a Form S-3. In addition, if we propose to
register any of our capital stock under the Securities Act, our
stockholders will be entitled to customary "piggyback"
registration rights which will entitle our stockholders to
include their shares of common stock in a registration of our
securities for sale by us or by other security holders. The
registration rights granted under the new registration rights
agreement are subject to customary exceptions and qualifications
and compliance with certain registration procedures. Following
the completion of this
offering,                      shares
of common stock,
representing                     %
of our outstanding shares of common stock following completion
of this offering, will be entitled to the benefits of these
registration rights.
QUOTATION OF OUR COMMON STOCK
We expect to have our common stock approved for quotation on the
Nasdaq National Market under the trading symbol "ARII."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is
American Stock Transfer & Trust Company.
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Shares eligible for future sale
Prior to this offering, there has not been a public market for
our common stock. Future sales of substantial amounts of our
common stock in the public market, or the possibility of these
sales, could adversely affect the trading price of the common
stock and could impair our future ability to raise capital
through the sale of our equity at a time and price we deem
appropriate.
Upon completion of this offering and the merger, we will have
outstanding                      shares
of common stock. Of these shares,
the                      shares
sold in this offering,
or                      shares
if the underwriters' over-allotment option is exercised in
full, will be freely tradable without restriction or further
registration under the Securities Act, except for any shares
purchased by our "affiliates," as defined in
Rule 144 under the Securities Act, which would be subject
to the limitations and restrictions described below.
The
remaining                      shares
of common stock outstanding upon completion of this offering
will be "restricted securities" as defined in
Rule 144. Restricted securities may be sold in the public
market only if they are registered or if they qualify for an
exemption from registration such as the exemption provided by
Rule 144.
Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration
under Rules 144 and 144(k) promulgated under the Securities
Act, which rules are summarized below. Subject to the lock-up
agreements described below and the provisions of Rules 144
and 144(k), additional shares will be available for sale in the
public market as follows:
Number of Shares
Date
After the date of this prospectus.
After 180 days from the date of this prospectus.
All of these restricted securities will be eligible for sale in
the public market, subject in all cases to the volume
limitations and other restrictions of Rule 144, beginning
upon expiration of the lock-up agreements described below.
RULE 144
In general, under Rule 144 as currently in effect,
beginning 90 days after this offering, a person (or persons
whose shares are required to be aggregated), including an
affiliate, who has beneficially owned shares of our common stock
for at least one year is entitled to sell in any three-month
period a number of shares that does not exceed the greater of:
4
1% of then-outstanding shares of
    our common stock, which is
    approximately                      shares
    of our common stock immediately after the completion of this
    offering; or
4
the average weekly reported
    trading volume of our common stock on the Nasdaq National Market
    during the four calendar weeks preceding the filing of a
    Form 144 with respect to the sale, subject to certain
    restrictions.
Sales under Rule 144 are also subject to manner of sale
provisions and notice requirements and to the availability of
current public information about us.
RULE 144(K)
In addition, a person who is not deemed to have been an
affiliate of ours at any time during the 90 days preceding
a sale and who has beneficially owned the shares proposed to be
sold for at least two years, would be entitled to sell those
shares under Rule 144(k) without regard to the manner of
sale, public information, volume limitation or notice
requirements of Rule 144.
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Shares eligible for future sale
LOCK-UP AGREEMENTS
We have agreed that we will not offer, sell, contract to sell,
pledge or otherwise dispose of, directly or indirectly, or file
with the SEC a registration statement under the Securities Act
relating to any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, or publicly disclose the intention to make
any offer, sale, pledge, disposition or filing, without the
prior written consent of UBS Securities LLC and Bear,
Stearns & Co. Inc. for a period of
180 days after the date of this prospectus. Our officers,
directors, all of our existing stockholders have also agreed,
and certain individuals who purchase shares of our common stock
through the directed share program may agree, that they will not
offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our common stock (other
than shares they may sell in this offering) or securities
convertible into or exchangeable or exercisable for any shares
of our common stock, enter into a transaction that would have
the same effect, or enter into any swap, hedge or other
arrangement that transfers, in whole or in part, any of the
economic consequences of ownership of our common stock, whether
any of these transactions are to be settled by delivery of our
common stock or other securities, in cash or otherwise, or
publicly disclose the intention to make any offer, sale, pledge
or disposition, or to enter into any transaction, swap, hedge or
other arrangement, without, in each case, the prior written
consent of UBS Securities LLC and Bear,
Stearns & Co. Inc. until 180 days after
the date of this prospectus. UBS Securities LLC and Bear,
Stearns & Co. Inc. may, in their sole
discretion at any time without notice, release all or any
portion of the shares of our common stock held by our officers,
directors, existing stockholders and certain individuals who
have purchased shares of our common stock in the directed share
program, subject to these lock-up agreements.
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Material U.S. income tax considerations for
non-U.S. holders
The following summary describes material United States federal
income tax consequences of the ownership and disposition of
common stock by a Non-U.S. Holder (as defined below) as of
the date of this prospectus. This discussion does not address
all aspects of United States federal income taxation and does
not deal with estate, gift, foreign, state and local tax
consequences that may be relevant to such Non-U.S. Holders
in light of their personal circumstances. Special U.S. tax
rules may apply to certain Non-U.S. Holders, such as
"controlled foreign corporations," "passive
foreign investment companies," corporations that accumulate
earnings to avoid U.S. federal income tax, investors in
partnerships or other pass-through entities for
U.S. federal income tax purposes, dealers in securities,
holders of securities held as part of a "straddle,"
"hedge," "conversion transaction" or other
risk reduction transaction, and certain former citizens or
long-term residents of the United States that are subject to
special treatment under the Internal Revenue Code of 1986, as
amended (which we also refer to as the Code). Such entities and
persons should consult their own tax advisors to determine the
U.S. federal, state, local and other tax consequences that
may be relevant to them. Furthermore, the discussion below is
based upon the provisions of the Code, and regulations,
administrative pronouncements of the Internal Revenue Service
(which we also refer to as the IRS) and judicial decisions
thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified with or without retroactive effect
so as to result in United States federal income tax consequences
different from those discussed below.
If a partnership (or an entity treated as a partnership for
U.S. federal income tax purposes) holds the common stock,
the tax treatment of a partner will generally depend on the
status of the partner and the activities of the partnership.
Persons who are partners in partnerships holding the common
stock should consult their tax advisors.
The authorities on which this summary is based are subject to
various interpretations, and any views expressed within this
summary are not binding on the IRS or the courts. No assurance
can be given that the IRS or the courts will agree with the tax
consequences described in this prospectus.
As used herein, a "Non-U.S. Holder" means a
beneficial owner of our common stock that is not any of the
following for U.S. federal income tax purposes:
4
a citizen or resident of the
    United States,
4
a corporation, or other entity
    treated as a corporation for United States federal income tax
    purposes, created or organized in or under the laws of the
    United States, any state thereof or the District of Columbia,
4
an estate the income of which is
    subject to United States federal income taxation regardless of
    its source, or
4
a trust (i) which is subject
    to primary supervision by a court situated within the United
    States and as to which one or more United States persons have
    the authority to control all substantial decisions of the trust,
    or (ii) that has a valid election in effect under
    applicable U.S. Treasury regulations to be treated as a
    United States person.
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non-U.S. holders
Prospective purchasers are urged to consult their own tax
advisors regarding the U.S. federal income tax
consequences, as well as other U.S. federal, state, and
local income and estate tax consequences, and non-U.S. tax
consequences, to them of acquiring, owning, and disposing of our
common stock.
DIVIDENDS
If we make distributions on our common stock, such distributions
paid to a Non-U.S. Holder will generally constitute
dividends for U.S. federal income tax purposes to the
extent such distributions are paid from our current or
accumulated earnings and profits, as determined under
U.S. federal income tax principles. If a distribution
exceeds our current and accumulated earnings and profits, the
excess will be treated as a tax-free return of the
Non-U.S. Holder's investment to the extent of the
Non-U.S. Holder's adjusted tax basis in our common
stock. Any remaining excess will be treated as capital gain.
Dividends paid to a Non-U.S. Holder generally will be
subject to withholding of United States federal income tax at a
30% rate or such lower rate as may be specified by an applicable
income tax treaty. A Non-U.S. Holder of common stock who
wishes to claim the benefit of an applicable treaty rate for
dividends will be required to (a) properly complete IRS
Form W-8BEN (or appropriate substitute form) and certify,
under penalties of perjury, that such holder is not a
U.S. person and is eligible for the benefits with respect
to dividends allowed by such treaty or (b) hold common
stock through certain foreign intermediaries and satisfy the
certification requirements for treaty benefits of applicable
Treasury regulations. A Non-U.S. Holder eligible for a
reduced rate of United States withholding tax pursuant to an
income tax treaty may obtain a refund of any excess amounts
withheld by timely filing an appropriate claim for refund with
the IRS.
This United States withholding tax generally will not apply to
dividends that are effectively connected with the conduct of a
trade or business by the Non-U.S. Holder within the United
States, and, if a treaty applies, attributable to a United
States permanent establishment or fixed base of the
Non-U.S. Holder. Dividends effectively connected with the
conduct of a trade or business, as well as those attributable to
a United States permanent establishment or fixed base of the
Non-U.S. Holder under an applicable treaty, are subject to
United States federal income tax generally in the same manner as
if the Non-U.S. Holder were a U.S. person, as defined
under the Code. Certain IRS certification and disclosure
requirements must be complied with in order for effectively
connected income to be exempt from withholding. Any such
effectively connected dividends received by a
Non-U.S. Holder that is a foreign corporation may, under
certain circumstances, be subject to an additional "branch
profits tax" at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty.
GAIN ON DISPOSITION OF COMMON STOCK
A Non-U.S. Holder generally will not be subject to United
States federal income tax (or any withholding thereof) with
respect to gain recognized on a sale or other disposition of
common stock unless:
4
The Non-U.S. Holder is an
    individual who is present in the United States for 183 or more
    days in the taxable year of the disposition and certain other
    conditions are met,
4
the gain is effectively connected
    with a trade or business of the Non-U.S. Holder in the
    United States and, where a tax treaty applies, is attributable
    to a United States permanent establishment or fixed base of the
    Non-U.S. Holder, or
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non-U.S. holders
4
we are or have been a
    "U.S. real property holding corporation" within
    the meaning of Section 897(c)(2) of the Code, also referred
    to as a USRPHC, for United States federal income tax purposes at
    any time within the five-year period preceding the disposition
    (or, if shorter, the Non-U.S. Holder's holding period
    for the common stock).
Gain recognized on the sale or other disposition of common stock
and effectively connected with a United States trade or
business, or attributable to a United States permanent
establishment or fixed base of the Non-U.S. Holder under an
applicable treaty, is subject to United States federal income
tax on a net income basis generally in the same manner as if the
Non-U.S. Holder were a U.S. person, as defined under
the Code. Any such effectively connected gain from the sale or
disposition of common stock received by a Non-U.S. Holder
that is a foreign corporation may, under certain circumstances,
be subject to an additional "branch profits tax" at a
30% rate or such lower rate as may be specified by an applicable
income tax treaty.
In general, a corporation is a USRPHC if the fair market value
of its "U.S. real property interests" equals or
exceeds 50% of the sum of the fair market value of its worldwide
(domestic and foreign) real property interests and its other
assets used or held for use in a trade or business. For this
purpose, real property interests include land, improvements, and
associated personal property. We believe that we currently are
not a USRPHC. In addition, based on these financial statements
and current expectations regarding the value and nature of our
assets and other relevant data, we do not anticipate becoming a
USRPHC.
If we become a USRPHC, a Non-U.S. Holder nevertheless will
not be subject to United States federal income tax if our common
stock is regularly traded on an established securities market,
within the meaning of applicable Treasury regulations, and the
Non-U.S. Holder holds no more than five percent of our
outstanding common stock, directly or indirectly, during the
five-year testing period identified in the third bullet point
immediately above. We expect that our common stock will be
quoted on the Nasdaq National Market and may be regularly traded
on an established securities market in the United States so long
as it is so quoted.
INFORMATION REPORTING AND BACKUP WITHHOLDING
We must report annually to the IRS and to each
Non-U.S. Holder the amount of dividends paid to such holder
and the tax withheld with respect to such dividends, regardless
of whether withholding was required. Copies of the information
returns reporting such dividends and withholding may also be
made available to the tax authorities in the country in which
the Non-U.S. Holder resides under the provisions of an
applicable income tax treaty.
The United States imposes a backup withholding tax on dividends
and certain other types of payments to United States persons
(currently at a rate of 28%) of the gross amount. Dividends paid
to a Non-U.S. Holder will not be subject to backup
withholding if proper certification of foreign status (usually
on an IRS Form W-8BEN) is provided, and the payor does not
have actual knowledge or reason to know that the beneficial
owner is a United States person, or the holder is a corporation
or one of several types of entities and organizations that
qualify for exemption, also referred to as an exempt recipient.
Information reporting and backup withholding generally are not
required with respect to the amount of any proceeds from the
sale or other disposition of shares of common stock by a
Non-U.S. Holder outside the United States through a foreign
office of a foreign broker that does not have certain specified
connections to the United States. However, if a
Non-U.S. Holder sells or otherwise disposes of shares of
common stock through the U.S. office of a United States or
foreign broker, the broker will be required to report the amount
of proceeds paid to such holder to the IRS and to apply the
backup
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non-U.S. holders
withholding tax (currently at a rate of 28%) to the amount of
such proceeds unless appropriate certification (usually on an
IRS Form W-8BEN) is provided to the broker of the
holder's status as either an exempt recipient or a
non-U.S. person, and the payor does not have actual
knowledge or reason to know that the beneficial owner is a
United States person. Information reporting also applies if a
Non-U.S. Holder sells or otherwise disposes of its shares
of common stock through the foreign office of a broker deriving
more than a specified percentage of its income from United
States sources or having certain other connections to the United
States and the foreign broker does not have certain documentary
evidence in its files of the Non-U.S. Holder's foreign
status.
Any amounts withheld under the backup withholding rules may be
allowed as a refund or a credit against such holder's
U.S. federal income tax liability provided the required
information is timely furnished to the IRS.
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Underwriting
We are offering the shares of our common stock described in this
prospectus through the underwriters named below. UBS Securities
LLC and Bear, Stearns & Co. Inc. are the
representatives of the underwriters and joint book-running
managers of this offering. We have entered into an underwriting
agreement with the underwriters. Subject to the terms and
conditions of the underwriting agreement, each of the
underwriters has severally agreed to purchase the number of
shares of common stock from us listed next to its name in the
following table:
Number of
Underwriters
shares
UBS Securities LLC
Bear, Stearns & Co. Inc.
BB&T Capital Markets, a division of Scott &
    Stringfellow, Inc.
CIBC World Markets Corp.
Morgan Keegan & Company, Inc.
Total
The underwriting agreement provides that the underwriters must
buy all of the shares if they buy any of them. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters' over-allotment option
described below.
Our common stock is offered subject to a number of conditions,
including:
4
receipt and acceptance of our
    common stock by the underwriters; and
4
the underwriters' right to
    reject orders in whole or in part.
We have been advised by the representatives that the
underwriters intend to make a market in our common stock but
that they are not obligated to do so and may discontinue making
a market at any time without notice.
In connection with this offering, certain of the underwriters or
securities dealers may distribute prospectuses electronically.
OVER-ALLOTMENT OPTION
We have granted the underwriters an option to buy up to an
aggregate
of                      additional
shares of our common stock. The underwriters may exercise this
option solely for the purpose of covering over-allotments, if
any, made in connection with this offering. The underwriters
have 30 days from the date of this prospectus to exercise
this option. If the underwriters exercise this option, they will
each purchase additional shares on a pro rata basis in
approximately the same proportion to the amounts specified in
the table above.
Directed Share Program
At our request, the underwriters have reserved up
to   % of the shares of common stock for sale at the
public offering price set forth on the cover page of this
prospectus to persons who are directors, officers, employees,
and certain vendors, suppliers, customers and business
associates, or who are otherwise associated with us through a
directed share program. The number of shares of common stock
available for sale to the general public will be reduced by the
number of directed shares purchased by participants in the
directed share program. Any directed shares not purchased will be
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offered by the underwriters to the general public on the same
basis as all other shares of common stock offered. We have
agreed to indemnify the underwriters against certain liabilities
and expenses, including liabilities under the Securities Act, in
connection with the sales of the directed shares. We have been
advised by UBS Securities LLC that any participants in the
directed share program who purchase more than $100,000 of our
common stock will be required to sign a lock-up agreement, the
form of which will be the same as that of the lock-up agreements
to be entered into by all of our directors, officers and
existing stockholders. See "Shares eligible for future
sale— Lock-up agreements" for a description of the
material terms of these agreements.
COMMISSIONS AND DISCOUNTS
Shares sold by the underwriters to the public will initially be
offered at the initial offering price set forth on the cover of
this prospectus. Any shares sold by the underwriters to
securities dealers may be sold at a discount of up to
$                     per
share from the initial public offering price. Any of these
securities dealers may resell any shares purchased from the
underwriters to other brokers or dealers at a discount of up to
$                     per
share from the initial public offering price. If all the shares
are not sold at the initial public offering price, the
representatives may change the offering price and the other
selling terms. Sales of shares made outside of the United States
may be made by affiliates of the underwriters. Upon execution of
the underwriting agreement, the underwriters will be obligated
to purchase the shares at the prices and upon the terms stated
in the underwriting agreement and, as a result, will thereafter
bear any risk associated with changing the offering price to the
public or other selling terms.
The following table shows the per share and total underwriting
discounts and commissions we will pay to the underwriters
assuming both no exercise and full exercise of the
underwriters' option to purchase up to an
additional                      shares.
No exercise
Full exercise
Per share
$
$
Total
$
$
We estimate that the total expenses of this offering payable by
us, not including the underwriting discounts and commissions,
will be approximately
$                    .
NO SALES OF SIMILAR SECURITIES
We, our executive officers and directors and all of our existing
stockholders have entered, and certain individuals who purchase
shares of our common stock in this offering through the directed
share program may enter, into lock-up agreements with the
underwriters. Under these agreements, subject to certain
exceptions, we and each of these persons may not, without the
prior written approval of UBS Securities LLC and Bear,
Stearns & Co. Inc., offer, sell, contract to
sell or otherwise dispose of, directly or indirectly, or hedge
our common stock or securities convertible into or exchangeable
for our common stock. These restrictions will be in effect for a
period of 180 days after the date of this prospectus. At
any time and without public notice, UBS Securities LLC and Bear,
Stearns & Co. Inc. may, in their sole
discretion, release all or some of the securities from these
lock-up agreements. Notwithstanding the foregoing, if
(1) during the last 17 days of the 180-day lock-up
period we issue an earnings release or material news or a
material event relating to us occurs or (2) prior to the
expiration of the 180-day lock-up period, we announce that we
will release earnings results during the 16-day period beginning
on the last day of the 180-day lock-up period, then the
restrictions described above will continue to apply until the
expiration of the 18-day period beginning on the issuance of the
earnings release or the occurrence of the material news or
material event.
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INDEMNIFICATION
We have agreed to indemnify the underwriters against certain
liabilities, including certain liabilities under the Securities
Act. If we are unable to provide this indemnification, we have
agreed to contribute to payments the underwriters may be
required to make in respect of those liabilities.
LISTING
We expect to apply to have our common stock approved for
quotation on the Nasdaq National Market under the trading symbol
"ARII."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is
American Stock Transfer & Trust Company.
PRICE STABILIZATION, SHORT POSITIONS
In connection with this offering, the underwriters may engage in
activities that stabilize, maintain or otherwise affect the
price of our common stock, including:
4
stabilizing transactions;
4
short sales;
4
purchases to cover positions
    created by short sales;
4
imposition of penalty
    bids; and
4
syndicate covering transactions.
Stabilizing transactions consist of bids or purchases made for
the purpose of preventing or retarding a decline in the market
price of our common stock while this offering is in progress.
These transactions may also include making short sales of our
common stock, which involve the sale by the underwriters of a
greater number of shares of common stock than they are required
to purchase in this offering and purchasing shares of common
stock in the open market to cover positions created by short
sales. Short sales may be "covered short sales," which
are short positions in an amount not greater than the
underwriters' over-allotment option referred to above, or
may be "naked short sales," which are short positions
in excess of that amount.
The underwriters may close out any covered short position by
either exercising their over-allotment option, in whole or in
part, or by purchasing shares in the open market. In making this
determination, the underwriters will consider, among other
things, the price of shares available for purchase in the open
market as compared to the price at which they may purchase
shares through the over-allotment option.
Naked short sales are sales made in excess of the over-allotment
option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position
is more likely to be created if the underwriters are concerned
that there may be downward pressure on the price of the common
stock in the open market that could adversely affect investors
who purchased in this offering.
The underwriters also may impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representatives have
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repurchased shares sold by or for the account of that
underwriter in stabilizing or short covering transactions.
As a result of these activities, the price of our common stock
may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. The underwriters
may carry out these transactions on the Nasdaq National Market,
in the over-the-counter market or otherwise.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there has been no public market for our
common stock. The initial public offering price was determined
by negotiation by us and the representatives of the
underwriters. The principal factors considered in determining
the initial public offering price include:
4
the information set forth in this
    prospectus and otherwise available to representatives;
4
our history and prospects and the
    history and prospects for the industry in which we compete;
4
our past and present financial
    performance and an assessment of our management;
4
our prospects for future earnings
    and the present state of our development;
4
the general condition of the
    securities markets at the time of this offering;
4
the recent market prices of, and
    demand for, publicly traded common stock of generally comparable
    companies; and
4
other factors deemed relevant by
    the underwriters and us.
AFFILIATIONS
Certain of the underwriters and their affiliates have provided
in the past and may provide from time to time in the future
certain commercial banking, financial advisory, investment
banking and other services for us for which they will be
entitled to receive customary fees.
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Legal matters
An opinion regarding the legality of the shares of common stock
being offered in this offering is being provided by Brown
Rudnick Berlack Israels LLP, New York, New York. The
underwriters have been represented by Shearman &
Sterling LLP, New York, New York.
Experts
Our consolidated financial statements as of and for the year
ended December 31, 2004 included in this prospectus were
audited by Grant Thornton LLP (Grant Thornton), our independent
registered public accounting firm, as stated in their report
appearing therein. Our consolidated financial statements as of
December 31, 2003 and for each of the years in the two year
period ended December 31, 2003 have been included in this
prospectus in reliance upon the report of KPMG LLP (KPMG), our
former independent registered public accounting firm, appearing
elsewhere herein and upon the authority of said firm as experts
in accounting and auditing. KPMG's reports on our
consolidated financial statements as of December 31, 2003
and for each of the years in the two year period ended
December 31, 2003 contained no adverse opinion or
disclaimer of opinion and were not otherwise qualified or
modified as to uncertainty, audit scope or accounting
principles. On August 11, 2004, we terminated KPMG. In
connection with its audits of our financial statements as of and
for the years ended December 31, 2002 and 2003, and through
August 11, 2004, there were no disagreements with KPMG on
any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of KPMG,
would have caused KPMG to make reference thereto in its report
on such statements for such periods.
Following KPMG's termination, we engaged Grant Thornton as
our independent certified public accountants effective
August 12, 2004. The decision to hire Grant Thornton was
unanimously approved by our board of directors. We did not
consult with Grant Thornton with respect to the application of
accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might
be rendered on our financial statements, or a disagreement with
KPMG and there were no "reportable events" as defined
in Item 304(a)(1)(v) of Regulation S-K promulgated
under the Exchange Act during this time frame. Grant Thornton
has been given access to prior years work papers by KPMG without
limitation in accordance with Statement on Auditing Standard
No. 84, Communications Between Predecessor and Successor
Auditors.
Where you can find more information
We have filed with the SEC a registration statement on
Form S-1 under the Securities Act with respect to the
shares to be sold in this offering. This prospectus, which
constitutes a part of the registration statement, does not
contain all of the information set forth in the registration
statement and the exhibits, schedules and amendments to the
registration statement, certain parts of which are omitted in
accordance with the rules and regulations of the SEC. For
further information about us and the shares to be sold in this
offering, please refer to the registration statement.
Statements contained in this prospectus as to the contents of
any contract, agreement or other document that we make reference
to, are not necessarily complete, and in each instance, where
applicable, please refer to the copy of the contract, agreement
or other document filed as an exhibit to the registration
statement, each statement being qualified in all respects by
this reference.
149
Table of Contents
Where you can find more information
Upon completion of this offering, we will become subject to the
reporting and information requirements of the Exchange Act and,
as a result, we will file periodic and current reports, proxy
statements and other information with the SEC.
You may read and copy all or any portion of the registration
statement or any reports, statements or other information we
file with the SEC following the completion of this offering at
the public reference room maintained by the SEC at 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for more information on the public reference
rooms. Copies of such material are also available by mail from
the SEC at prescribed rates. You can also find our SEC filings
at the SEC's website at www.sec.gov.
We intend to provide our stockholders with annual reports
containing consolidated financial statements that have been
examined and reported on, with an opinion expressed by, an
independent registered public accounting firm.
150
Table of Contents
Index to financial statements
Page
Audited Consolidated Financial Statements of American Railcar
    Industries, Inc.
Report of Grant Thornton LLP Independent
    Registered Public Accounting Firm
F-2
Report of KPMG LLP Independent Registered
    Public Accounting Firm
F-3
Consolidated Balance Sheets as of
    December 31, 2003 and 2004
F-4
Consolidated Statements of Operations for
    the years ended December 31, 2002, 2003
and 2004
F-5
Consolidated Statements of Cash Flows for
    the years ended December 31, 2002, 2003
and 2004
F-6
Consolidated Statements of
    Shareholders' Equity and Comprehensive Income (Loss) for
    the years ended December 31, 2002, 2003 and 2004
F-7
Notes to Consolidated Financial
    Statements
F-8
Unaudited Condensed Consolidated Financial Statements of
    American Railcar Industries, Inc.
Condensed Consolidated Balance Sheets as of
    December 31, 2004 and September 30, 2005
    (unaudited)
F-33
Condensed Consolidated Statements of
    Earnings for the nine months ended September 30, 2004 and
    2005 (unaudited)
F-34
Condensed Consolidated Statements of Cash
    Flows for the nine months ended September 30, 2004 and 2005
    (unaudited)
F-35
Notes to Condensed Consolidated Financial
    Statements
F-36
Audited Consolidated Financial Statements of Ohio Castings
    Company, LLC
Report of Grant Thornton LLP Independent Registered Public
    Accounting Firm
F-53
Consolidated Balance Sheets as of August 31, 2003, 2004 and
    2005
F-54
Consolidated Statements of Operations for the period from
    June 20, 2003 to August 31, 2003 and for the years
    ended August 31, 2004 and 2005
F-55
Consolidated Statements of Cash Flows for the period from
    June 20, 2003 to August 31, 2003 and for the years
    ended August 31, 2004 and 2005
F-56
Consolidated Statements of Members' Equity for the period
    from June 20, 2003 to August 31, 2003 and for the
    years ended August 31, 2004 and 2005
F-57
Notes to Consolidated Financial Statements
F-58
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
American Railcar Industries, Inc.
We have audited the accompanying consolidated balance sheet of
the manufacturing and railcar services operations of American
Railcar Industries, Inc. and subsidiaries (the
"Company") as of December 31, 2004, and the
related consolidated statements of operations,
shareholders' equity and comprehensive income (loss), and
cash flows for the period then ended. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of the manufacturing and railcar services operations of American
Railcar Industries, Inc. and subsidiaries as of
December 31, 2004, and the consolidated results of its
operations and cash flows for the period then ended, in
conformity with accounting principles generally accepted in the
United States of America.
/s/     Grant Thornton LLP
Chicago, Illinois
September 30, 2005
F-2
Table of Contents
Report of Independent Registered Public Accounting Firm
The Board of Directors
American Railcar Industries, Inc.:
We have audited the accompanying consolidated balance sheet of
American Railcar Industries, Inc. and subsidiaries as of
December 31, 2003, and the consolidated statements of
operations, shareholders' equity and comprehensive income
(loss), and cash flows for each of the years in the two-year
period ended December 31, 2003. These consolidated
financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of American Railcar Industries, Inc. and subsidiaries
as of December 31, 2003, and the results of their
operations and their cash flows for each of the years in the
two-year period ended December 31, 2003, in conformity with
U.S. generally accepted accounting principles.
/s/ KPMG LLP
St. Louis, Missouri
April 23, 2004
F-3
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share amounts)
Year Ended
December 31,
2003
2004
Assets
Current assets:
Cash and cash equivalents
$
65
$
6,943
Accounts receivable, net
13,409
25,183
Inventories, net
45,207
73,925
Amounts due from affiliates— current
404
—
Prepaid expenses
62
244
Deferred tax asset
1,423
2,065
Total current assets
60,570
108,360
Property, plant and equipment:
Land
1,977
1,977
Buildings
66,199
66,350
Machinery and equipment
56,152
58,816
Construction in process
—
8,686
124,328
135,829
Less accumulated depreciation
53,098
58,878
Net property, plant and equipment
71,230
76,951
Notes receivable from affiliates and interest thereon
57,170
165,000
Deferred tax asset
—
663
Debt issuance costs and other assets
905
615
Investment in joint venture
6,633
5,251
Total assets
$
196,508
$
356,840
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt
$
14,738
$
1,334
Accounts payable
10,752
22,800
Accrued expenses and taxes
7,997
13,524
Note payable to affiliate— current
12,000
19,000
Other amounts due to affiliates— current
—
5,137
Total current liabilities
45,487
61,795
Long-term debt, net of current portion
35,335
8,517
Note payable to affiliate— noncurrent
—
130,000
Other amounts due to affiliates— noncurrent
4,028
17,109
Deferred tax liability
9,583
—
Mandatorily redeemable payment-in-kind preferred stock,
    $.01 par value, 150,000 shares authorized,
    89,899 shares issued and outstanding at December 31,
    2003, $1,000 liquidation price per share
89,899
—
Mandatorily redeemable preferred stock, stated value $1,000,
    99,000 shares authorized, 1 share issued and
    outstanding at December 31, 2003 and 2004, respectively
1
1
Other liabilities
6,371
4,395
Total liabilities
190,704
221,817
Commitments and contingencies
—
—
Shareholders' equity:
New Preferred Stock, $.01 par value per share, stated value
    $1,000 per share, 500,000 shares authorized,
    111,685 shares issued and outstanding at December 31,
    2004
—
111,685
Common stock, $.01 par value, 12,000 shares
    authorized, 1,000 and 1,195 shares issued and outstanding at
    December 31, 2003 and 2004, respectively
—
—
Additional paid-in capital
11,577
41,360
Accumulated deficit
(4,889
)
(16,959
)
Accumulated other comprehensive loss
(884
)
(1,063
)
Total shareholders' equity
5,804
135,023
Total liabilities and shareholders' equity
$
196,508
$
356,840
See notes to the consolidated financial statements.
F-4
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Years Ended December 31,
2002
2003
2004
Revenues:
Manufacturing operations (including revenues from affiliates of
    $63,561, $62,882 and $64,372 in 2002, 2003 and 2004,
    respectively)
$
138,441
$
188,119
$
316,432
Railcar services (including revenues from affiliates of $12,838,
    $11,012 and $19,429 in 2002, 2003 and 2004, respectively)
30,387
29,875
38,624
Total revenues
168,828
217,994
355,056
Costs of goods sold:
Cost of manufacturing operations (including costs related to
    affiliates of $55,679, $54,394 and $59,052 in 2002, 2003 and
    2004, respectively)
134,363
174,629
306,283
Cost of railcar services (including costs related to sales to
    affiliates of $12,152, $10,136 and $15,539 in 2002, 2003 and
    2004, respectively)
29,533
29,762
34,473
Total costs of goods sold
163,896
204,391
340,756
Gross profit
4,932
13,603
14,300
Selling, administrative and other
9,505
10,340
10,334
Earnings (loss) from operations
(4,573
)
3,263
3,966
Interest income (includes interest income from affiliates of
    $3,379, $2,998 and $3,885 in 2002, 2003 and 2004, respectively)
3,619
3,161
4,422
Interest expense including interest expense to affiliates of
    $1,524 in 2004
4,853
3,616
3,667
Loss from joint venture
—
(604
)
(609
)
Earnings (loss) before income tax expense (benefit)
(5,807
)
2,204
4,112
Income tax expense (benefit)
(1,894
)
1,139
2,191
Net earnings (loss)
$
(3,913
)
$
1,065
$
1,921
Less preferred dividends
(7,139
)
(9,690
)
(13,241
)
Loss available to common shareholders
(11,052
)
(8,625
)
(11,320
)
Weighted average common shares outstanding — basic and
    diluted
1,000
1,000
1,087
Net loss per common share — basic and diluted
$
(11,052
)
$
(8,625
)
$
(10,414
)
See notes to the consolidated financial statements.
F-5
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years ended December 31,
2002
2003
2004
Operating activities:
Net earnings (loss)
$
(3,913
)
$
1,065
$
1,921
Adjustments to reconcile net earnings (loss) to net cash
    provided by operating activities:
Depreciation and amortization
6,271
6,408
6,247
Change in joint venture investment as a result of loss
—
604
609
Expenses relating to pre-recapitalization liabilities
668
583
1,431
Curtailment gain
—
—
(59
)
Provision for deferred income taxes (benefits)
(2,349
)
963
1,740
Provision for losses on accounts receivable
159
254
209
Long-lived asset impairment and other charges
193
801
—
(Gain) loss on the disposition of property, plant and equipment
(19
)
73
—
Changes in operating assets and liabilities:
Accounts receivable
4,489
(4,509
)
(11,983
)
Inventories
(469
)
(11,835
)
(28,718
)
Prepaid expenses
2,257
88
(365
)
Accounts payable
(417
)
3,999
12,048
Accrued expenses and taxes
808
1,183
1,966
Other
2,933
(1,316
)
(2,128
)
Net cash provided by (used in) operating activities
10,611
(1,639
)
(17,082
)
Investing activities:
Purchases of property, plant and equipment
(1,816
)
(2,301
)
(11,441
)
Proceeds from the disposition of property, plant and equipment
822
—
—
Change in note and interest receivable from ACF
50
50
404
Refund of sales tax on property, plant and equipment
409
—
—
Net cash used in investing activities
(535
)
(2,251
)
(11,037
)
Financing activities:
Issuance of common stock
—
—
42,500
Issuance of preferred stock
15,000
10,000
67,500
Effect of ARL spin off
—
—
(25,000
)
Advance to affiliate under notes receivable
—
—
(165,000
)
Proceeds from issuance of notes payable from affiliates
—
—
137,000
(Increase) decrease in amount due from affiliate
(8,634
)
8,634
—
Increase (decrease) in amount due to affiliate
(893
)
4,028
18,219
Repayment of debt
(16,842
)
(18,890
)
(40,222
)
Net cash provided by (used in) financing activities
(11,369
)
3,772
34,997
Increase (decrease) in cash and cash equivalents
(1,293
)
(118
)
6,878
Cash and cash equivalents at beginning of year
1,476
183
65
Cash and cash equivalents at end of year
$
183
$
65
$
6,943
See notes to the consolidated financial statements.
F-6
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
COMPREHENSIVE INCOME (LOSS)
(in thousands except share data)
Retained
New
Accumulated
Comprehensive
earnings
Preferred
New
Common
Additional
other
Total
income
(accumulated
Stock-
preferred
Stock-
Common
paid-in
comprehensive
shareholders'
(loss)
deficit)
Shares
stock
Shares
stock
capital
loss
equity
Balance December 31, 2001
$
19,662
—
$
—
1,000
$
—
$
10,326
$
(427
)
$
29,561
Net loss
$
(3,913
)
(3,913
)
(3,913
)
Currency translation adjustment
—
—
—
Minimum pension liability adjustment, net of tax effect of $163
(260
)
(260
)
(260
)
Comprehensive loss
$
(4,173
)
Capital contribution for expenses relating to pre-
    recapitalization liabilities retained by ACF
668
668
Dividends on mandatorily redeemable payment-in-kind preferred
    stock
(7,139
)
(7,139
)
Balance December 31, 2002
8,610
—
—
1,000
—
10,994
(687
)
18,917
Net earnings
$
1,065
1,065
1,065
Currency translation adjustment
11
11
11
Minimum pension liability adjustment, net of tax effect of $128
(208
)
(208
)
(208
)
Comprehensive income
$
868
Capital contribution for expenses relating to pre-
    recapitalization liabilities retained by ACF
583
583
Excess of purchase price over book value related to transfer of
    Castings from ACF
(4,874
)
(4,874
)
Dividends on mandatorily redeemable payment-in-kind preferred
    stock
(9,690
)
(9,690
)
Balance December 31, 2003
(4,889
)
—
—
1,000
—
11,577
(884
)
5,804
Net earnings
$
1,921
1,921
1,921
Currency translation adjustment
14
14
14
Minimum pension liability adjustment, net of taxes of $109
(193
)
(193
)
(193
)
Comprehensive income
$
1,742
Dividends on preferred stock
(13,241
)
(13,241
)
Transfer mandatorily redeemable PIK preferred to New Preferred
    Stock
95,517
95,517
95,517
Conversion of PIK Preferred Dividends
654
654
195
654
Capital contributions
102,000
102,000
42,500
144,500
Net adjustments relating to spin off of ARL (Note 1)
(86,486
)
(86,486
)
(14,148
)
(100,634
)
Deemed distribution related to decrease in Castings book value
(750
)
(750
)
Capital contribution for expenses relating to pre-
    capitalization liabilities retained by ACF
1,431
1,431
Balance December 31, 2004
$
(16,959
)
111,685
$
111,685
1,195
$
—
$
41,360
$
(1,063
)
$
135,023
See notes to the consolidated financial statements.
F-7
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended December 31, 2002, 2003 and 2004
Note 1—Description of the Business
The accompanying consolidated financial statements include the
manufacturing and railcar services operations of American
Railcar Industries, Inc. and its wholly owned subsidiaries
(collectively the "Company" or "ARI"). As
further described below, the Company purchased Castings, LLC (or
"Castings") on January 1, 2005. In accordance
with accounting principles generally accepted in the United
States of America, assets and liabilities transferred between
entities under common control are accounted for at historical
cost in a manner similar to a pooling of interests, and the
financial statements of previously separate companies for
periods prior to the acquisition are restated as if the transfer
occurred at the beginning of the year. The consolidated income
statement and statement of cash flows also include the activity
of Castings for all periods after its formation in June of 2003,
as if it were owned for these periods. All significant
intercompany balances and transactions have been eliminated.
ARI manufactures railcars, custom designed railcar parts for
industrial companies, railroads, and other industrial products,
primarily aluminum and special alloy steel castings, for
non-rail customers. ARI also provides railcar maintenance
services for railcar fleets, including that of its affiliate,
American Railcar Leasing, LLC ("ARL"). In addition,
ARI provides fleet management and maintenance services for
railcars owned by selected customers. Such services include
inspecting and supervising the maintenance and repair of such
railcars. The Company's operations are located in the
United States and Canada. The Company operates a small railcar
repair facility in Sarnia Ontario Canada. Canadian revenues were
0.7%, 0.5% and 0.5% of total company revenues for 2002, 2003 and
2004, respectively. Canadian assets were 0.5%, 0.5% and 0.3% of
total company assets for 2002, 2003 and 2004, respectively.
ARI was recapitalized on October 1, 1994 when ACF
Industries LLC ("ACF"), the former holder of
ARI's common stock, transferred to ARI the old common stock
of ARI along with the assets and liabilities of ACF's
railcar maintenance and railcar parts manufacturing businesses.
In exchange, ACF received 57,306 shares of ARI's newly
issued mandatorily redeemable preferred stock. New shares of
ARI's common stock were issued to Carl C. Icahn, Chairman
of the Board of ACF, in exchange for cash of $6.4 million.
In October 1998, ARI redeemed 57,305 shares of the
preferred stock and the remaining share of preferred stock was
transferred to Mr. Icahn.
In 2003, ACF Industries Holding Corp. ("ACF Holding"),
an affiliate of ARI, formed a wholly-owned subsidiary, Castings.
Castings has a one-third ownership interest in Ohio Castings
Company, LLC ("Ohio Castings"), a limited liability
company formed to run two foundries which cast railcar
sideframes and bolsters for use or sale by the ownership group.
Starting in the third quarter of 2003, ARI has purchased
bolsters and sideframes produced by Ohio Castings. In June 2005,
ARI completed the purchase of its one-third ownership interest
in Castings from ACF Holding. The transaction was consummated on
January 1, 2005. The cost of the acquisition was
$12.0 million represented by a demand note that the Company
expects to pay in 2005. However, as Castings was owned by an
entity with ownership common to ARI, the investment in
subsidiary is recorded at the date of Castings' inception,
June, 2003 at book value. The purchase price is recorded at full
value as a payable to the affiliate and the excess of fair value
over cost, totalling $4.9 million, is presented as a
distribution from equity. Interest is accrued on the note
payable to the affiliate as of January 1, 2005 as that is
the date the purchase was agreed to.
F-8
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
On July 20, 2004, ARI formed ARL, a wholly owned
subsidiary. ARL's primary business is the leasing of
railcars. The subsidiary was capitalized through the issuance of
common and preferred stock. ARI's investment in ARL was
$116.7 million and $151.7 million at December 31, 2004 and
June 30, 2005, respectively. Preferred stock of ARL was
issued to affiliated companies in exchange for contributions of
cash or railcars totaling $102.7 million. In January 2005, ARI
obtained an additional $35 million of ARL common stock resulting
in a carrying value of $151.7 million.
On June 30, 2005, in anticipation of its public offering,
ARI sold its common interest in ARL for $125.0 million to
affiliated companies in return for the preferred stock
investment, valued at $116.1 million, plus accrued dividends of
$8.9 million that those affiliates held in ARI. At
December 31, 2004, ARI's investment in ARL was
$116.7 million. This investment was eliminated as of
December 31, 2004 in order to present ARI on a stand alone
basis. New preferred stock of $86.5 million plus accrued
dividends of $3.5 million were eliminated from ARI's
equity and a charge of $26.7 million was recorded to
additional paid in capital to reflect the difference between the
final transfer price of $125 million and the ultimate
carrying value of ARI's investment in ARL of
$151.7 million. The 2005 financial statements will reflect
a reduction of New Preferred Stock of $29.6 million plus
accrued dividends of $5.4 million to eliminate the
additional investment of $35 million made in that period.
ARI retained no liabilities or other interests in ARL as a
result of this sale. The presentation of ARI's operations
has been prepared on a standalone basis excluding ARL's
operations for all periods, and all transactions giving effect
to ARL's formation have been eliminated from the financial
statements. Any differences related to the amounts originally
capitalized and the amount paid for ARL in the sale have been
recorded through adjustments to shareholders' equity,
including certain tax benefits that ARI received as a result of
utilizing ARL's previously incurred tax losses. ARI
recorded a related deferred tax asset of $12.5 million for those
net operating loss carry forwards, as ARI has the legal right to
utilize them for tax purposes.
The following table discloses the preferred stock transactions
and the effect on additional paid in capital for the year ended
December 31, 2004 required to eliminate ARI's
investment in ARL at that time.
New preferred
Additional
stock
paid in capital
(in thousands)
January 1, 2004
$
—
$
11,577
New preferred stock issued in exchange for mandatorily
    redeemable preferred stock
95,517
—
Capital contribution
102,654
42,500
Exchange of common interest in ARL for new preferred stock
(86,486
)
(26,670
)
ARL deferred tax assets
—
12,522
Other
—
1,431
December 31, 2004
$
111,685
$
41,360
F-9
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Note 2—Summary of Significant Accounting
Policies
Significant accounting policies are described below.
Revenue recognition
Revenues from railcar sales are recognized following completion
of manufacturing, inspection, customer acceptance and shipment,
which is when title and risk for any damage or loss with respect
to the railcars passes to the customer. In some cases, paint and
lining work may be outsourced and, as a result, the sale will
not be recorded until the railcars are shipped from the
independent contractor and accepted by the customer. Revenues
from railcar and industrial parts and components are recorded at
the time of product shipment, in accordance with our contractual
terms. Revenue for railcar maintenance services are recognized
upon completion and shipment of railcars from our plants. The
Company does not bundle railcar service contracts with new
railcar sales. Revenue for fleet management services are
recognized as performed.
The Company records amounts billed to customers for shipping and
handling as part of sales in accordance with EITF 00-10,
Accounting for Shipping and Handling Fees and Costs,
and
records related costs in cost of sales.
Debt issuance costs
Debt issuance costs are incurred in connection with ARI's
issuance of long-term debt as described in Note 6, and are
amortized over the term of the related debt, utilizing the
effective interest method.
Inventories
Inventories are stated at the lower of average cost or market on
a first-in, first-out basis, and include the cost of materials,
direct labor and manufacturing overhead.
Accounts receivable
The Company carries its accounts receivable at cost, less an
allowance for doubtful accounts. On a periodic basis, the
Company evaluates its account receivable and establishes an
allowance for doubtful accounts, based on a history of past
write-offs and collections and current credit conditions.
Accounts are placed for collection on a limited basis once all
other methods of collection have been exhausted. Once it has
been determined that the customer is no longer in business
and/or refuses to pay, the accounts are written off.
Property, plant and equipment
Land, buildings, machinery and equipment are carried at cost,
including interest on funds borrowed to finance construction.
Maintenance and repair costs are charged directly to earnings.
Tooling is generally capitalized and amortized over a period of
two to five years.
Buildings are depreciated over estimated useful lives that range
from 14 to 50 years. The estimated useful lives of other
depreciable assets, including equipment, vary from 3 to
25 years. Depreciation is calculated on the straight-line
method for financial reporting purposes and on accelerated
methods for tax purposes.
F-10
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Ohio Castings joint venture
The Company uses the equity method to account for its investment
in Ohio Castings, owned by its subsidiary, Castings. Under the
equity method, the Company recognizes its share of the earnings
and losses of the joint venture as they accrue instead of when
they are realized. Advances and distributions are charged and
credited directly to the investment account. Ohio Castings
produces railcar parts that are sold to one of the joint venture
partners. The joint venture partner sells these parts to outside
third parties at current market prices and to the Company and
the other joint venture partner in Ohio Castings at cost plus a
licensing fee. The risk of loss to Castings and the Company is
limited to its investment in Ohio Castings and its one third
share of its guarantee of Ohio Castings debt which was
approximately $3.3 million at December 31, 2004. The
fair market value of the guarantee was approximately
$0.1 million at December 31, 2004.
The cost of railcar manufacturing for the years ended
December 31, 2003 and 2004 included $3.0 million and
$19.9 million, respectively, in products produced by Ohio
Castings.
The carrying amount of the investment in Ohio Castings by
Castings was $6.6 million and $5.3 million at
December 31, 2003 and 2004, respectively. Summary combined
financial information for Ohio Castings, the investee company,
as of and for the 6 months ended December 31, 2003 and as
of for the year ended December 31, 2004 are as follows:
2003
2004
(in thousands)
Financial position
Current assets
$
18,009
$
19,111
Property, plant, and equipment, net
12,144
14,407
Other assets
41
—
Total assets
30,194
33,518
Current liabilities
13,806
19,674
Long-term debt
8,903
8,184
Total liabilities
22,709
27,858
Member's equity
7,485
5,660
Results of Operations
Sales
14,419
76,789
Operating loss
(1,793
)
(1,770
)
Net loss
$
(1,812
)
$
(1,827
)
Impairment of long-lived assets
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of
assets may not be recoverable. The criteria for determining
impairment for such long-lived assets to be held and used is
determined by comparing the carrying value of these long-lived
assets to be held and used to management's best estimate of
future undiscounted cash flows expected to result from the use
of the assets. If the assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the
assets. The estimated fair value of the assets is measured by
estimating the present value of the future discounted cash flows
to be generated. An impairment loss in the years
F-11
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
ended December 31, 2002 and 2003 is discussed in
Note 5. No impairment losses have been recorded in the year
ended December 31, 2004.
Pension plans and other postretirement benefits
Certain ARI employees participate in noncontributory, defined
benefit pension plans and a supplemental executive retirement
plan. Benefits for the salaried employees are based on salary
and years of service, while those for hourly employees are based
on negotiated rates and years of service.
ARI also participates in defined contribution retirement plans,
health care and life insurance plans sponsored by a related
party covering certain employees. Benefit costs are accrued
during the years the employees render service.
Income taxes
ARI accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial reporting basis and the tax
basis of ARI's assets and liabilities at enacted tax rates
expected to be in effect when such amounts are recovered or
settled. ARI files a tax return separate from other members of
the controlled group.
Statement of cash flows
For the purpose of the consolidated statement of cash flows, ARI
considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash
equivalents. Until October 2004, ACF received the majority of
ARI's cash receipts and disbursed ARI's cash on behalf
of ARI, and maintained an intercompany receivable/payable which
bore interest at ACF's internal cost of funds in accordance
with an administration agreement between ARI and ACF, which is
described in Note 10. Since October 2004, ARI maintains its
own cash balances.
Fair value of financial instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, amounts due to/from affiliates and accounts payable
approximate fair values because of the short-term maturity of
these instruments. The fair value of long-term debt is discussed
in Note 6. The fair value of the note receivable from ACF,
which is carried at face amount plus accrued interest, could not
reasonably be estimated due to the lack of market for similar
instruments. Fair value estimates are made at a specific point
in time, based on relevant market information about the
financial instrument. These estimates are subjective in nature
and involve uncertainties and matters of significant judgment
and, therefore, cannot be determined with precision.
Foreign currency translation
Balance sheet amounts from our Canadian operation are translated
at the exchange rates in effect at year-end, and operations
statement amounts are translated at the average rates of
exchange prevailing during the year. Currency translation
adjustments are included in Shareholders' Equity.
F-12
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity
of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources.
Comprehensive income (loss) consists of net earnings (loss),
foreign currency translation adjustment and the Company's
minimum pension liability adjustment, which is shown net of tax.
Retained earnings
As ARI and ACF are entities under common control, accounting
principles generally accepted in the United States of America
require that ARI's initial carrying value of assets
transferred to it from ACF and the purchase of Castings be equal
to ACF's historical net book value at the time of transfer.
The excess of the fair value paid over the net book value of
assets and liabilities transferred to ARI is reflected as a
distribution of retained earnings and has the effect of reducing
shareholders' equity by $24.1 million as of
December 31, 2003 and 2004. Of that amount,
$19.2 million was recorded at the formation of ARI, and
$4.9 million was recorded in 2003 from the acquisition of
Castings.
Basic earnings (loss) per share are calculated as net
earnings (loss) attributable to common shareholders divided by
the weighted-average number of common shares outstanding during
the respective period. Diluted earnings (loss) per share are
calculated by dividing net earnings (loss) attributable to
common shareholders by the weighted-average number of shares
outstanding plus dilutive potential common shares outstanding
during the year.
As of the years ended December 31, 2002 and 2003, 1,000
common shares were issued and outstanding. As indicated in Note
13, an additional 195 common shares were issued in 2004 in
connection with the capital contribution received from Hopper
Investments.
Use of estimates
Management of ARI has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with
accounting principles generally accepted in the United States of
America. Significant items subject to estimates and assumptions
include deferred taxes, workers compensation accrual, valuation
allowances for accounts receivable and inventory obsolescence,
valuation of property, plant and equipment, and the reserve for
warranty claims. Actual results could differ from those
estimates.
Recent accounting pronouncements
In January 2003, the Financial Accounting Standards Board
("FASB") issued Interpretation No. ("FIN")
46,
Consolidation of Variable Interest Entities
, which
was later amended on December 24, 2003
("FIN 46R"). FIN 46R explains how to
identify variable interest entities and how an enterprise
assesses its interest in a variable interest entity to decide
whether to consolidate that entity. FIN 46R requires
unconsolidated variable interest entities to be consolidated by
their primary beneficiaries. The provisions of FIN 46R are
generally effective for periods after December 31, 2003.
The adoption of this pronouncement has not had a material effect
on the Company.
In May 2003, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 150,
Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity
, ("SFAS 150"), which
establishes standards for how companies classify and measure
certain financial
F-13
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
instruments with characteristics of both liabilities and equity.
It requires companies to classify a financial instrument that is
within its scope as a liability (or an asset in some
circumstances). ARI re-classified the mandatorily redeemable
payment-in-kind preferred stock (see Note 12) as a
liability in accordance with SFAS 150 in 2003.
In November 2004, the FASB issued SFAS No. 151,
Inventory Costs—An Amendment of ARB No. 43
,
Chapter 4
, which requires the recognition of costs
of idle facilities, excessive spoilage, double freight, and
rehandling costs as a component of current-period expenses. The
provisions of SFAS No. 151 are effective for inventory
costs incurred during fiscal years beginning after June 15,
2005. Since the Company produces railcars based upon specific
customer orders, management does not expect the provisions of
SFAS No. 151 to have a material impact on the
Company's financial statements.
In December 2004, the FASB issued SFAS No. 123R,
Share-Based Payments.
SFAS No. 123R is a
revision of SFAS No. 123,
Accounting for Stock
Based Compensation,
and supersedes APB 25. Among other
items, SFAS 123R eliminates the use of Accounting
Principles Board ("APB") 25 and the intrinsic
value method of accounting, and requires companies to recognize
the cost of employee services received in exchange for awards of
equity instruments, based on the grant date fair value of those
awards, in the consolidated financial statements. The effective
date of SFAS 123R is the first quarter of the
Company's year ending December 31, 2006.
In March 2005, the FASB issued FIN 47 as an interpretation
of FASB Statement 143,
Accounting for Asset Retirement
Obligations
("FASB 143"). This interpretation
clarifies that the term conditional asset retirement obligation
as used in FASB 143 and refers to a legal obligation to
perform an asset retirement activity in which the timing and/or
method of settlement are conditional on a future event that may
or may not be within the control of the entity. The obligation
to perform the asset retirement activity is unconditional even
though uncertainty exists about the timing and/or method of
settlement. Accordingly, an entity is required to recognize a
liability for the fair value of a conditional asset retirement
obligation if the fair value of the liability can be reasonably
estimated. This interpretation also clarifies when an entity
would have sufficient information to reasonably estimate the
fair value of an asset retirement obligation. FIN 47 is
effective no later than the end of fiscal years ending after
December 15, 2005. The Company believes that the adoption
of FIN 47 will not have a material effect on the Company.
On June 1, 2005, the FASB issued Statement No. 154,
Accounting Changes and Error Corrections, a replacement of
APB Opinion No. 20 and FASB Statement No. 3
SFAS 154. The Statement applies to all voluntary
changes in accounting principle, and changes the requirements
for accounting for and reporting of a change in accounting
principle. The Company will adopt SFAS 154 at
December 31, 2005 and does not anticipate any material
change to its operating results as a result of this adoption.
F-14
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Note 3—Accounts Receivable
The allowance for doubtful accounts consists of the following:
Years Ended December 31,
2002
2003
2004
(in thousands)
Beginning balance
$
482
$
522
$
572
Bad debt expense
159
254
209
Accounts written off
(167
)
(279
)
(271
)
Recoveries
48
75
—
Ending balance
$
522
$
572
$
510
Note 4—Inventories
Inventories consist of the following:
December 31,
2003
2004
(in thousands)
Raw materials
$
18,341
$
39,655
Work-in-process
20,710
25,515
Finished products
8,466
11,434
Total inventories
$
47,517
$
76,604
Less reserves
2,310
2,679
Total inventories, net
$
45,207
$
73,925
Inventory reserves consist of the following:
December 31,
2002
2003
2004
(in thousands)
Beginning balance
$
948
$
1,670
$
2,310
Provision
990
762
559
Write off
(268
)
(122
)
(190
)
Ending balance
$
1,670
$
2,310
$
2,679
Note 5—Long-Lived Asset Impairment and Other
Charges
The Company reduced the carrying value of building improvements
and equipment by $0.2 million and $0.8 million in 2002
and 2003, for one of its car repair plants which is reflected in
the consolidated statement of operations in the costs of railcar
services. The scope of work performed at this facility was
reduced due the economic slow-down. As a result, an impairment
charge was recorded for equipment that was no longer in use. The
facility was idled in 2003.
F-15
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Note 6—Long-Term Debt
Long-term debt at December 31, 2003 and 2004 consists of:
December 31,
2003
2004
(in thousands)
Senior secured credit facilities, secured by all the assets of
    ARI, and guaranteed by ACF, ACF's parent, NMI Holding
    Corp., and ACF Holding, bearing interest at variable rates based
    on LIBOR(1), payable in installments through the year 2005
$
28,984
$
—
Industrial revenue bonds secured by certain buildings and
    manufacturing equipment and guaranteed by ACF and ACF Holding,
    with effective interest rates ranging from 6.75% to 8.5%,
    principal amounts due through the year 2011
10,770
9,600
Subordinated note secured by all the assets of ARI and
    guaranteed by ACF and ACF Holding, bearing interest at variable
    rates based on LIBOR(1), payable in 2006
10,000
—
Other
319
251
Total long-term debt, including current portion
50,073
9,851
Less current portion of debt
14,738
1,334
Total long-term debt, net of current portion
$
35,335
$
8,517
(1)
LIBOR was 1.1% at December 31, 2003, and 2.3% at
    December 31, 2004.
Aggregate maturities of long-term debt over the next five years,
as of December 31, 2004, are as follows (in thousands):
2005
$
1,334
2006
1,441
2007
1,573
2008
1,613
2009 and thereafter
3,890
The senior secured credit facilities were issued for
$120.0 million in 1998. Prior to termination of the
revolver in June 2002, the credit facilities provided for an
additional $30.0 million revolving credit facility. There
were no amounts drawn on the revolving credit facility prior to
its termination in June 2002. Debt covenants require ARI to
maintain certain debt-to-earnings and coverage ratios with which
ARI was in compliance at December 31, 2003 and 2004. The
Company repaid $15.8 million, $17.7 million and
$29.0 million of the senior secured credit facilities in
2002, 2003 and 2004, respectively. On July 20, 2004, ARI
repaid in full a $10.0 million subordinated note. In
addition, the company repaid industrial revenue bonds of
$1.0 million, $1.2 million and $1.2 million in
2002, 2003 and 2004, respectively.
The fair value of long-term debt was approximately
$50.1 million and $9.9 million at December 31,
2003 and 2004, respectively, as calculated by discounting cash
flows through maturity using ARI's current rate of
borrowing for similar liabilities.
F-16
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Note 7—Income Taxes
Income tax expense (benefit) consists of:
Years Ended December 31,
2002
2003
2004
(in thousands)
Current:
Federal
$
388
$
172
$
332
State and local
61
27
46
Foreign
6
(23
)
71
Total current
455
176
449
Deferred
Federal
(2,092
)
833
1,504
State and local
(332
)
136
239
Foreign
75
(6
)
(1
)
Total deferred
(2,349
)
963
1,742
Total income tax expense (benefit)
$
(1,894
)
$
1,139
$
2,191
Income tax expense (benefit) attributable to earnings (loss)
from operations differed from the amounts computed by applying
the U.S. Federal income tax rate of 35% to earnings (loss)
from operations by the following amounts:
Years Ended December 31,
2002
2003
2004
(in thousands)
Computed income tax expense (benefit)
$
(2,032
)
$
771
$
1,439
State and local taxes, net of federal tax benefit
(176
)
106
185
Non-deductible expenses
297
267
566
Other
17
(5
)
1
Total income tax expense (benefit)
$
(1,894
)
$
1,139
$
2,191
Years Ended December 31,
2002
2003
2004
Computed income tax expense (benefit)
(35.0
)%
35.0
%
35.0
%
State and local taxes, net of federal tax benefit
(3.0
)
4.8
4.5
Non-deductible expenses
5.1
12.1
13.8
Other
0.3
(0.2
)
—
Effective income tax rate
(32.6
)%
51.7
%
53.3
%
F-17
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
The tax effects of temporary differences that have given rise to
deferred tax assets and liabilities are presented below:
December 31,
2003
2004
(in thousands)
Current deferred taxes
Deferred tax assets
Provisions not currently deductible
1,423
$
2,065
Non-current deferred taxes
Deferred tax assets
Provisions not currently deductible
786
627
Net operating loss carryforwards
—
10,144
Pensions and post retirement
1,953
1,440
2,739
12,211
Deferred tax liabilities
Property, plant and equipment
12,322
11,548
Total non-current deferred tax (liability) asset-net
(9,583
)
663
Total deferred tax (liability) asset
$
(8,160
)
$
2,728
The net deferred tax liability is classified in the balance
sheet as follows:
December 31,
2003
2004
(in thousands)
Deferred tax current asset
$
1,423
$
2,065
Deferred tax non-current (liability) asset
$
(9,583
)
$
663
Net deferred tax (liability) asset
$
(8,160
)
$
2,728
In the consolidated balance sheets, these deferred tax assets
and liabilities are classified as either current or non-current
based on the classification of the related liability or asset
for financial reporting. A deferred tax asset or liability that
is not related to an asset or liability for financial reporting,
including deferred taxes related to carryforwards, is classified
according to the expected reversal date of the temporary
differences as of the end of the year. A valuation allowance is
provided when it is more likely than not that some portion or
all of the deferred tax assets will not be realized. No
valuation allowances have been recorded at December 31,
2003 and 2004 as management believes that it is more likely than
not that all deferred tax assets will be fully realized based on
the expectation of taxable income in future years. At
December 31, 2004, the Company had net operating loss
carry-forwards of $26 million which begin to expire in 2024.
Note 8—Warranties
The Company records a liability for an estimate of costs that it
expects to incur under its basic limited warranty when
manufacturing revenue is recognized. Factors affecting the
Company's warranty liability include the number of units
sold and historical and anticipated rates of claims and costs
per claim. The Company periodically assesses the adequacy of its
warranty liability based on changes in these factors.
F-18
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Changes in the Company's warranty reserve, which is
reflected on the balance sheet in accrued expenses, are as
follows:
December 31,
2002
2003
2004
(in thousands)
Liability, beginning of year
$
434
$
1,048
$
1,436
Expense for new warranties issued
924
893
114
Warranty claims
(310
)
(505
)
(142
)
Liability, end of year
$
1,048
$
1,436
$
1,408
Note 9—Stock Options
In 1994, the Company entered into an agreement with
Mr. Unger, currently its chief executive officer, which
provided that Mr. Unger shall be granted an option to
purchase 2.0% of the outstanding common shares of ARI at a price
equal to 2.0% of the common equity contribution by
Carl C. Icahn (ARI's chairman of the board and a
principal stockholder) at the formation of ARI. The agreement
provided that this option shall be exercisable at the time of
ARI's initial public offering, and should ARI be sold to
parties other than in a public offering, Mr. Unger shall
receive 2.0% of the sales price, net of the preferred interest
established at the formation of ARI, and net of the contribution
for common stock. The agreement further provided that the above
options and or rights shall remain in effect as long as
Mr. Unger is employed by ARI. Compensation expense under
this arrangement would be recognized when the contingency is met
at the effective date of a public offering or the completion of
a sale.
Note 10—Related Party Transactions
As part of the 1994 recapitalization described in Note 1,
ACF has retained certain liabilities existing as of the
recapitalization date, including employee benefits, workers
compensation, litigation, environmental and others. If ACF were
unable to honor or meet these obligations, ARI would be
responsible for such liabilities. In the opinion of management,
ACF has the present ability to meet these obligations. This
liability totaled approximately $10.0 million and
$11.1 million at December 31, 2003 and 2004
respectively, consisting primarily of pension and postretirement
liabilities.
In connection with the 1994 ACF asset transfer, the Company
entered into the following administrative and operating
agreements with ACF, effective as of October 1, 1994:
Manufacturing services agreement
Under the manufacturing services agreement, ACF agreed to
manufacture and distribute, at the Company's instruction,
various products using certain assets that the Company acquired
pursuant to the 1994 ACF asset transfer agreement. In
consideration for these services, the Company agreed to pay ACF
based on agreed upon rates. Components supplied to ARI by ACF
include tank railcar heads, wheel sets and various structural
components. In the years ended December 31, 2002, 2003 and
2004, ARI purchased inventory of $15.7 million,
$19.0 million and $31.3 million, respectively, of
components from ACF. The agreement automatically renews unless
written notice is provided by the Company.
F-19
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Administration Agreement
Under this agreement, ACF agreed to provide the Company with
office facilities and administrative services, primarily
information technology services. In exchange for the facilities
and services, the Company agreed to pay ACF based on agreed upon
rates. Management believes that these allocation methods are
reasonable for the relevant costs. Total amounts incurred under
this agreement totaled $0.8 million, $0.8 million and
$0.8 million at December 31, 2002, 2003, and 2004,
respectively.
Until October 2004, ACF received the majority of ARI's cash
receipts and disbursed cash on its behalf. ARI maintained a
receivable/payable from affiliates bearing interest at
ACF's internal cost of funds in accordance with this
agreement.
At the time of ARI's formation in 1994, when this
Administrative Agreement was entered into, ARI and ACF
contemplated that ARI would generally need funds to build its
facilities, acquire assets and provide for working capital
needs. ACF has provided financing to ARI and ARI has repaid
these amounts through an affiliate account based on ARI's
cash flow needs from month to month. ARI has classified its
relations with ACF through its affiliate account as financing
activities on the accompanying statements of cash flows. From
time to time this account has had a due from balance but ARI
does not believe that this changes the basic nature of the
financing relationship.
Included in amounts due to affiliates was a payable to ACF of
$4.0 million as of December 31, 2003. As of
December 31, 2004, amounts due to affiliates included
$22.2 million in payables to ACF and ARL.
Railcar Servicing Agreement
Under this agreement, the Company agreed to provide ACF with
railcar repair and maintenance services, fleet management
services and consulting services on safety and environmental
matters for railcars owned or managed by ACF. ACF agreed to
compensate the Company based on agreed upon rates. Revenue
recorded under this arrangement totaled $12.8 million,
$11.0 million and $18.2 million at December 31,
2002, 2003, and 2004, respectively and is included under revenue
from affiliates on the statement of operations.
Supply Agreement
Under this agreement, we agreed to manufacture and sell to ACF
specified components at cost plus mark-up or on terms not less
favorable than the terms on which the Company sold the same
products to third parties. Revenue recorded under this
arrangement totaled $1.4 million, $0.9 million and
$0.7 million at December 31, 2002, 2003, and 2004,
respectively and is included under revenue from affiliates on
the statement of operations.
In 2004, the Company entered into the following agreements with
ARL and its subsidiaries:
Railcar Management Agreements with ARI First LLC and ARI
    Third LLC
Under this agreement, the Company provided ARI First and
    ARI Third with marketing, leasing, administration,
    maintenance, record keeping and insurance services for railcars
    owned by ARI First and ARI Third. In exchange for
    these services ARI First and ARI Third paid the
    Company a management fee which totaled $1.2 million for the
    year ended December 31, 2004 which is included under
    revenue from affiliates on the statement of operations.
F-20
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
ACF Administration Agreement
The ACF Administration agreement was entered into with ACF
    and ARL. Under the agreement, ACF agreed to provide certain
    management services which were required under the railcar
    management agreement wit ARI First and ARI Third
    described above. Fees paid to ACF under this agreement were
    equal to the fees the Company charged to ARI First and
    Third under the railcar management agreement and totaled
    $1.2 million for the year ended December 31, 2004
    which is included under revenue from affiliates on the statement
    of operations.
These two arrangements were terminated on June 30, 2005,
when ARI assigned its management agreements for ARI First LLC
and ARI Third LLC to ARL.
Cost of railcar manufacturing for the years ended
December 31, 2003 and 2004 includes $3.0 million and
$19.9 million, respectively, in railcar products produced
by Ohio Castings, which is partially owned by Castings, as
described in Note 1. Expenses of $0.4 million and
$3.2 million paid to Castings under a supply agreement is
included in the cost of railcar manufacturing for the years
ended December 31, 2003 and 2004, respectively. ARI also
has been charged $0.2 million in the year ending
December 31, 2003 relating to certain costs incurred by
Castings in the establishment of Ohio Castings. Inventory at
December 31, 2003 and 2004 includes approximately
$0.3 million and $5.3 million, respectively, of
purchases from Ohio Castings.
In September 2003, Castings loaned Ohio Castings
$3.0 million under a promissory note which was due January
2004. The note was renegotiated for $2.2 million and bears
interest at 4.0% with payments made in quarterly installments
with the last payment due in November 2008.
ARI's employees participate in ACF's noncontributory,
defined benefit pension plans and other postretirement health
care and life insurance plans. As part of ARI's
recapitalization, ACF retained the liabilities for unfunded
pension and other postretirement liabilities and workers
compensation liabilities as of October 1, 1994 for
employees who transferred from ACF to ARI at that date and for
environmental liabilities as of that date. Although ACF is
responsible for any costs associated with the liabilities at the
recapitalization date, related expenses which have accrued since
the recapitalization have been reflected in ARI's financial
statements in order to reflect the full cost of doing business.
Expenses that ACF pays relating to pre-recapitalization
liabilities are recorded as capital contributions and appear as
additional paid-in capital on ARI's balance sheet. ARI
recorded total expenses relating to benefits and environmental
liabilities of $2.8 million, $2.8 million and
$4.0 million in the years ended December 31, 2002,
2003 and 2004, respectively. Included in these total expenses
were $0.7 million, $0.6 million and $1.4 million
in 2002, 2003 and 2004, respectively, which related to
pre-recapitalization liabilities retained by ACF and are
reflected as additional paid-in capital.
In October 1998, ARI advanced $57.2 million to ACF under a
promissory note secured by the stock of an affiliate.
$14.9 million of the note was assigned to an affiliate,
with the remaining $42.3 million of the note repaid in
October 2004. The Company recorded interest income on this note
of $2.8 million, $2.5 million and $1.8 million in
the years ended December 31, 2002, 2003 and 2004,
respectively. Accrued interest was $0.4 million as of
December 31, 2003.
In 2001, ARI entered into a derivative instrument in the form of
an interest rate swap contract with an underlying initial
notional amount of $49.0 million, terminating in February
2005. Concurrent with the execution of this swap agreement, ARI
assigned its rights and obligations under this contract to ACF.
ARI includes the fair value of the contract as a liability on
its balance sheet, with an equal amount included in amounts due
from ACF to reflect the assignment of the contract. The fair
value of the contract was $2.7 million, $1.5 million
and $0.1 million at December 31, 2002, 2003 and 2004,
F-21
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
respectively. Interest expense is not reflected in ARI's
results of operations due to ACF's assumption of the
contract.
ACF and ACF Holding have guaranteed the Company's
obligations under the industrial revenue bonds as described in
Note 6. In addition, ACF and ACF Holding provided
guarantee's under the senior secured credit facility and
the subordinated note, also described in Note 6. The senior
secured credit facility and the subordinated note were both
repaid in July 2004.
During 2004, ARI advanced $165.0 million to Mr. Icahn
under a secured note due in 2007 and bearing interest at prime
plus
1
3
/
4
%.
Accrued interest was paid in full as of December 31, 2004.
Interest income on the note was $2.0 million for the year
ended December 31, 2004. As further discussed in
Note 17, ARI transferred its interest in the note
receivable to an affiliate on January 26, 2005.
During 2004, ARL advanced $130.0 million to ARI under a
note due in 2007 and bearing interest at prime plus
1
1
/
2
%.
Accrued interest was paid in full as of December 31, 2004.
Interest expense on the note was $1.5 million for the year
ended December 31, 2004. As further discussed in
Note 17, this note was fully satisfied on January 26,
2005.
On December 17, 2004, ARI borrowed $7.0 million under
a note payable to Arnos Corp., an affiliate. The note bears
interest at prime plus
1
3
/
4
%
and is payable on demand.
We have been advised that affiliates of Mr. Icahn are
currently negotiating with the Foundation for a Greater
Opportunity, or the Foundation, our other significant beneficial
stockholder, to enter into an agreement to acquire all of our
common stock held by the Foundation. The consummation of this
acquisition of our common stock would require the approval of
applicable authorities of the State of New York. If the parties
obtain this approval, we have been advised that the parties
expect that the purchase would be completed in the first three
months of 2006. As a result of these contemplated arrangements,
we expect that Mr. Icahn will continue to control a
majority of the voting power of our capital stock following the
offering. As a result, Mr. Icahn is, and will be, able to
exert substantial influence over us, elect our directors and
control most matters requiring board or shareholder approval.
Note 11—Pension Plans
ARI is the sponsor of two defined benefit plans that cover
certain executives and employees at certain of its manufacturing
facilities. ARI uses a measurement date of October 1 for
all of its employee benefit plans. The plan's assets are
held by independent trustees and consist primarily of equity and
fixed income securities.
Costs of benefits relating to current service for those
employees to whom the Company is responsible to provide benefits
are expensed currently. Pension expense for the year ended
December 31, 2004 includes a $0.1 million curtailment
gain caused by the elimination of future benefit accruals for
service credit for salaried employees as of April 1, 2004
and a reduction in service hours for hourly employees at one
plant location. The changes in benefit obligation, change in
plan assets, funded status and
F-22
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
weighted average assumptions as of December 31, 2003 and
2004, and components of net periodic benefit cost for the years
ended December 31, 2002, 2003 and 2004 is as follows:
Years Ended
December 31,
2003
2004
(in thousands)
Change in benefit obligation
Benefit obligation, beginning of year
$
2,678
$
3,148
Service cost
127
34
Interest cost
173
188
Plan Amendments
—
(7
)
Actuarial loss
180
29
Benefits paid
(10
)
(14
)
Benefit obligation, end of year
$
3,148
$
3,378
Change in plan assets
Fair value of plan assets, beginning of year
$
1,377
$
1,574
Actual return on plan assets
59
(92
)
Employer contributions
148
308
Benefits paid
(10
)
(14
)
Fair value of plan assets, end of year
$
1,574
$
1,776
Funded status
Benefit obligation in excess of plan assets
$
(1,574
)
$
(1,602
)
Unrecognized prior service cost
(59
)
(7
)
Unrecognized net loss
1,584
1,783
Net amount recognized
$
(49
)
$
174
December 31,
2003
2004
(in thousands)
Amounts recognized in the balance sheets
Accrued benefit liability
$
(2,145
)
$
(2,450
)
Prepaid pension
622
848
Other comprehensive income
909
1,102
Net amount recognized
$
(614
)
$
(500
)
The accumulated benefit obligation for all defined benefit
pension plans was $3.1 million and $3.4 million at
December 31, 2003 and 2004, respectively.
F-23
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Years Ended December 31,
2002
2003
2004
(in thousands)
Components of net periodic benefit cost
Service cost
$
114
$
126
$
34
Interest cost
157
173
188
Expected return on plan assets
64
(58
)
92
Deferred asset gain
(182
)
(90
)
(236
)
Amortization of unrecognized prior service cost from plan
    amendments
(9
)
(9
)
—
Curtailment gain
—
—
(59
)
Amortization of net loss
28
49
65
Net periodic benefit cost
$
172
$
191
$
84
Additional information
Years Ended
December 31,
2003
2004
(in thousands)
Increase in minimum liability (pre-tax)
$
336
$
302
Weighted-average assumptions used to determine benefit
obligations at December 31
Years Ended
December 31,
2003
2004
Discount rate
6.50
%
6.00
%
Rate of compensation increase
5.00
%
N/A
Weighted-average assumptions used to determine net periodic
benefit cost for years ended
December 31
Years Ended December 31,
2002
2003
2004
Discount rate
6.50
%
6.00
%
6.00
%
Expected long-term return on plan assets
9.00
%
9.00
%
8.50
%
Rate of compensation increase
5.00
%
5.00
%
N/A
F-24
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
The Company's pension plan weighted-average asset
allocations by asset category at
December 31 are as follows:
Years Ended
December 31,
2003
2004
Asset Category
Equity securities
51
%
68
%
Debt securities
49
%
32
%
100
%
100
%
The objective of the pension plan investment policy is to grow
assets in relation to liabilities, while prudently managing the
risk of a decrease in the pension plan's assets. The
pension plan management committee has established a target
investment mix with upper and lower limits for investments in
equities, fixed-income and other appropriate investments. Assets
will be re-allocated among asset classes from time-to-time to
maintain the target investment mix. The committee has
established a target investment mix of 65% equities and 35%
fixed-income for the plan.
The expected return on plan assets is based on our asset
allocation mix and our historical return, taking into account
current and expected market conditions.
The Company's policy with respect to funding the qualified
plans is to fund at least the minimum required by the Employee
Retirement Income Security Act of 1974, as amended, and not more
than the maximum amount deductible for tax purposes. ARI does
not currently have minimum funding requirements, as set forth in
employee benefit and tax laws. All contributions made to the
funded pension plans for 2003 and 2004 were voluntary and were
made with cash generated from operations.
The Company also maintains qualified defined contribution plans
which provide benefits to their employees based on employee
contributions, years of service, and employee earnings with
discretionary contributions allowed. Expenses related to these
plans were $0.5 million, $0.5 million, and
$0.7 million for the years ended December 31, 2002,
2003, and 2004, respectively. Selected ARI salaried employees
participated in the ACF Industries, Inc. Savings and Investment
Plan, and the expense is included above.
The following benefit payments, which reflect expected future
service, as appropriate, are expected to be paid:
As of 12/31/04
(in thousands)
2005
$
20
2006
23
2007
23
2008
106
2009
139
2010-2014
791
ARI is currently a member of a controlled group that includes
ACF, an entity in which Mr. Icahn has an indirect ownership
of at least 80%. ACF is the sponsor of several pension plans
that are underfunded, as of December 31, 2004, by a total
of approximately $24.1 million on an ongoing actuarial
basis and $172.4 million if those plans were terminated, as
most recently reported by the plans' actuaries. The
liabilities could increase or decrease, depending on a number of
factors, including future changes in promised benefits,
investment returns and the assumptions used to calculate the
F-25
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
liability. As members of the controlled group, ARI would be
jointly and severally liable for any failure of ACF to pay the
unfunded liabilities upon a termination of the ACF pension
plans. Upon completion of this offering, ARI believes that it
should no longer be a member of the ACF controlled group. As a
result, ARI should no longer be subject to ACF's pension
liabilities, unless it were determined that ARI was otherwise a
member of the ACF controlled group or that a principal purpose
of the offering or other transactions that resulted in
ARI's ceasing to be a member of the ACF controlled group
was to evade pension liabilities and the termination date of the
underfunded plan was within five years after the offering or
other transactions. If such a determination were made and upheld
by a court, ARI could remain jointly and severally liable for
pension plan obligations of ACF, which could have a material
adverse effect on ARI's financial condition and results of
operations.
ARI employees are participants in the ACF Retirement Plan and
the ACF Shippers Hourly Plan, both of which are sponsored by
ACF. At October 1, 2003 and 2004, these plans had actuarial
liabilities in excess of assets. Presented below are the assets
and liabilities of those plans, and the liabilities attributed
to ARI participants.
2003
ACF
Shipper's
Retirement Plan
Hourly Plan
(in millions)
Projected benefit obligation(a)
$
110.4
$
11.2
Assets at fair value
61.4
7.5
Underfunded status
$
(49.0
)
$
(3.7
)
(a)  — Amount attributed to ARI
    participants
$
9.1
$
1.9
— Percentage of total
    liabilities
8
%
17
%
2004
ACF
Shipper's
Retirement Plan
Hourly Plan
(in millions)
Projected benefit obligation(a)
$
107.4
$
11.5
Assets at fair value
62.7
8.0
Underfunded status
$
(44.7
)
$
(3.5
)
(a)  — Amount attributed to ARI
    participants
$
8.8
$
2.0
— Percentage of total
    liabilities
8
%
18
%
Note 12—Commitments and Contingencies
As of December 31, 2004, future minimum rental payments
required under noncancellable operating leases for property and
equipment leased by the Company with lease terms longer than one
year are as follows:
(in
thousands)
2005
$
5,355
2006
1,696
2007
1,656
2008
168
2009
135
2010 and after
66
F-26
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
The Company leases certain facilities from an entity owned by
its Chief Executive Officer, certain affiliates of ARI and third
parties. Total rent expense on leases were approximately
$5.4 million, $5.8 million and $6.6 million for
the years ended December 31, 2002, 2003 and 2004,
respectively. Expenses to related parties included in the
amounts above were $0.8 million, annually for the years
ended December 31, 2002, 2003 and 2004.
In connection with Trans World Airlines, Inc.'s (TWA) 1992
bankruptcy proceedings under Chapter 11 of the Bankruptcy Code,
the Pension Benefit Guarantee Corporation ("PBGC")
asserted that ACF as well as the other entities in which Mr.
Icahn had a controlling interest were obligated along with TWA
to satisfy any underfunding of TWA's defined benefit plan.
Subsequently, and in response to a petition of another member of
the Icahn control group, the PBGC terminated the TWA pension
plan and obligated an affiliate of ARI, Highcrest Investors Corp
(Highcrest) to make eight annual payments of $30 million
each commencing on July 1, 2002 and totaling
$240 million (termination payments). As of
December 31, 2004, Highcrest had made termination payments
totaling $130 million and still owed $110 million on
this obligation. The obligation to make termination payments is
non-recourse except to the common stock of ACF Holding (another
member of the control group). While ARI is a controlled entity
of Mr. Icahn, management believes this obligation will have no
adverse effect on the future liquidity, results of operations,
or financial position of ARI.
The Company is subject to comprehensive federal, state, local
and international environmental laws and regulations relating to
the release or discharge of materials into the environment, the
management, use, processing, handling, storage, transport or
disposal of hazardous materials and wastes, or otherwise
relating to the protection of human health and the environment.
These laws and regulations not only expose ARI to liability for
the environmental condition of its current or formerly owned or
operated facilities, and its own negligent acts, but also may
expose ARI to liability for the conduct of others or for
ARI's actions that were in compliance with all applicable
laws at the time these actions were taken. In addition, these
laws may require significant expenditures to achieve compliance,
and are frequently modified or revised to impose new
obligations. Civil and criminal fines and penalties and other
sanctions may be imposed for non-compliance with these
environmental laws and regulations. ARI's operations that
involve hazardous materials also raise potential risks of
liability under common law. ARI is involved in investigation and
remediation activities at properties that it now owns or leases
to address historical contamination and potential contamination
by third parties. The Company is also involved with state
agencies in the cleanup of two sites under these laws. These
investigations are at a preliminary stage, and it is impossible
to estimate, with any certainty, the timing and extent of
remedial actions that may be required, and the costs that would
be involved in such remediation. Substantially all of the issues
identified relate to the use of the properties prior to their
transfer to ARI in 1994 by ACF and for which ACF has retained
liability for environmental contamination that may have existed
at the time of transfer to ARI. ACF has also agreed to indemnify
ARI for any cost that might be incurred with those existing
issues. However, if ACF fails to honor its obligations to ARI,
ARI would be responsible for the cost of such remediation. The
Company believes that its operations and facilities are in
substantial compliance with applicable laws and regulations and
that any noncompliance is not likely to have a material adverse
effect on its operations or financial condition.
When it is possible to make a reasonable estimate of the
liability with respect to such a matter, a provision will be
made as appropriate. Actual cost to be incurred in future
periods may vary from these estimates. Based on facts presently
known, ARI does not believe that the outcome of these
proceedings will have a material adverse effect on its future
liquidity, results of operations or financial position.
F-27
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against ARI.
Management believes that all such claims, suits, and complaints
arising in the ordinary course of business have been properly
reported and reflected in Company's financial statements.
The Company believes that the settlement of these claims would
not have a significant effect on the future liquidity, results
of operations or financial position of ARI.
ARI is a party to collective bargaining agreements with labor
unions at its Longview, Texas and North Kansas City, Missouri
repair facilities and at its Longview, Texas steel foundry and
components manufacturing facility. These agreements expire in
January 2008, September 2007, and April 2008, respectively. ARI
is also party to a collective bargaining agreement at our
Milton, Pennsylvania repair facility, which expired on
June 19, 2005. At the present time, there are no workers at
Milton, as the site is idled.
Note 13—Mandatorily Redeemable Payment-in-Kind
Preferred Stock, New Preferred Stock and Shareholders'
Equity
In January 2001, ARI issued to ACF 15,000 shares of a new
class of mandatorily redeemable payment-in-kind preferred stock
("PIK Preferred Stock") in exchange for
$15.0 million in cash. In November 2001, ACF sold these
15,000 shares to an affiliated entity, Vegas Financial
Corp. ("Vegas") for $15.0 million plus accrued
dividends of $1.6 million. The PIK Preferred Stock is
redeemable within 30 days after the full repayment of
amounts outstanding under the senior secured credit facilities,
but no earlier than February 1, 2006. The PIK Preferred
Stock provides for cumulative dividends at 12.5% per year
on the liquidation price of $1,000 per share, payable in
the form of additional shares of PIK Preferred Stock.
In 2001, 2002 and 2003, ARI issued additional shares of PIK
Preferred Stock to Vegas in exchange for cash. In August 2001,
ARI issued to Vegas 30,000 shares of PIK Preferred Stock in
exchange for cash of $30.0 million. In the second quarter
of 2002, ARI issued 15,000 shares of PIK Preferred Stock in
exchange for cash of $15.0 million. In the year ended
December 31, 2003, ARI issued 10,000 shares of PIK
Preferred Stock in exchange for cash of $10.0 million.
On July 20, 2004, ARI's PIK Preferred Stock was
converted into a new issue of preferred stock ("New
Preferred Stock"). As a result of this conversion, 95,517
shares of PIK Preferred Stock held by Vegas, an entity owned by
Mr. Icahn were converted into New Preferred Stock. Additionally,
ARI issued Vegas 654 shares of New Preferred Stock in
consideration for accrued PIK Preferred dividends at the date of
conversion. Vegas invested an additional $67.5 million in
New Preferred Stock in exchange for cash on July 20, 2004.
On July 20, 2004, ACF transferred its ownership in ACF
Lease Administrators, Inc. to ARI in exchange for 2,000 shares
of New Preferred Stock. On the same date, ARI contributed its
ownership in ACF Lease Administrators, Inc. to ARL in exchange
for 2,000 A Units of ARL.
On December 22, 2004, Shippers Second transferred its
ownership in Shippers Third to ARI in exchange for
32,500 shares of ARI New Preferred Stock. On the same date,
ARI contributed its ownership in Shippers Third to ARL in
exchange for 32,500 A Units of ARL.
The New Preferred Stock is entitled to cumulative dividends at
the rate of 9.25% per annum, payable solely in cash on a
semi annual basis. Holders of the New Preferred Stock are
entitled to vote on matters submitted to the holders of shares
of common stock based on a percentage of the combined number of
shares of common stock and New Preferred Stock.
F-28
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
ARI issued 195 shares of common stock to Hopper Investments
LLC, an entity controlled by Mr. Icahn, in exchange for
cash of $42.5 million.
Note 14—Operating Segment and Sales/ Credit
Concentrations
ARI operates in two reportable segments; manufacturing and
railcar services. The accounting policies of the segments are
the same as those described in Note 2. Performance is
evaluated based on revenue and operating profit. Intersegment
sales and transfers are accounted for as if sales or transfers
were to third parties.
The information in the following table is derived from the
segments' internal financial reports used for corporate
management purposes.
As of and for the
Manufacturing
Railcar
Corporate
year ended December 31, 2002
operations
services
& all other
Eliminations
Totals
(in thousands)
Revenues from external customers
$
138,441
$
30,387
$
—
$
—
$
168,828
Intersegment revenues
129
409
—
(538
)
—
Cost of goods sold—external customers
134,363
29,533
—
—
163,896
Cost of intersegment sales
110
328
—
(438
)
—
Gross profit
4,097
935
—
(100
)
4,932
Selling, administration and other
1,476
1,715
6,314
—
9,505
Earnings (loss) from operations
$
2,621
$
(780
)
$
(6,314
)
$
(100
)
$
(4,573
)
Total assets
$
96,468
$
32,010
$
59,112
$
—
$
187,590
Capital expenditures
995
804
17
—
1,816
Depreciation and amortization
3,685
2,061
525
—
6,271
As of and for the
Manufacturing
Railcar
Corporate
year ended December 31, 2003
operations
services
& all other
Eliminations
Totals
(in thousands)
Revenues from external customers
$
188,119
$
29,875
$
—
$
—
$
217,994
Intersegment revenues
1,152
548
—
(1,700
)
—
Cost of goods sold—external customers
174,629
29,762
—
—
204,391
Cost of intersegment sales
1,074
539
—
(1,613
)
—
Gross profit
13,568
122
—
(87
)
13,603
Selling, administration and other
3,370
1,555
5,415
—
10,340
Earnings (loss) from operations
$
10,198
$
(1,433
)
$
(5,415
)
$
(87
)
$
3,263
Total assets
$
105,542
$
32,594
$
58,372
$
—
$
196,508
Capital expenditures
1,733
568
—
—
2,301
Depreciation and amortization
3,932
2,112
364
—
6,408
F-29
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
As of and for the
Manufacturing
Railcar
Corporate
year ended December 31, 2004
operations
services
& all other
Eliminations
Totals
(in thousands)
Revenues from external customers
$
316,432
$
38,624
$
$
—
$
355,056
Intersegment revenues
2,574
3,003
—
(5,577
)
—
Cost of goods sold—external customers
306,283
34,473
—
—
340,756
Cost of intersegment sales
2,307
2,527
—
(4,834
)
—
Gross profit
10,416
4,627
—
(743
)
14,300
Selling, administration and other
4,210
2,225
3,899
—
10,334
Earnings (loss) from operations
$
6,206
$
2,402
$
(3,899
)
$
(743
)
$
3,966
Total assets
$
34,606
$
33,034
$
289,200
$
—
$
356,840
Capital expenditures
11,062
379
—
—
11,441
Depreciation and amortization
3,955
1,959
333
—
6,247
Manufacturing operations
Revenues from affiliates were 38%, 29% and 18% of total revenues
for the years ended December 31, 2002, 2003 and 2004,
respectively. Revenues from one significant customer totaled
13%, 32% and 20% of total revenues for the years ended
December 31, 2002, 2003 and 2004, respectively. Revenues
from two significant customers were 17%, 35% and 36% for the
years ended December 31, 2002, 2003 and 2004, respectively.
Receivables from one significant customer were 2% and 7% of
total accounts receivable at December 31, 2003 and 2004,
respectively. Receivables from two significant customers were 2%
and 10% at December 31, 2003 and 2004, respectively.
Railcar services
Revenues from affiliates were 8%, 5% and 5% of total revenues
for the years ended December 31, 2002, 2003 and 2004,
respectively. Revenues from one significant customer totaled 3%,
1% and 1% of total revenues for the years ended
December 31, 2002, 2003 and 2004, respectively. Revenues
from two significant customers were 4%, 1% and 1% for the years
ended December 31, 2002, 2003 and 2004, respectively.
Receivables from one significant customer were 8% and 1% of
total accounts receivable at December 31, 2003 and 2004,
respectively. Receivables from two significant customers were
10% and 1% at December 31, 2003 and 2004, respectively.
Note 15—Selected Quarterly Financial Data
(unaudited)
First
Second
Third
Fourth
quarter
quarter
quarter
quarter
(in thousands)
2003
Sales
$
50,374
$
54,549
$
57,239
$
55,832
Gross profit
3,906
3,925
4,911
861
Net earnings (loss) available to common shareholders
170
433
953
(491
)
Net loss attributable to common shareholders, basic and diluted
$
(2,024
)
$
(1,775
)
$
(1,691
)
$
(3,135
)
F-30
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
First
Second
Third
Fourth
quarter
quarter
quarter
quarter
(in thousands)
2004
Sales
$
79,084
$
79,910
$
95,337
$
100,725
Gross profit
6,099
4,783
2,838
580
Net earnings (loss) available to common shareholders
1,016
969
889
(953
)
Net loss attributable to common shareholders, basic and diluted
$
(1,793
)
$
(1,841
)
$
(2,789
)
$
(4,897
)
Note 16—Supplemental Cash Flow Information
ARI received interest income of $3.4 million,
$3.0 million and $4.4 million for the years ended
2002, 2003 and 2004, respectively.
ARI paid interest expense of $4.4 million,
$3.2 million and $1.8 million for the years ended
December 31, 2002, 2003 and 2004, respectively.
ARI was refunded taxes of $1.7 million for the year ended
December 31, 2002 and paid taxes of $0.2 million for
each year ended December 31, 2003 and 2004.
During the year ended December 31, 2004, ARI recorded a
non-cash charge to additional paid-in-capital of
$26.7 million, representing the excess of the book value of
its investment in ARL over fair market value on the date of the
transfer of the investment in ARL to its affiliates. In
addition, $12.5 million representing certain tax benefits
that ARI received as a result of utilizing ARL's previously
incurred tax losses is also being recorded through additional
paid-in-capital as ARI will receive the benefit of these tax
losses in the future. The net non-cash effect of these
transactions was a charge to additional paid-in-capital of
$14.1 million (see Note 1).
Note 17—Subsequent Events
On January 26, 2005, the ARL operating agreement was
amended and an assignment and assumption agreement was executed
whereby ARI transferred its interest in a $165.0 million
secured note receivable from Mr. Icahn dated
October 28, 2004 to ARL in exchange for 35,000 A Units of
ARL and in satisfaction of its $130.0 million note issued
to ARL.
ARI entered into two supply agreements on January 28, 2005
and on June 8, 2005 with a supplier for two types of steel
plates. The agreement is for five years and is cancelable by
either party, with proper notice after two years. The agreement
commits ARI to buy the lesser of a fixed volume of steel or 75%
of its production needs from this supplier at prices that
fluctuate with market.
In March 2005, ARI entered into a $50.0 million revolving
credit facility secured by receivables and inventory. The notes
bear interest at various rates based on LIBOR and prime. The
term of the credit facility is one year. Debt covenants require
ARI to maintain certain debt-to-earnings and coverage ratios
with which ARI was in compliance. In addition, the revolving
credit facility provides that the payment of dividends triggers
a demand right in favor of ARI's lenders unless ARI meets
certain financial covenants and provides advance notice of the
dividend to its lenders. Through April 26, 2005, ARI had
drawn $30.3 million on the revolving credit facility.
In March 2005, ARI acquired certain assets of ACF for
$2.8 million. The assets were transferred between entities
under common control and, hence, have been accounted for at
historical cost.
F-31
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Years Ended December 31, 2002, 2003 and 2004
In April 2005, construction began on a new paint shop at the
Paragould facility. The project is expected to be completed by
November 2005 at an estimated cost of $13.2 million.
In August 2005, the company entered into an employment agreement
with its Chief Financial Officer (CFO). The agreement provides
for a bonus that will be earned upon the successful completion
of an Initial Public Offering. Under the terms of the agreement,
the CFO will receive a minimum annual base salary of
$0.25 million and a non-prorated cash bonus of at least
$0.15 million for the 2005 fiscal year. In addition to the
salary and bonus compensation, the CFO will receive a one-time
special cash bonus of $0.5 million on April 22, 2007
if, prior to that date, the Company issues common stock to the
public in an offering registered with the Securities and
Exchange Commission ("SEC") or if the Company is sold
to a third party in a private transaction.
The Company is negotiating the terms of an employment contract
with its Chief Executive Officer (CEO) and expects to execute
this agreement in the fourth quarter of 2005. Significant terms
of this agreement are still being finalized.
In August 2005, the company was named a party to a suit in which
the plaintiff alleges the company was responsible for the
malfunction of a valve which was remanufactured in 2004 by a
third party. The company believes it has no responsibility for
this malfunction and has a meritorious defense against any
liability in this case. In any event, it is not possible to
estimate the expected settlement, if any, that any party might
be held accountable for at this time as the case is in its early
stages.
The Company has been named as the defendant in a lawsuit in
which the plaintiff claims that the Company is responsible for
the damage caused by allegedly defective railcars that were
manufactured by the Company. The plaintiffs allege that failures
in certain components caused the contents transported by these
railcars to spill out of the railcars causing property damage,
clean-up costs, monitoring costs, testing costs and other costs
and damages. The Company was recently served with the complaint
for this lawsuit, but Management believes that the Company is
not responsible for the spills and has meritorious defenses
against liability.
F-32
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(a)
Proforma
December 31,
September 30,
September 30,
2004
2005
2005
Assets
Current assets:
Cash and cash equivalents
$
6,943
$
26,201
$
26,201
Accounts receivable, net
25,183
39,060
39,060
Receivables from affiliates
—
9,867
9,867
Inventories, net
73,925
81,864
81,864
Prepaid expenses
244
5,364
5,364
Deferred tax asset
2,065
1,837
1,837
Total current assets
108,360
164,193
164,193
Property, plant and equipment:
Land
1,977
1,977
1,977
Buildings
66,350
75,541
75,541
Machinery and equipment
58,816
61,178
61,178
Construction in process
8,686
13,549
13,549
135,829
152,245
152,245
Less accumulated depreciation
58,878
63,690
63,690
Net property, plant and equipment
76,951
88,555
88,555
Notes receivable from affiliates and interest thereon
165,000
—
—
Deferred tax asset
663
—
—
Debt issuance costs and other assets
615
3,643
3,643
Investment in joint venture
5,251
5,633
5,633
Total assets
$
356,840
$
262,024
$
262,024
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt
$
1,334
$
32,733
$
32,733
Accounts payable, including $3,073 due from affiliates in 2005
22,800
56,154
56,154
Accrued expenses and taxes
13,524
25,109
107,164
Notes payable to affiliate—current
19,000
19,000
19,000
Other amounts due to affiliates—current
5,137
—
—
Total current liabilities
61,795
132,996
215,051
Long-term debt, net of current portion
8,517
7,097
7,097
Note payable to affiliate—noncurrent
130,000
—
—
Other amounts due to affiliates—noncurrent
17,109
—
—
Deferred tax liability
—
9,853
9,853
Mandatorily redeemable preferred stock, stated value $1,000,
    99,000 shares authorized, 1 share issued and
    outstanding at December 31, 2004 and September 30, 2005
1
1
1
Other liabilities
4,395
4,542
4,542
Total liabilities
221,817
154,489
236,544
Commitments and contingencies
—
—
—
Shareholders' equity:
New Preferred Stock, $.01 par value per share, stated value
    $1,000 per share, 500,000 shares authorized, 111,685
    and 82,055 shares issued and outstanding at
    December 31, 2004 and September 30, 2005, respectively
111,685
82,055
—
Common stock, $.01 par value, 12,000 shares
    authorized, 1,195 shares issued and outstanding at
    December 31, 2004 and September 30, 2005, respectively
—
—
—
Additional paid-in capital
41,360
40,125
40,125
Accumulated deficit
(16,959
)
(13,599
)
(13,599
)
Accumulated other comprehensive loss
(1,063
)
(1,046
)
(1,046
)
Total shareholders' equity
135,023
107,535
25,480
Total liabilities and shareholders' equity
$
356,840
$
262,024
$
262,024
(a)
Proforma adjustment includes the reduction of preferred stock
    of $82,055, which will be paid with IPO proceeds. A
    corresponding increase of $82,055 has been included in accrued
    expenses and taxes.
See notes to the condensed consolidated financial
statements.
F-33
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF
EARNINGS—UNAUDITED
(in thousands, except share and per share amounts)
Nine months ended
September 30,
2004
2005
Revenues:
Manufacturing operations (including revenues from transactions
    with affiliates of $44,590 and $44,493 in 2004 and 2005,
    respectively)
$
226,759
$
409,208
Railcar services (including revenues from affiliates of $12,698
    and $16,036 in 2004 and 2005, respectively)
27,572
32,940
Total revenues
254,331
442,148
Costs of goods sold:
Cost of manufacturing operations (including costs from
    transactions with affiliates of $40,178 and $41,384 in 2004 and
    2005, respectively)
216,027
377,181
Cost of railcar services (including costs from transactions with
    affiliates of $9,593 and $12,728 in 2004 and 2005, respectively)
24,585
27,538
Total costs of goods sold
240,612
404,719
Gross profit
13,719
37,429
Selling, administrative and other
8,543
11,417
Earnings from operations
5,176
26,012
Interest income (includes interest income from affiliates of
    $1,201 and $823 in 2004 and 2005, respectively)
2,122
1,265
Interest expense (including interest expense to affiliates of
    $174 and $1,683 in 2004 and 2005, respectively)
2,216
3,577
Earnings(loss) income from joint venture
(351
)
443
Earnings before income tax expense
4,731
24,143
Income tax expense
1,858
9,611
Net earnings
$
2,873
$
14,532
Less preferred dividends
(9,296
)
(11,171
)
Net earnings (loss) available to common shareholders
(6,423
)
3,361
Weighted average shares outstanding — basic and
    diluted
1,051
1,195
Net earnings (loss) per common share — basic and
    diluted
$
(6,111
)
$
2,813
See notes to condensed consolidated financial statements
F-34
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED
(in thousands)
Nine Months Ended
September 30,
2004
2005
Operating activities:
Net earnings
$
2,873
$
14,532
Adjustments to reconcile net earnings to net cash provided by
    (used in) operating activities:
Depreciation and amortization
4,774
4,972
Change in joint venture investment as a result of (earnings) loss
351
(443
)
Expenses relating to pre-capitalization liabilities retained by
    ACF
800
794
Provision for deferred income taxes
1,485
8,721
Provision for losses on accounts receivable
86
50
Curtailment gain
(59
)
—
Changes in operating assets and liabilities:
Accounts receivable
(13,353
)
(23,794
)
Inventories
(14,204
)
(7,939
)
Prepaid expenses and other assets
(156
)
(8,309
)
Accounts payable
14,952
33,354
Accrued expenses and taxes
5,041
5,784
Other
(644
)
109
Net cash provided by operating activities
1,946
27,831
Investing activities:
Purchases of property, plant and equipment
(6,750
)
(16,356
)
Net cash used in investing activities
(6,750
)
(16,356
)
Financing activities:
Issuance of common stock
42,500
—
Issuance of preferred stock
67,500
—
Effect of ARL spin off
(25,000
)
—
Increase (decrease) in amounts due to affiliates
10,548
(22,246
)
Repayment of note receivable from affiliate
—
50
Proceeds from debt issuance
—
31,294
Repayment of debt
(40,204
)
(1,315
)
Net cash provided by financing activities
55,344
7,783
Increase in cash and cash equivalents
50,540
19,258
Cash and cash equivalents at beginning of year
65
6,943
Cash and cash equivalents at end of period
$
50,605
$
26,201
See notes to condensed consolidated financial statements.
F-35
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2004 and 2005
The condensed consolidated financial statements included herein
have been prepared by American Railcar Industries, Inc. and
subsidiary (collectively the "Company" or
"ARI"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the
"SEC"). Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United
States of America have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading.
The Condensed Balance Sheet as of December 31, 2004 has
been derived from the audited consolidated balance sheets as of
that date. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's
latest annual report attached on Form S-1 for the year
ended December 31, 2004. In the opinion of management, the
information contained herein reflects all adjustments necessary
to make the results of operations for the interim periods a fair
statement of such operations. Due to the seasonality of the
Company's business, the results of operations of any
interim period are not necessarily indicative of the results
that may be expected for a fiscal year.
Note 1—Description of the Business
The condensed consolidated financial statements of the Company
include the accounts of American Railcar Industries, Inc. and
its wholly owned subsidiaries. Through its subsidiary Castings,
LLC ("Castings"), the Company has a one-third
ownership interest in Ohio Castings Company, LLC ("Ohio
Castings"), a limited liability company formed to run two
foundries which cast railcar sideframes and bolsters for use or
sale by the ownership group. All significant intercompany
transactions and balances have been eliminated.
ARI manufactures railcars, custom designed railcar parts for
industrial companies, railroads, and other industrial products,
primarily aluminum and special alloy steel castings, for
non-rail customers. ARI also provides railcar maintenance
services for railcar fleets, including that of its affiliate,
American Railcar Leasing, LLC ("ARL"). In addition,
ARI provides fleet management and maintenance services for
railcars owned by selected customers. Such services include
inspecting and supervising the maintenance and repair of such
railcars. The Company's operations are located in the
United States and Canada. The Company operates a small railcar
repair facility in Sarnia Ontario Canada. Canadian revenues were
0.5% and 0.4% of total company revenues for the nine months
ended September 30, 2004 and 2005, respectively. Canadian
assets were 0.4% and 0.3% of total company assets for the nine
months ended September 30, 2004 and 2005, respectively.
ARI was recapitalized on October 1, 1994 when ACF
Industries LLC ("ACF"), the former holder of
ARI's common stock, transferred to ARI the old common stock
of ARI along with the assets and liabilities of ACF's
railcar maintenance and railcar parts manufacturing businesses.
In exchange, ACF received 57,306 shares of ARI's newly
issued mandatorily redeemable preferred stock. New shares of
ARI's common stock were issued to Carl C. Icahn
("Mr. Icahn"), Chairman of the Board of ACF, in
exchange for cash of $6.4 million. In October 1998, ARI
redeemed 57,305 shares of the preferred stock and the
remaining share of preferred stock was transferred to
Mr. Icahn.
In 2003, ACF Industries Holding Corp. ("ACF Holding"),
an affiliate of ARI, formed a wholly-owned subsidiary, Castings.
In June 2005, ARI completed the purchase of Castings from ACF
Holdings. The transaction was effective January 1, 2005.
The cost of the acquisition totaled $12.0 million, which
represents the fair value of Castings equity interest in Ohio
Castings. The purchase price will be paid in 2005. However as
Castings was owned by an entity with ownership common to ARI,
the investment in subsidiary is recorded at the date of Castings
inception, June, 2003 at book value. The
F-36
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
purchase price is recorded at full value as a payable to the
affiliate and the excess of fair value over cost is presented as
a distribution from equity. Interest is accrued on the note
payable to the affiliate as of January 1, 2005 as that is
the date the purchase was agreed to.
On July 20, 2004, ARI formed ARL, a wholly owned
subsidiary. ARL's primary business is the leasing of
railcars. The subsidiary was capitalized through the issuance of
common and preferred stock. ARI's investment in ARL was
$116.7 and $151.7 million at December 31, 2004 and
just prior to June 30, 2005, respectively. Preferred stock
of ARL was issued to affiliated companies in exchange for
contributions of cash or railcars totaling $102.7 million. In
January 2005, ARI obtained an additional $35 million of ARL
common stock resulting in a carrying value of
$151.7 million.
On June 30, 2005, in anticipation of its public offering,
ARI sold its common interest in ARL for $125.0 million to
affiliated companies in return for the preferred stock
investment valued at $116.1 million plus accrued dividends of
$8.9 million that those affiliates held ARI. At
December 31, 2004, ARI's investment in ARL was
$116.7 million. This investment was eliminated as of
December 31, 2004 in order to present ARI on a stand alone
basis. New preferred stock of $86.5 million plus accrued
dividends of $3.5 million were eliminated from ARI's
equity and a charge of $26.7 million was recorded to
additional paid in capital to reflect the difference between the
final transfer price of $125 million and the ultimate
carrying value of ARI's investment in ARL of
$151.7 million. The 2005 financial statements reflect a
reduction of New Preferred Stock of $29.6 million plus
accrued dividends of $5.4 million to eliminate the
additional investment of $35 million made in that period.
ARI retained no liabilities or other interests in ARL as a
result of this sale. The presentation of ARI's operations
has been prepared on a standalone basis excluding ARL's
operations for all periods, and all transactions giving effect
to ARL's formation have been eliminated from the financial
statements. Any differences related to the amounts originally
capitalized and the amount paid for ARL in the sale have been
recorded through adjustments to shareholder's equity,
including certain tax benefits that ARI received as a result of
utilizing ARL's previously incurred tax losses. ARI
recorded a related deferred tax asset of $12.5 million for those
net operating loss carry forwards as ARI has the legal right to
utilize them for tax purposes.
F-37
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
The following table discloses the preferred stock transactions
and the effect on additional paid in capital for the year ended
December 31, 2004 and nine months ended September 30,
2005 to include all of the transactions including the effect of
the spin off of ARL.
Additional
New preferred
paid in
stock
capital
(in thousands
January 1, 2004
$
—
$
11,577
New preferred issued for mandatorily redeemable preferred stock
95,517
—
Capital contribution
102,654
42,500
Exchange of common interest in ARL for new preferred stock
(86,486
)
(26,670
)
ARL deferred tax assets
—
12,522
Other
—
1,431
December 31, 2004
111,685
41,360
Exchange of common interest in ARL for new preferred stock
(29,630
)
—
ARL tax benefit
—
(2,023
)
Other
—
788
September 30, 2005
$
82,055
$
40,125
Note 2—Summary of Significant Accounting
Policies
Significant accounting policies are described below.
Revenue recognition
Revenues from railcar sales are recognized following completion
of manufacturing, inspection, customer acceptance and shipment,
which is when title and risk for any damage or loss with respect
to the railcars passes to the customer. In some cases, paint and
lining work may be outsourced and, as a result, the sale will
not be recorded until the railcars are shipped from the
independent contractor. Revenues from railcar and industrial
parts and components are recorded at the time of product
shipment, in accordance with our contractual terms. Revenue for
railcar maintenance services are recognized upon completion and
shipment of railcars from our plants. The Company does not
bundle railcar service contracts with new car sales. Revenue for
fleet management services are recognized as performed.
The Company records amounts billed to customers for shipping and
handling as part of sales in accordance with EITF 00-10,
Accounting for Shipping and Handling Fees and Costs
, and
records related costs in cost of sales.
Debt issuance costs
Debt issuance costs were incurred in connection with ARI's
issuance of long-term debt, and are amortized over the term of
the related debt, utilizing the effective interest method.
Inventories
Inventories are stated at the lower of average cost or market on
a first in, first out basis, and include the cost of materials,
direct labor and manufacturing overhead.
F-38
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
Accounts receivable
The Company carries its accounts receivable at cost less an
allowance for doubtful accounts. On a periodic basis, the
Company evaluates its account receivable and establishes an
allowance for doubtful accounts, based on a history of past
write-offs and collections and current credit conditions.
Accounts are placed for collection on a limited basis once all
other methods of collection have been exhausted. Once it has
been determined that the customer is no longer in business
and/or refuses to pay, the accounts are written off.
Property, plant and equipment
Land, buildings, machinery and equipment are carried at cost,
including interest on funds borrowed to finance construction.
Maintenance and repair costs are charged directly to earnings.
Tooling is generally capitalized and amortized over a period of
two to five years.
Buildings are depreciated over estimated useful lives that range
from 14 to 50 years. The estimated useful lives of other
depreciable assets, including equipment, vary from 3 to
25 years. Depreciation is calculated on the straight-line
method for financial reporting purposes and on accelerated
methods for tax purposes.
Ohio Castings joint venture
The Company uses the equity method to account for its investment
in Ohio Castings owned by its subsidiary, Castings, LLC. Under
the equity method, the Company recognizes its share of the
earnings and losses of the joint venture as they accrue instead
of when they are realized. Advances and distributions are
charged and credited directly to the investment account. Ohio
Castings produces railcar parts that are sold to one of the
joint venture partners. The joint venture partner sells these
parts to outside 3rd parties at current market prices and
to the Company and the other joint venture partner in Ohio
Castings at cost plus a licensing fee. The risk of loss to
Castings, LLC and the Company is limited to its investment in
Ohio Castings and its one third share of its guarantee of Ohio
Castings debt which was approximately $0.1 million at
September 30, 2005.
The cost of railcar manufacturing for the nine months ended
September 30, 2004 and 2005 included $14.3 million and
$19.0 million, respectively, in products produced by Ohio
Castings.
The carrying amount of the investment in Ohio Castings by
Castings LLC was $5.3 million and $6.2 million at
December 31, 2004 and September 30, 2005, respectively.
F-39
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
Summary combined unaudited financial information for Ohio
Castings as of and for the years ended December 31, 2004
and nine months ended September 30, 2005 follows:
December 31,
September 30,
2004
2005
(in thousands)
Financial Position
Current Assets
$
19,111
$
18,000
Property, plant, and equipment, net
14,407
15,436
Total assets
33,518
33,436
Current liabilities
19,674
14,679
Long-term debt
8,184
11,770
Total liabilities
27,858
26,449
Member's equity
$
5,660
$
6,987
Summary consolidated results of operations for the nine months
ended September 30, 2004 and 2005.
September 30,
September 30,
2004
2005
(in thousands)
Sales
$
53,488
$
88,324
Earnings (loss) from operations
(991
)
1,115
Net earnings (loss)
$
(1,053
)
$
1,327
Impairment of long-lived assets
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of
assets may not be recoverable. The criteria for determining
impairment for such long-lived assets to be held and used is
determined by comparing the carrying value of these long-lived
assets to be held and used to management's best estimate of
future undiscounted cash flows expected to result from the use
of the assets. If the assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the
assets. The estimated fair value of the assets is measured by
estimating the present value of the future discounted cash flows
to be generated. There were no events or changes in
circumstances that indicate that the carrying value of assets
may not be recoverable, as such, no impairment losses have been
recorded in the year ended December 31, 2004 or for the
nine month period ended September 30, 2005.
Pension plans and other postretirement benefits
Certain ARI employees participate in noncontributory, defined
benefit pension plans sponsored by a related party. Benefits for
the salaried employees are based on salary and years of service,
while those for hourly employees are based on negotiated rates
and years of service.
ARI also participates in defined contribution retirement plans,
health care and life insurance plans sponsored by a related
party covering certain employees. Benefit costs are accrued
during the years the employees render service.
F-40
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
Income taxes
ARI accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial reporting basis and the tax
basis of ARI's assets and liabilities at enacted tax rates
expected to be in effect when such amounts are recovered or
settled.
Statements of cash flows
For the purpose of the consolidated statements of cash flows,
ARI considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash
equivalents. Until October 2004, ACF received the majority of
ARI's cash receipts and disbursed ARI's cash on behalf
of ARI, and maintained an intercompany receivable/payable which
bore interest at ACF's internal cost of funds in accordance
with an administration agreement between ARI and ACF, which is
described in Note 9. Since October 2004, ARI maintains its
own cash balances.
Earnings per share
Basic earnings per share are calculated as net earnings
attributable to common shareholders divided by the
weighted-average number of common shares outstanding during the
respective period. Diluted earnings per share are calculated by
dividing net earnings attributable to common shareholders by the
weighted-average number of shares outstanding plus dilutive
potential common shares outstanding during the year.
Fair value of financial instruments
The carrying amounts of cash and cash equivalents, accounts
receivable, amounts due to/from affiliates and accounts payable
approximate fair values because of the short-term maturity of
these instruments. The fair value of long-term debt is discussed
in Note 5. The fair value of the note receivable from Ohio
Castings and Mr. Icahn, which is carried at face amount
plus accrued interest, could not reasonably be estimated due to
the lack of market for similar instruments. Fair value estimates
are made at a specific point in time, based on relevant market
information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and, therefore, cannot be determined with
precision.
Foreign currency translation
Balance sheet amounts from our Canadian operation are translated
at the exchange rates in effect at the end of the period, and
operations statement amounts are translated at the average rates
of exchange prevailing during the year. Currency translation
adjustments are included in Shareholders' Equity.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in equity
of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources.
Comprehensive income (loss) consists of net earnings (loss),
foreign currency translation adjustment and the Company's
minimum pension liability adjustment, which is shown net of tax.
F-41
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
Use of estimates
Management of ARI has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities
to prepare these financial statements in conformity with
accounting principles generally accepted in the United States of
America. Significant items subject to estimates and assumptions
include, deferred taxes, pension obligations, workers
compensation, valuation allowances for accounts receivable and
inventory obsolescence and the reserve for warranty claims.
Actual results could differ from those estimates.
Retained earnings
As ARI and ACF are entities under common control, accounting
principles generally accepted in the United States of America
require that ARI's initial carrying value of assets
transferred to it from ACF and the sale of Castings be equal to
ACF's historical net book value at the time of transfer.
The excess of the fair value paid over the net book value of
assets and liabilities transferred to ARI is reflected as a
distribution of retained earnings due to common control and has
the effect of reducing shareholders' equity by
$24.1 million at December 31, 2004 and
September 30, 2005. Of that amount, $19.2 million was
recorded at the formation of ARI, and $4.9 million was
recorded in 2003 from the acquisition of Castings.
Recent accounting pronouncements
In December 2004, the FASB revised SFAS No. 123,
Share-Based Payment, which establishes the accounting for
transactions in which an entity exchanges its equity instruments
or certain liabilities based upon the entity's equity
instruments for goods or services. The revision to SFAS
No. 123 generally requires that publicly traded companies
measure the cost of employee services received in exchange for
an award of equity instruments based on the fair value of the
award on the grant date. That cost will be recognized over the
period during which an employee is required to provide service
in exchange for the award, which is usually the vesting period.
Management expects that the revised provisions of SFAS
No. 123 will be effective for the Company after the Initial
Public Offering. Management has not yet evaluated the impact of
the revisions to SFAS No. 123 on the Company's
financial statements. After the offering, the Company will
comply with 123R and expense stock options.
In March 2005, the FASB issued FIN 47 as an interpretation
of FASB Statement 143,
Accounting for Asset Retirement
Obligations
(FASB 143). This interpretation clarifies that
the term conditional asset retirement obligation as used in FASB
143 and refers to a legal obligation to perform an asset
retirement activity in which the timing and/or method of
settlement are conditional on a future event that may or may not
be within the control of the entity. The obligation to perform
the asset retirement activity is unconditional even though
uncertainty exists about the timing and/or method of settlement.
Accordingly, an entity is required to recognize a liability for
the fair value of a conditional asset retirement obligation if
the fair value of the liability can be reasonably estimated.
This interpretation also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of
an asset retirement obligation. FIN 47 is effective no
later than the end of fiscal years ending after
December 15, 2005. We believe that the adoption of
FIN 47 will not result in a material change in our
financial statements.
On June 1, 2005, the FASB issued Statement No. 154,
Accounting Changes and Error Corrections, a replacement of
APB Opinion No. 20 and FASB Statement No. 3
(SFAS 154)
. The Statement applies to all voluntary
changes in accounting principle, and changes the requirements
for accounting for and
F-42
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
reporting of a change in accounting principle. We will adopt
SFAS 154 at December 31, 2005 and do not anticipate
any material change to our operating results as a result of this
adoption.
$19.2 million was recorded at the formation of ARI, and
$4.9 million was recorded in 2003 from the acquisition of
Castings.
Note 3—Accounts Receivable
The allowance for doubtful accounts consists of the following:
September 30,
September 30,
2004
2005
(in thousands)
Beginning balance
$
572
$
510
Bad debt expense
86
35
Accounts written off
(81
)
(23
)
Recoveries
21
38
Ending balance
$
598
$
560
Note 4—Inventories
Inventories consist of the following:
December 31,
September 30,
2004
2005
(in thousands)
Raw materials
$
39,655
$
37,072
Work-in-process
25,515
34,253
Finished products
11,434
13,072
Total inventories
$
76,604
$
84,397
Less reserves
2,679
2,533
Total inventories, net
$
73,925
$
81,864
Inventory reserves consist of the following:
December 31,
September 30,
2004
2005
(in thousands)
Beginning Balance
$
2,310
$
2,679
Provision
559
309
Write-off
(190
)
(455
)
Ending balance
$
2,679
$
2,533
F-43
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
Note 5—Long-Term Debt
Long-term debt consists of the following:
December 31,
September 30,
2004
2005
(in thousands)
Revolving line of credit
$
—
31,294
Industrial revenue bonds guaranteed by ACF and ACF Holding, with
    effective interest rates ranging from 6.75% to 8.5%, principal
    amounts due through the year 2011
9,600
8,340
Other
251
196
9,851
39,830
Less current portion of debt
1,334
32,733
Total long-term debt, net of current portion
$
8,517
$
7,097
On March 10, 2005, ARI entered into a $50.0 million
revolving credit facility secured by receivables and inventory.
The note bears interest at various rates based on LIBOR or
prime. As of September 30, 2005, the interest rate on the
borrowings under the revolving credit facility was 6.5% and was
based on the U.S. prime rate at that time. The term of the
credit facility is one year. Debt covenants require ARI to
maintain certain debt-to-earnings and coverage ratios with which
ARI was in compliance at September 30, 2005. In addition,
the revolving credit facility provides that the payment of
dividends triggers a demand right in favor of ARI's lenders
unless ARI meets certain financial covenants and provides
advance notice of the dividend to its lenders.
The fair value of long-term debt was approximately
$9.9 million and $39.8 million at December 31,
2004 and September 30, 2005, respectively, as calculated by
discounting cash flows through maturity using ARI's current
rate of borrowing for similar liabilities.
Note 6—Warranties
The Company records a liability for an estimate of costs that it
expects to incur under its basic limited warranty when
manufacturing revenue is recognized. Factors affecting the
Company's warranty liability include the number of units
sold and historical and anticipated rates of claims and costs
per claim. The Company periodically assesses the adequacy of its
warranty liability based on changes in these factors.
Changes in the Company's warranty reserve are as follows:
Nine Months Ended
September 30,
2004
2005
(in thousands)
Liability, beginning of period
$
1,436
$
1,630
Expense for new warranties issued
159
278
Warranty claims
(67
)
(471
)
Liability, end of period
$
1,528
$
1,437
F-44
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
Note 7—Stock options
In 1994, the company entered into an agreement with
Mr. Unger, currently its chief executive officer, which
provided that Mr. Unger shall be granted an option to
purchase 2.0% of the outstanding common shares of ARI at a price
equal to 2.0% of the common equity contribution by
Carl C. Icahn (ARI's chairman of the board and a
principal stockholder) at the formation of ARI. The agreement
provided that this option shall be exercisable at the time of
ARI's initial public offering, and should ARI be sold to
parties other than in a public offering, Mr. Unger shall
receive 2.0% of the sales price net of the preferred interest
established at the formation of ARI and net of the contribution
for common stock. The agreement further provided that the above
options and or rights shall remain in effect as long as
Mr. Unger is employed by ARI. Compensation expense under
this arrangement would be recognized when the contingency is met
at the effective date of a public offering or the completion of
a sale.
In November 2005, ARI entered into a new agreement with
Mr. Unger. Upon the closing of an initial public offering
of ARI common stock, this new agreement will supersede the 1994
agreement and the 1994 agreement will terminate. The new
agreement provides for the issuance of $6 million of common
shares to be issued at the IPO price on the IPO date. These
shares will vest 40% upon issuance, with the remaining 60% to
vest one year after issuance.
Note 8—Related Party Transactions
As part of the 1994 recapitalization described in Note 1,
ACF has retained certain liabilities existing as of the
recapitalization date, including employee benefits, workers
compensation, litigation, environmental and others. If ACF were
unable to honor or meet these obligations, ARI would be
responsible for such liabilities. In the opinion of management,
ACF has the present ability to meet these obligations.
In connection with the 1994 ACF asset transfer, the Company
entered into the following administrative and operating
agreements with ACF, effective as of October 1, 1994:
Manufacturing services agreement
Under the manufacturing services agreement, ACF agreed to
    manufacture and distribute, at the Company's instruction,
    various products using certain assets that the Company acquired
    pursuant to the 1994 ACF asset transfer agreement. In
    consideration for these services, the Company agreed to pay ACF
    for the direct costs they incurred which totaled
    $20.0 million and $56.2 million for the nine month
    period ended September 30, 2004 and 2005, respectively. The
    agreement automatically renews unless written notice is provided
    by the Company.
Administration Agreement
Under this agreement, ACF agreed to provide the Company with
    office facilities and administrative services, primarily
    information technology services. In exchange for the facilities
    services, the Company agreed to pay ACF based on agreed upon
    cost allocations. Charges for these services represent a portion
    of actual direct and overhead expenses incurred by ACF, with
    direct expenses being charged based on relative time commitments
    of managerial personnel and overhead based on relative numbers
    of employees. Management believes that these allocation methods
    are reasonable for the relevant costs. Amounts incurred under
    this agreement totaled $0.6 million and $0.4 million
    for the nine month period ended September 30, 2004 and
    2005, respectively. The facility lease amounts, included in the
    amounts incurred, have been included in the total lease expense
    discussion within this footnote. The Agreement was terminated on
    April 1, 2005.
F-45
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
Railcar Servicing Agreement
Under this agreement, the Company agreed to provide ACF with
    railcar repair and maintenance services, fleet management
    services and consulting services on safety and environmental
    matters for railcars owned or managed by ACF and leased or held
    for lease by ACF. ACF agreed to compensate the Company based on
    agreed upon rates. Revenue recorded under this arrangement
    totaled $12.7 million for the nine month period ended
    September 30, 2004 and is included under revenue from
    affiliates on the statement of earnings. No amounts were
    recorded during the nine month period ended September 30,
    2005. The Agreement was terminated on April 1, 2005.
Supply Agreement
Under this agreement, we agreed to manufacture and sell to ACF
    specified components at cost plus mark-up or on terms not less
    favorable than the terms on which the Company sold the same
    products to third parties. Revenue recorded under this
    arrangement totaled $0.1 million and $0.3 million for
    the nine month period ended September 30, 2005 and 2004 and
    is included under revenue from affiliates on the statement of
    earnings. The Agreement was terminated on April 1, 2005.
ACF and ACF Holding have guaranteed the Company's
obligations under the industrial revenue bonds as described in
note 5.
As of December 31, 2004, amounts due to affiliates included
$22.2 million to ACF and ARL.
As of September 30, 2005, amounts due from affiliates
included $1.8 million from ACF, $7.1 million from ARL,
$0.8 million from Mr. Icahn, and $0.2 million
from Ohio Castings. As of September 30, 2005, amounts due
to affiliates included $2.1 million to ACF,
$0.6 million to ACF Holding for interest on the Castings
note described below, and $0.4 million for interest on the
Arnos note described below.
ARI's employees participate in ACF's noncontributory,
defined benefit pension plans and other postretirement health
care and life insurance plans. As part of ARI's
recapitalization, ACF retained the liabilities for unfunded
pension and other postretirement liabilities and workers
compensation liabilities as of October 1, 1994 for
employees who transferred from ACF to ARI at that date and for
environmental liabilities as of that date. Although ACF is
responsible for any costs associated with the liabilities at the
recapitalization date, related expenses which have accrued since
the recapitalization have been reflected in ARI's financial
statements in order to reflect the full cost of doing business.
Expenses that ACF pays relating to pre-recapitalization
liabilities are recorded as capital contributions and appear as
additional paid-in capital on ARI's balance sheet.
During 2004, ARI advanced $165.0 million to Mr. Icahn
under a secured note due in 2007 and bearing interest at prime
plus 1.75%. During 2004, ARL advanced $130.0 million to ARI
under a note due in 2007 and bearing interest at prime plus
1
1
/
2
%.
On January 26, 2005, an assignment and assumption agreement
was executed whereby ARI transferred its interest in a
$165.0 million note receivable from Mr. Icahn dated
October 28, 2004 to ARL in exchange for 35,000 Units of
common ownership and in satisfaction of a $130.0 million
note issued to ARL.
The Company leases certain facilities and equipment from an
entity owned by an officer of the Company, certain affiliates of
ARI and third parties. Total rent expense on these leases were
approximately $4.8 million and $5.3 million for the
nine month period ended September 30, 2004 and 2005,
respectively. Expenses to related parties included in the
amounts above were $0.6 million and $0.3 million for
the nine month period ended September 30, 2004 and 2005,
respectively.
F-46
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
Castings has a note receivable of $2.2 million from Ohio
Castings due November, 2008. The note bears interest at 4%.
Principle and interest is payable quarterly starting
November 30, 2005.
ARI entered into a note payable with ACF Holding, an affiliate,
for $12.0 million effective January 1, 2005 in
connection with the purchase of Castings (Note 1). The note
bears interest at prime (6.75% at September 30, 2005) plus
0.5% and is due on demand.
ARI entered into a note payable with Arnos Corp., an affiliate,
for $7.0 million in December 2004.
In 2005, the Company entered into the following agreements with
ARL and its subsidiaries:
ARL Railcar Services Agreement
Under this agreement, ARL provided the Company with railcar
    services which the Company was Required to provide to ARI First
    and ARI Third under the railcar management agreement. The
    Company paid ARL an amount equal to the amounts paid to the
    Company by ARI First and ARI Third under the railcar management
    agreement which totaled $2.0 million for the nine month
    period ended September 30, 2005 and it is included under
    cost to affiliates on the statement of earnings. This agreement
    was terminated on July 1, 2005.
ARL Railcar Servicing Agreement
Under this agreement, the Company agreed to provide ARL with
    railcar repair and maintenance services, fleet management
    services and consulting services on safety and environmental
    matters for railcars owned or managed by ARL and leased or held
    for lease by ARL. ARL agreed to compensate the Company based on
    agreed upon rates. Revenue of $16.0 million for the nine
    month period ended September 30, 2005 was recorded under
    this arrangement which is included under revenue from affiliates
    on the statement of earnings. The agreement extends through
    June 30, 2006 and is automatically renewable unless either
    party provides at least six months prior notice of termination.
    Termination by the Company would result in a termination fee of
    $0.5 million.
ARL Services Agreement
Under this agreement, ARL agreed to provide the Company certain
    information technology services, rent and building services and
    limited administrative services. The rent and building services
    includes the use of certain facilities owned by Mr. Unger
    which is further described in note 12. Under the agreement,
    the Company agreed to provide purchasing and engineering
    services to ARL. Consideration exchanged between the
    Company's is based on agreed upon fixed annual fee's.
    Total fees paid to ARL were $1.1 million for the nine month
    period ended September 30, 2005. Amounts billed to ARL
    totaled $0.1 million for the nine month period ended
    September 30, 2005. These balances are included in revenues
    and costs from affiliates on the statement of earnings. Either
    party may terminate any of these services, and the associated
    costs for these services, on at least six months prior notice at
    any time prior to the termination of the agreement on
    December 31, 2007.
In April 2005, the Company entered into a consulting agreement
with ACF in which both parties agreed to provide labor
litigation, labor relations support and consultation, and labor
contract interpretation and negation services to one another. In
addition, the Company has agreed to provide ACF with engineering
and consultation advice. Fees paid to one another are based on
agreed upon rates. No services were rendered and no amounts were
paid during the nine month period ended September 30, 2005.
F-47
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
ARI has been advised that in December 2005 an affiliate of
Mr. Icahn entered into an agreement with the Foundation for
a Greater Opportunity, or the Foundation, ARI's other
significant beneficial stockholder, to acquire all of ARI's
common stock held by the Foundation. The consummation of this
acquisition would require the approval of applicable authorities
of the State of New York. If the parties obtain this approval,
ARI has been advised that the parties expect that the purchase
would be completed in the first three months of 2006. Pending
the completion of this purchase, and for so long as the purchase
agreement has not been terminated, the Foundation has granted
the purchaser an irrevocable proxy to vote all the shares of ARI
common stock held by the Foundation. As a result of these
contemplated arrangements, ARI expects that Mr. Icahn will
continue to control a majority of the voting power of ARI's
capital stock following the offering. As a result,
Mr. Icahn is, and will be, able to exert substantial
influence over ARI, elect ARI's directors and control most
matters requiring board or shareholder approval.
Note 9—Commitments and contingencies
The Company is currently a member of a controlled group that
includes ACF, an entity in which Mr. Icahn has an indirect
ownership of at least 80%. ACF is the sponsor of several pension
plans that are underfunded, as of December 31, 2004, by a
total of approximately $24.1 million on an ongoing
actuarial basis and $172.4 million if those plans were
terminated, as most recently reported by the plans'
actuaries. The liabilities could increase or decrease, depending
on a number of factors, including future changes in promised
benefits, investment returns and the assumptions used to
calculate the liability. As a member of the controlled group,
ARI would be jointly and severally liable for any failure of ACF
to pay the unfunded liabilities upon a termination of the ACF
pension plans. Upon completion of this offering, ARI believes
that it should no longer be a member of the ACF controlled
group. As a result, ARI should no longer be subject to
ACF's pension liabilities, unless it were determined that
ARI was otherwise a member of the ACF controlled group or that a
principal purpose of the offering or other transactions that
resulted in ARI's ceasing to be a member of the ACF
controlled group was to evade pension liabilities and the
termination date of the underfunded plan was within five years
after the offering or other transactions. If such a
determination were made and upheld by a court, ARI could remain
jointly and severally liable for pension plan obligations of
ACF, which could have a material adverse effect on ARI's
financial condition and results of operations.
In connection with Trans World Airlines, Inc.'s (TWA) 1992
bankruptcy proceedings under Chapter 11 of the Bankruptcy
Code, the Pension Benefit Guarantee Corporation
("PBGC") asserted that ACF as well as the other
entities in which Mr. Icahn had a controlling interest were
obligated along with TWA to satisfy any underfunding of
TWA's defined benefit plan. Subsequently, and in response
to a petition of another member of the Icahn control group, PBGC
terminated the TWA pension plan and obligated an affiliate of
ARI, Highcrest Investors Corp. (Highcrest) to make eight annual
payments of $30 million each commencing on July 1,
2002 and totaling $240 million (termination payments). As
of December 31, 2004, Highcrest had made termination
payments totaling $130 million and still owed $110 million
on this obligation. The obligation to make termination payments
is non-recourse except to the common stock of ACF Holding
(another member of the control group). While ARI is a controlled
entity of Mr. Icahn, management believes this obligation
will have no adverse effect to the future liquidity, results of
operations, or financial position of ARI.
The Company is subject to comprehensive federal, state, local
and international environmental laws and regulations relating to
the release or discharge of materials into the environment, the
management, use, processing, handling, storage, transport or
disposal of hazardous materials and wastes, or otherwise
relating to the protection of human health and the environment.
These laws and regulations
F-48
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
not only expose ARI to liability for the environmental condition
of its current or formerly owned or operated facilities, and its
own negligent acts, but also may expose ARI to liability for the
conduct of others or for ARI's actions that were in
compliance with all applicable laws at the time these actions
were taken. In addition, these laws may require significant
expenditures to achieve compliance, and are frequently modified
or revised to impose new obligations. Civil and criminal fines
and penalties and other sanctions may be imposed for
non-compliance with these environmental laws and regulations.
ARI's operations that involve hazardous materials also
raise potential risks of liability under common law. ARI is
involved in investigation and remediation activities at
properties that it now owns or leases to address historical
contamination and potential contamination by third parties. The
Company is also involved with state agencies in the cleanup of
two sites under these laws. These investigations are at a
preliminary stage, and it is impossible to estimate, with any
certainty, the timing and extent of remedial actions that may be
required, and the costs that would be involved in such
remediation. Substantially all of the issues identified relate
to the use of the properties prior to their transfer to ARI in
1994 by ACF and for which ACF has retained liability for
environmental contamination that may have existed at the time of
transfer to ARI. ACF has also agreed to indemnify ARI for any
cost that might be incurred with those existing issues. However,
if ACF fails to honor its obligations to ARI, ARI would be
responsible for the cost of such remediation. The Company
believes that its operations and facilities are in substantial
compliance with applicable laws and regulations and that any
noncompliance is not likely to have a material adverse effect on
its operations or financial condition.
When it is possible to make a reasonable estimate of the
liability with respect to such a matter, a provision will be
made as appropriate. Actual cost to be incurred in future
periods may vary from these estimates. Based on facts presently
known, ARI does not believe that the outcome of these
proceedings will have a material adverse effect on its future
liquidity, results of operations or financial position.
Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against ARI.
In the opinion of management, all such claims, suits, and
complaints arising in the ordinary course of business are
without merit or would not have a significant effect on the
future liquidity, results of operations or financial position of
ARI if disposed of unfavorably.
ARI is a party to collective bargaining agreements with labor
unions at its Longview, Texas and North Kansas City, Missouri
repair facilities and at its Longview, Texas steel foundry and
components manufacturing facility. These agreements expire in
January 2008, September 2007, and April 2008, respectively. We
are also party to a collective bargaining agreement at our
Milton, Pennsylvania repair facility, which expired on June 19,
2005. At the present time, there are no workers at Milton, as
the site is idled.
The Company was named a party to a suit in which the plaintiff
alleges the Company was responsible for the malfunction of a
valve which was remanufactured in 2004 by a third party. The
Company believes it has no responsibility for this malfunction
and has a meritorious defense against any liability in this
case. In any event, it is not possible to estimate the expected
settlement, if any, that any party might be held accountable for
at this time as the case is in its early stages.
ARI entered two supply agreements on January 28, 2005 and
on June 8, 2005 with a supplier for two types of steel
plates. The agreement is for five years and is cancelable by
either party, with proper notice after two years. The agreement
commits ARI to buy 75% of its production needs from this
supplier at prices that fluctuate with market.
F-49
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
In August 2005, the company entered into employment agreement
with its Chief Financial Officer (CFO). The agreement provides
for a bonus that will be earned upon the successful completion
of an Initial Public Offering. Under the terms of the agreement,
the CFO will receive a minimum annual base salary of
$0.25 million and a non-prorated cash bonus of at least
$0.15 million for the 2005 fiscal year. In addition to the
salary and bonus compensation, the CFO will receive a one-time
special cash bonus of $0.5 million on April 22, 2007 if,
prior to that date, the Company issues common stock to the
public in an offering registered with the SEC or if the Company
is sold to a third party in a private transaction.
The Company has been named as the defendant in a lawsuit in
which the plaintiff claims that the Company is responsible for
the damage caused by allegedly defective railcars that were
manufactured by the Company. The plaintiffs allege that failures
in certain components caused the contents transported by these
railcars to spill out of the railcars causing property damage,
clean-up costs, monitoring costs, testing costs and other costs
and damages. The Company was recently served with the complaint
for this lawsuit, but Management believes that the Company is
not responsible for the spills and has meritorious defenses
against liability.
Note 10—New Preferred Stock
The New Preferred Stock is entitled to cumulative dividends at
the rate of 9.25% per annum, payable solely in cash on a
semi annual basis. Holders of the New Preferred Stock are
entitled to vote on matters submitted to the holders of shares
of common stock based on a percentage of the combined number of
shares of common stock and New Preferred Stock. Dividends
declared on the New Preferred Stock for the nine months ended
September 30, 2005 were $9.3 million.
Note 11—Operating Segment and Sales/ Credit
Concentrations
ARI operates in two reportable segments; manufacturing and
railcar services. The accounting policies of the segments are
the same as those described in the summary of significant
accounting policies in Note 2. Performance is evaluated
based on revenue and operating profit. Intersegment sales and
transfers are accounted for as if sales or transfers were to
third parties.
The information in the following table is derived from the
segments' internal financial reports used for corporate
management purposes.
As of and for the
Manufacturing
Railcar
Corporate
nine months ended September 30, 2004
Operations
Services
& All Other
Eliminations
Totals
(in thousands)
Revenues from external customers
$
226,759
$
27,572
$
—
$
—
$
254,331
Intersegment revenues
2,357
2,505
—
(4,862
)
—
Cost of goods sold — external customers
216,027
24,585
—
—
240,612
Cost of intersegment sales
2,103
2,135
—
(4,238
)
—
Gross profit
10,986
3,357
—
(624
)
13,719
Selling, administration and other
3,983
1,319
3,241
—
8,543
Earnings (loss) from operations
$
7,003
$
2,038
$
(3,241
)
$
(624
)
$
5,176
Total assets
$
133,003
$
32,101
$
135,660
$
—
$
300,764
Capital expenditures
6,733
135
—
—
6,868
Depreciation & amortization
2,929
1,518
327
—
4,774
F-50
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
As of and for the
Manufacturing
Railcar
Corporate
nine months ended September 30, 2005
Operations
Services
& All Other
Eliminations
Totals
(in thousands)
Revenues from external customers
$
409,208
$
32,940
$
—
$
—
$
442,148
Intersegment revenues
666
1,911
—
(2,577
)
—
Cost of goods sold — external customers
377,181
27,538
—
—
404,719
Cost of intersegment sales
595
1,474
—
(2,069
)
—
Gross profit
32,098
5,839
—
(508
)
37,429
Selling, administration and other
4,077
1,442
5,898
—
11,417
Earnings (loss) from operations
$
28,021
$
4,397
$
(5,898
)
$
(508
)
$
26,012
Total assets
$
175,669
$
31,888
$
54,467
$
—
$
262,024
Capital expenditures
15,595
568
193
—
16,356
Depreciation & amortization
3,372
1,453
147
—
4,972
Manufacturing operations
Revenues from affiliates were 20% and 11% of total manufacturing
revenues for the nine months ended September 30, 2004 and
2005, respectively. Revenues from five significant customers
totaled 18%, 17%, 15%, 11% and 11% of total manufacturing
revenues for the nine months ended September 30, 2005.
Revenues from three significant customers totaled 23%, 21% and
19% of total manufacturing revenues for the nine months ended
September 30, 2004. Receivables from these customers
totaled 26% and 40% of total receivables at September 30,
2004 and 2005, respectively.
Railcar services
Revenues from affiliates were 46% and 49% of total railcar
services revenues for the nine months ended September 30,
2004 and 2005, respectively. No customer accounted for more than
5% of railcar services revenue.
Note 12—Supplemental Cash Flow Information
The Company received interest income of approximately
$2.1 million and $1.3 million for the nine months
ended September 30, 2004 and 2005, respectively.
ARI paid interest expense of $2.2 million and
$3.6 million for the nine months ended September 30,
2004 and 2005, respectively.
ARI paid taxes of $1.5 million and $0.3 million for
the nine months ended September 30, 2004 and 2005,
respectively.
In January 2005, ARI exchanged the $165.0 million secured
note with Mr. Icahn to ARL in satisfaction of the
$130.0 million note owed to ARL plus $35.0 million of
common interest in ARL.
Note 13—Subsequent Events
We entered into two vendor supply contracts with minimum volume
commitments in October 2005, with suppliers of materials used at
our railcar production facilities. The agreements have terms of
two and three years respectively. We have agreed to purchase a
combined total of $67.6 million from these two suppliers
over the next three years. In 2006, 2007 and 2008 we expect to
purchase $16.0 million, $27.1 million and
$24.5 million respectively under these agreements.
F-51
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
In November 2005, ARI began discussions with ACF to release ARI
from all employee benefit reimbursement obligations under the
1994 Asset Transfer Agreement. The final settlement of all
obligations will be based on the actuarial valuation of
liabilities at December 1, 2005, which is in process, and
the market value of assets at the time of settlement.
When this transaction is completed, it is contemplated that ACF
will release ARI from all employee benefit reimbursement
obligations under the 1994 Asset Transfer Agreement in exchange
for ARI assuming sponsorship and all obligations of the
Shipper's Car Line Pension Plan, including obligations
related to ACF participants in the Plan, and a cash payment to
ACF of approximately $9.2 million to settle all of its
obligations related to ARI employees included in the ACF
Retirement Plan. The Shipper's Car Line Pension Plan has an
unfunded liability of $4.0 million, which will become the
obligation of ARI. ACF will continue to be responsible for the
ACF Retirement Plan and be responsible for all obligations of
that plan including obligations related to ARI employees who are
in the Plan. The ACF Retirement Plan was curtailed in April 2004.
The assets, liabilities and unfunded liability of the
Shipper's Car Line Plan based on 2004 actuarial valuations
are as follows:
Projected benefit obligation
$
12.4 million
Assets at fair value
8.4 million
Underfunded status
4.0 million
The Shipper's Car Line Plan assets consist mainly of equity
and debt securities.
In addition to the agreement related to pension plans, ARI will
assume sponsorship of a Retiree Medical and Retiree Life
Insurance plan for retirees of ARI and for active ARI employees
that will receive this benefit in the future. The post
retirement liability related to this obligation is estimated to
be $3.9 million based on the 2005 APBO valuation. ACF will
pay ARI approximately $2.9 million in exchange for assuming
the portion of this liability that relates to years prior to
1994. The 2006 projected expense and cash spending estimates
related to these benefits were $0.2 million and
$0.3 million, respectively.
The total amount of the obligations to be assumed by ARI is
estimated to be $14.2 million. ARI has previously accrued
an estimated liability related to this settlement of
$3.8 million. ARI will record an increase in the estimated
liability of $10.4 million and a loss on the settlement of
the same amount. The net cash payment to ACF related to this
transaction, and included in the numbers above, will be
approximately $6.3 million ($9.2 million less $2.9
million).
ARI intends to reincorporate from Missouri to Delaware in
connection with its initial public offering. To accomplish this
reincorporation, it is contemplated that, immediately prior to
the closing of the offering, ARI will merge into its wholly
owned subsidiary, American Railcar Industries, Inc., a Delaware
corporation incorporated on November 16, 2005 by ARI for
this purpose. The subsidiary will survive the merger and will be
named American Railcar Industries, Inc.
F-52
Table of Contents
American Railcar Industries, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
For the Nine Months Ended September 30, 2004 and 2005
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Ohio Castings Company, LLC
We have audited the accompanying consolidated balance sheets of
Ohio Castings Company, LLC and subsidiaries (the
"Company") as of August 31, 2005, 2004 and 2003,
and the related consolidated statements of operations,
members' equity and cash flows for the year ended
August 31, 2005 and 2004, and the period from inception
(June 20, 2003) to August 31, 2003. These financial
statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America as
established by the Auditing Standards Board of the American
Institute of Certified Public Accountants. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control over
financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Ohio Castings Company, LLC as of
August 31, 2005, 2004 and 2003, and the consolidated
results of their operations and their cash flows for the year
ended August 31, 2005, 2004 and the period from inception
(June 20, 2003) to August 31, 2003, in conformity with
accounting principles generally accepted in the United States of
America.
/s/ Grant Thornton LLP
Chicago, Illinois
December 1, 2005
F-53
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
August 31,
2003
2004
2005
Assets
Current assets:
Cash
$
811
$
1,922
$
2,026
Accounts receivable, net
4,808
10,802
8,522
Inventories
2,242
5,275
5,827
Other Assets
393
112
759
Total current assets
8,254
18,111
17,134
Restricted cash
—
935
800
Property, plant and equipment:
Buildings
—
2,178
2,192
Machinery and equipment
79
12,052
14,866
79
14,230
17,058
Less accumulated depreciation and amortization
3
854
1,846
76
13,376
15,212
Land
—
270
270
Net property, plant and equipment
76
13,646
15,482
Debt issuance costs, net
—
254
214
Total assets
$
8,330
$
32,946
$
33,630
Liabilities and Members' Equity
Current liabilities:
Current portion of long-term debt, net of debt discount of $14
    in 2005
$
—
$
2,370
$
3,700
Current portion of capital leases
20
20
16
Accounts payable
1,369
7,850
7,246
Accrued expenses
570
3,046
3,969
Total current liabilities
1,959
13,286
14,931
Long-term liabilities:
Long-term debt, net of current portion, net of debt discount of
    $51 in 2005
—
14,725
11,838
Long-term portion of capital leases, net of current portion
38
16
—
Total long-term liabilities
38
14,741
11,838
Total liabilities
1,997
28,027
26,769
Members' equity
6,333
4,919
6,861
Total liabilities and members' equity
$
8,330
$
32,946
$
33,630
See accompanying notes to the consolidated financial
statements.
F-54
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
Period From
Inception
(June 20,
2003) to
Years Ended August 31,
August 31,
2003
2004
2005
Revenues
$
5,039
$
55,722
$
109,801
Costs and expenses:
Cost of sales
4,860
54,974
101,518
Selling, administrative and other
144
4,666
5,698
Interest expense
—
496
643
Total costs and expenses
5,004
60,136
107,859
Net earnings (loss)
$
35
$
(4,414
)
$
1,942
See accompanying notes to the consolidated financial
statements.
F-55
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Period From
Inception
(June 20,
2003) to
Years Ended August 31
August 31,
2003
2004
2005
Operating activities:
Net earnings (loss)
$
35
$
(4,414
)
$
1,942
Adjustments to reconcile net earnings (loss) to net cash
    provided by (used in) operating activities:
Depreciation and amortization
3
878
1,032
Changes in operating assets and liabilities, net of effects of
    acquisitions:
Accounts receivable
(4,808
)
(5,994
)
2,280
Inventories
(408
)
(3,033
)
(552
)
Other assets
(393
)
281
(647
)
Accounts payable
1,369
6,481
(604
)
Accrued expenses
400
2,476
858
Net cash provided by (used in) operating activities
(3,802
)
(3,325
)
4,309
Investing activities:
Acquisitions
(1,664
)
(12,000
)
—
Purchases of property, plant and equipment
(17
)
(2,424
)
(2,828
)
Net cash used in investing activities
(1,681
)
(14,424
)
(2,828
)
Financing activities:
Proceeds from notes payable
—
17,750
—
Payments of debt
—
(655
)
(1,492
)
Payments of capital lease obligations
(4
)
(22
)
(20
)
Debt issuance costs
—
(278
)
—
Net change in restricted cash
—
(935
)
135
Investment from members
6,298
3,000
—
Net cash (used in) provided by financing activities
6,294
18,860
(1,377
)
Decrease in cash and cash equivalents
811
1,111
104
Cash at beginning of year
—
811
1,922
Cash at end of year
$
811
$
1,922
$
2,026
See accompanying notes to the consolidated financial
statements.
F-56
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
Period from Inception (June 20, 2003) to August 31,
2003 and the
Years Ended August 31, 2004 and 2005
(Dollars in thousands)
Balance at inception (June 20, 2003)
$
—
Capital contributions
6,298
Net loss
35
Balance, August 31, 2003
6,333
Net loss
(4,414
)
Capital contributions
3,000
Balance, August 31, 2004
4,919
Net earnings
1,942
Balance, August 31, 2005
$
6,861
See accompanying notes to consolidated financial
statements.
F-57
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Period from Inception (June 20, 2003) to August 31,
2003 and the
Years Ended August 31, 2004 and 2005
Note 1—Basis of Presentation
The accompanying consolidated financial statements of Ohio
Castings Company, LLC and Subsidiaries ("Ohio
Castings" or the "Company") have been prepared in
accordance with accounting principles generally accepted in the
United States of America, applied on a consistent basis
throughout the periods covered.
The consolidated financial statements include the accounts of
Ohio Castings and its subsidiaries, Alliance Castings Company,
LLC ("Alliance Castings") and Chicago Castings
Company, LLC ("Chicago Castings"). All significant
intercompany accounts and transactions have been eliminated.
Amounts presented in thousands unless otherwise noted.
Note 2—Description of the Business
Ohio Castings was formed on June 20, 2003 to acquire and
operate two steel foundries. The members of Ohio Castings, each
with a one-third ownership, are Gunderson Specialty Products,
LLC ("Gunderson"), an Oregon company and wholly-owned
subsidiary of Gunderson, Inc., an Oregon corporation; Castings,
LLC ("Castings"), a Delaware company and wholly-owned
subsidiary of American Railcar Industries, Inc.
("ARI"), a Missouri corporation and ASF-Keystone, Inc.
("ASF"), a Delaware corporation and wholly-owned
subsidiary of Amsted Industries, a Delaware corporation
(collectively, the "members"). ARI acquired its
ownership interest from ACF Industries Holding Corporation
("ACF"), an affiliate of ARI, in 2005. The members
share equally in the profits and losses of Ohio Castings. The
steel foundries are operated for the purpose of casting railcar
sideframes and bolsters for use or sale by the Ohio Castings
members.
Formation and Capital Contributions
Chicago Castings was formed in June, 2003 and capitalized
through contributions of $6,298 by the members. Alliance
Castings was formed in September, 2003 and capitalized through
contributions of $3,000 by the members.
Acquisitions
On June 20, 2003, Chicago Castings purchased certain assets
from the Meridian Rail Products Corporation
("Meridian") foundry business located in Cicero,
Illinois. The effects of the transaction on the consolidated
balance sheet as of June 20, 2003, were as follows:
Inventory
$
1,834
Accrued liabilities
(170
)
On September 30, 2003, Alliance Castings purchased real and
personal property from Amsted Industries, Inc. and ASF for use
in the operation of a foundry in Alliance, Ohio. Total
consideration paid was $12,000; no liabilities were assumed in
the transaction. The effects of the acquisition on the
consolidated balance sheet as of September 30, 2003, were
as follows:
Land
$
270
Buildings
2,178
Equipment
9,552
F-58
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Period from Inception (June 20, 2003) to August 31,
2003 and the
Years Ended August 31, 2004 and 2005
Both transactions were accounted for using the purchase method
of accounting and the purchase price was allocated to the assets
acquired based upon relative fair values.
Note 3—Summary of Significant Accounting
Policies
Significant accounting policies are described below.
Revenue Recognition
Sales are recorded when the product is shipped to the customer
and title is transferred. All shipments are made FOB shipping
point.
Debt Issuance Costs
Debt issuance costs are incurred in connection with Ohio
Castings issuance of long-term debt as described in Note 5,
and are amortized over the term of the related debt, utilizing
the straight-line method. Amortization expense of $24 and $40
was recognized for the year ended August 31, 2004, and
2005, respectively. Accumulated amortization totaled $24 and $54
at August 31, 2004 and 2005, respectively. There was no
amortization expense or accumulated amortization as of and for
the period from inception (June 20, 2003) to
August 31, 2003.
Inventories
Inventories are recorded using the first-in first-out
("FIFO") method and are stated at the lower of cost or
market. Inventory includes the cost of materials, direct labor
and manufacturing overhead.
Accounts Receivable
The Company carries its accounts receivable at cost, less an
allowance for doubtful accounts. On a periodic basis, the
Company evaluates its account receivable and establishes an
allowance for doubtful accounts, based on a history of past
write-offs, collections and current credit conditions. Accounts
are placed for collection on a limited basis once all other
methods of collection have been exhausted. Once it has been
determined that the customer is no longer in business and/or
refuses to pay, the accounts are written off. At August 31,
2005, an allowance of $85 is recorded against receivables. No
allowance was recorded at August 31, 2003 and 2004. No
amounts were written off during the period from inception
(June 20, 2003) to August 31, 2003 and the years ended
August 31, 2004 and 2005, respectively.
Property, Plant and Equipment
Land, buildings, machinery and equipment are carried at cost.
Maintenance and repair costs are charged directly to earnings.
Buildings are depreciated over estimated useful lives that range
from 14 to 50 years. The estimated useful lives of
machinery and equipment, vary from 3 to 25 years.
Depreciation is calculated on the straight-line method for
financial reporting purposes and on accelerated methods for tax
purposes. Depreciation expense of $3, $854 and $992 was
recognized for the period from inception (June 20, 2003) to
August 31, 2003 and for the years ended August 31,
2004 and 2005, respectively.
F-59
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Period from Inception (June 20, 2003) to August 31,
2003 and the
Years Ended August 31, 2004 and 2005
Impairment of Long-Lived Assets
In the event that facts and circumstances indicate the carrying
amount of assets held for use may be impaired, an evaluation of
recoverability would be performed. If an evaluation is required,
the estimated future undiscounted cash flows associated with the
asset would be compared to the asset's carrying amount. If
the carrying amount of an asset is less than the future
undiscounted cash flows expected to be generated by the asset,
the impairment to be recognized is measured by the amount by
which the carrying amount of the asset exceeds the fair value of
the asset. No impairment of long-lived assets was determined for
the period from inception (June 20, 2003) to
August 31, 2003 and for the years ended August 31,
2004 and 2005, respectively.
Income Taxes
Ohio Castings is organized as a limited liability company and is
not subject to Federal income taxes. The Company's taxable
income is reported in the tax returns of the members.
Accordingly, no liability or provision for Federal income taxes
is included in the accompanying consolidated financial
statements as of and for the periods ending August 31,
2003, 2004 and 2005.
Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable and accounts
payable approximate fair values because of the short-term
maturity of these instruments. The fair value of long-term debt
is discussed in Note 5. Fair value estimates are made at a
specific point in time, based on relevant market information
about the financial instrument. These estimates are subjective
in nature and involve uncertainties and matters of significant
judgment and, therefore, cannot be determined with precision.
Restricted Cash
Alliance Castings is required to maintain a cash balance in an
escrow account equal to 10% of the outstanding principal on the
enterprise bond described in Note 5. Alliance Castings is
entitled to interest earned on the escrow balance which totaled
$4 and $17 for the years ended August 31, 2004 and 2005,
respectively. There were no restricted cash balances or interest
recorded as of and for the period ended August 31, 2003.
Use of Estimates
Management of Ohio Castings has made a number of estimates and
assumptions relating to the reporting of assets, liabilities,
revenues and expenses, and the disclosure of contingent assets
and liabilities to prepare these financial statements in
conformity with accounting principles generally accepted in the
United States of America. Significant items subject to estimates
and assumptions include property, plant and equipment, inventory
reserves and workers' compensation. Actual results could
differ from those estimates.
F-60
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Period from Inception (June 20, 2003) to August 31,
2003 and the
Years Ended August 31, 2004 and 2005
Note 4—Inventories
Inventories consist of the following at August 31 (in thousands):
2003
2004
2005
Raw materials
$
515
953
$
433
Work in process
1,440
3,097
4,781
Finished products
677
1,520
1,459
Less reserves
(390
)
(295
)
(846
)
Total inventories
$
2,242
$
5,275
$
5,827
Note 5—Long-Term Debt
Long-term debt consists of the following at August 31 (in
thousands):
2003
2004
2005
Enterprise bonds to the Director of Development of the State of
    Ohio due on December 1, 2010, at 3.90% interest payable in
    quarterly installments to a trustee pursuant to a payment
    schedule. The bonds are guaranteed by the members
$
—
$
9,345
$
8,000
Term note payable to the State of Ohio, to be comprised of two
    separate disbursements of $1,000 at 1% interest (modified from
    3% in January 2005), with interest-only payments until
    disbursement of the second installment and monthly payments of
    principal and interest thereafter, reported net of debt discount
    of $65 in 2005
—
1,000
935
Notes payable to the members, payable in quarterly principal and
    interest payments at 4% interest due November 2008
—
6,750
6,603
—
17,095
15,538
Less current portion of debt
—
2,370
3,700
Total long-term debt, net of current portion
$
—
$
14,725
$
11,838
Aggregate maturities of long-term debt over the next five years,
as of August 31, 2005, are as follows (in thousands):
2006
$
3,700
2007
3,591
2008
3,653
2009
2,233
2010
1,801
Thereafter
560
In association with the Enterprise bonds, the Company paid $15
and $20 in administration and trustee fees for the years ended
August 31, 2004 and 2005. The fees vary with costs incurred
by the trustee and changes in the outstanding principle of the
bonds. The administration fee equaled .10% and .125% at
August 31, 2004 and 2005, respectively. The trustee fee
equaled .01% and .16% at
F-61
Table of Contents
Ohio Castings Company, LLC and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Period from Inception (June 20, 2003) to August 31,
2003 and the
Years Ended August 31, 2004 and 2005
August 31, 2004 and 2005, respectively. The bonds are
secured by substantially all of the assets of the Company and
subject to mandatory redemption by the state at any time. A
number of non-financial covenants under the agreement have been
met for the periods ended August 31, 2004 and 2005.
In connection with the term note, the Company shall receive two
disbursements of $1,000 from the State of Ohio. The first
installment was received in May 2004. The second installment is
expected to be received in December 2005, following the
completion of qualified capital expenditures.
The Company had no outstanding debt as of and for the period
ended August 31, 2003. Accordingly, no interest expense or
fees associated with the aforementioned debt were recorded in
the financial statements for the period ended August 31,
2003.
Note 6—Capital Leases
The Company leases certain machinery and equipment for use in
the businesses. These leases have been accounted for as capital
leases and mature in 2006. Scheduled future minimum lease
payments required under the capital leases are $16 at
August 31, 2005, which are due in 2006. Machinery and
equipment include assets under capitalized leases of $58, $39
and $18 at August 31, 2003, 2004 and 2005, respectively.
Note 7—Related-Party Transactions
The majority of the Company's products are sold to one of
the members through supply agreements. The supply agreements
have an original term of 5 years and expire in 2008. The
other members have supply agreements in place with this member
to purchase a defined percentage of the products produced by
Ohio Castings. These agreements also have a term of 5 years
and expire in 2008. A balance of $4,614, $8,688 and $10,534 is
due from this member as of August 31, 2003, 2004 and 2005,
respectively, which has been classified as accounts receivables.
Alliance Castings purchases a majority of its scrap steel used
in production from an affiliate of one of the members of Ohio
Castings. A balance of $1,203 and $662 is due to this affiliate
as of August 31, 2004 and 2005, respectively. No amounts
were due at August 31, 2003. The balance is included in
accounts payable.
Note 8—Commitments and Contingencies
As of August 31, 2005, future minimum rental payments
required under non-cancelable operating leases for property and
equipment leased by Ohio Castings, with lease terms longer than
one year are as follows (in thousands):
2006
$
241
2007
67
2008
55
2009
46
2010
44
Rent expense on the related leases was $62, $394, and $445 for
the period from inception (June 20, 2003) to
August 31, 2003 and the years ended August 31, 2004
and 2005, respectively.
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Ohio Castings Company, LLC and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Period from Inception (June 20, 2003) to August 31,
2003 and the
Years Ended August 31, 2004 and 2005
A monthly rental agreement was negotiated between Chicago
Castings and Meridian for the rental of the real property at the
Cicero foundry. Rent expense under this agreement was $25, $600,
and $600 for the period from inception (June 20, 2003) to
August 31, 2003 and the years ending August 31, 2004
and 2005, respectively.
Chicago Castings currently purchases general utilities and waste
removal under negotiated service contracts from unrelated third
parties. The contracts are generally under a twelve-month
period, with a right to renewal. Under the terms of the
contracts, the cost is based on market price, and charged based
on consumption.
The Company is involved in certain matters of litigation,
substantially all of which have arisen in the ordinary course of
business. It is the opinion of management that these matters are
either adequately covered by insurance or that the resulting
liability, if any, from these actions and other pending claims
will not materially affect the Company's financial position.
Note 9—Business and Credit Concentrations
The Company has an exclusive supply arrangement with one of the
members whereby 100% of the castings produced by the Company are
sold to the member, as described in Note 7.
Note 10—Employee Benefit Plan
The Company maintains defined contribution plans which cover all
employees. Participants under 50 years old may elect to
defer up to $13 of eligible compensation. Participants
50 years or older may elect to defer up to $15 of eligible
compensation. Participants are fully vested in all contributions
made to the plan. Employer contributions are made to the plan
based on number of hours worked for employees covered by a
collective bargaining agreement and as a percentage of annual
salary for all other employees. Contributions of $121 and $350
were made for the years ending August 31, 2004 and 2005,
respectively. No amounts were contributed for the period from
inception (June 20, 2003) to August 31, 2003.
Note 11—Supplemental Cash Flow Data
The Company incurred interest expense of $496 and $630 for the
years ended August 31, 2004 and 2005, respectively.
In 2003, the Company entered into $62 in capital lease
agreements to finance the purchase of equipment.
The Company amortized $13 of the debt discount relating to the
term loan in 2005.
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Table of Contents
Table of Contents
Until                     ,
2006 (the 25th day after the date of this prospectus), all
dealers that effect transactions in our common stock, whether or
not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions.
Table of Contents
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other expenses of issuance and distribution.
The following are the estimated expenses to be incurred in
connection with the issuance and distribution of the securities
registered under this Registration Statement, other than
underwriting discounts and commissions. All amounts shown are
estimates except the Securities and Exchange Commission
registration fee, the National Association of Securities
Dealers, Inc. filing fee and the Nasdaq National Market listing
fee. The following expenses will be borne solely by the
registrant.
SEC Registration Fee
$
17,655
NASD Filing Fee
$
15,500
Nasdaq Listing Fee
*
Transfer Agent Fees and Expenses
$
3,500
Costs of Printing and Engraving
*
Legal Fees and Expenses
*
Accounting Fees and Expenses
*
Director and Officer Liability Insurance Premium
*
Blue Sky Fees and Expenses
*
Miscellaneous
*
Total
$
*
*
To be provided by amendment.
Item 14.
Indemnification of directors and officers.
Sections 145(a) and (b) of The Delaware General
Corporation Law, or the DGCL, provide that a corporation may
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action,
suit or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. The indemnity may
include expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his
conduct was unlawful, except that, in the case of an action or
suit by or in the right of the corporation, the corporation may
not indemnify such persons against judgments and fines and no
person shall be indemnified as to any claim, issue or matter as
to which such person shall have been adjudged to be liable to
the corporation, unless and only to the extent that the court in
which the action or suit was brought determines upon application
that, despite the adjudication of liability and in view of all
the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses that the
court deems proper.
Section 145(c) of the DGCL provides that, our certificate
of incorporation, to the extent a director, officer, employee or
agent of the corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in Section 145(a) and (b) of the DGCL, or in
defense of any claim, issue or matter therein, he shall be
indemnified against expenses, including attorney's fees,
actually and reasonably incurred by him in connection with the
action, suit or proceeding.
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Part II
Our bylaws will generally provide that the corporation shall
indemnify each person (other than a party plaintiff suing on his
or her own behalf or in the right of the corporation) who at any
time is serving or has served as a director or officer of the
corporation against any claim, liability or expense incurred as
a result of such service (or as a result of any other service on
behalf of or at the request of the corporation) to the maximum
extent permitted by law. This indemnification includes, but is
not limited to, indemnification of any such person (other than a
party plaintiff suing on his or her behalf or in the right of
the corporation), who was or is a party or is threatened to be
made a party, to any threatened, pending or completed action,
suit or proceeding (including, but not limited to, an action by
or in the right of the corporation) by reason of such service
against expenses (including, without limitation, costs of
investigation and attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
him or her in connection with such action, suit or proceeding.
Our bylaws will further generally provide that the corporation
may indemnify any person (other than a party plaintiff suing on
his or her own behalf or in the right of the corporation) who at
any time is serving or has served as an employee or agent of the
corporation against any claim, liability or expense incurred as
a result of such service (or as a result of any other service on
behalf of or at the request of the corporation) to the maximum
extent permitted by law or to such lesser extent as the
corporation, in its discretion, may deem appropriate. Without
limiting the generality of the foregoing, the corporation may
indemnify any such person (other than a party plaintiff suing on
his or her own behalf or in the right of the corporation), who
was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding
(including, but not limited to, an action by or in the right of
the corporation) by reason of such service, against expenses
(including, without limitation, costs of investigation and
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding.
Our bylaws will also provide that the corporation may purchase
and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against such person and incurred by such person in any
such capacity, or arising out of such person's status as
such, whether or not the corporation would have the power to
indemnify such person against liability under the
indemnification provisions of the corporation's bylaws. The
corporation has obtained director and officer liability
insurance.
The foregoing represents a summary of the general effect of the
indemnification and insurance provisions of the DGCL, the
certificate of incorporation, the bylaws and such agreements.
Additional information regarding indemnification of directors
and officers can be found in Section 145 of the DGCL, the
certificate of incorporation and the bylaws.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
or persons controlling the registrant pursuant to the foregoing
provisions, the registrant has been informed that in the opinion
of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 15.
Recent sales of unregistered securities.
The following information is furnished with regard to all
securities issued by us since July 15, 2002 that were not
registered under the Securities Act.
Prior to the closing of this offering and in connection with our
merger, we plan to effect
a        for-one split of our
common stock. All references to numbers of shares and prices of
capital stock give effect to the stock split. All of the
securities issued in the following transactions were sold in
reliance
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Part II
upon the exemptions from registration set forth in
Sections 3(a)(9) and 4(2) of the Securities Act relating to
sales by an issuer not involving any public offering. There were
no underwriters employed in connection with any of the
transactions set forth in this Item 15.
(1)
In June 2003 Vegas Financial Corp., a company beneficially owned
    and controlled by Carl C. Icahn, our principal beneficial
    stockholder and the chairman of our board of directors, invested
    $10.0 million for 10,000 shares of our payment-in-kind
    preferred stock, which we refer to as our PIK preferred stock.
(2)
During the period July 15, 2002 through December 2003, we
    issued to Vegas Financial Corp., the sole owner of our PIK
    preferred stock, 8,531.65 shares of PIK preferred stock as
    a dividend on the PIK preferred stock.
(3)
In July 2004, Vegas Financial Corp. converted all of its PIK
    preferred stock, consisting of 95,517.04 shares of PIK
    preferred stock and representing all of the shares of PIK
    preferred stock then outstanding and dividend accrued thereon,
    into 96,171 shares of our new preferred stock. The PIK
    preferred stock was valued at the liquidation preference of
    95.6 million plus accrued and unpaid dividends of
    0.7 million on such PIK preferred stock converted. At that
    time Vegas Financial Corp. also invested $67.5 million for
    an additional 67,500 shares of our new preferred stock.
(4)
In July 2004, Hopper Investments LLC, a company beneficially
    owned and controlled by Mr. Icahn, invested
    $42.5 million for 195 shares of our common stock.
(5)
In July 2004, we issued ACF Industries, Incorporated
    2,000 shares of our new preferred stock in exchange for ACF
    Industries, Incorporated transferring certain assets to us. The
    assets were valued at $2 million equaling the liquidation
    preference for the new preferred stock issued. The assets so
    transferred to us were subsequently transferred to American
    Railcar Leasing, LLC.
(6)
In December 2004, we issued 32,500 shares of our new
    preferred stock to Shippers Second LLC, a subsidiary of ACF
    Industries, Incorporated, in exchange for Shippers Second
    transferring certain assets to us. The assets were valued at
    $32.5 million equalling the liquidation preference for the new
    preferred stock issued. The assets so transferred to us were
    subsequently transferred to American Railcar Leasing LLC.
(7)
In July 2004, American Railcar Leasing LLC issued 40,000 B-units
    of American Railcar Leasing LLC to ACF Industries, Incorporated
    and its subsidiaries in consideration of the transfer of assets
    to American Railcar Leasing LLC. The B-units of American Railcar
    Leasing LLC were convertible into shares of our new preferred
    stock. On June 30, 2005, the terms of the B-Units were
    modified, among other things, to eliminate this conversion
    feature. We did not issue any shares of our capital stock in
    connection with these transactions.
Item 16.
Exhibits and financial statement schedules.
(a)
Exhibits
See Exhibit Index at the end of this registration statement.
(b)
Financial Statement Schedules
No financial statement schedules of the registrant are included
in Part II of the Registration Statement.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange
Commission are not required under the related instructions, are
inapplicable or not material, or the information called for
thereby is otherwise included in the financial statements and
therefore has been omitted.
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Part II
Item 17.
Undertakings.
(a) The undersigned registrant hereby undertakes to provide
to the Underwriters at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in
such names as required by the Underwriters to permit prompt
delivery to each purchaser.
(b) Insofar as indemnification by the registrant for
liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 14 of this
Registration Statement or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act, and is therefore unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered hereunder, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities
    Act, the information omitted from the form of prospectus filed
    as part of this Registration Statement in reliance upon
    Rule 430A and contained in the form of prospectus filed by
    the registrant pursuant to Rule 424(b)(1) or (4) or
    497(h) under the Securities Act shall be deemed to be part of
    this Registration Statement as of the time it was declared
    effective.
(2)
For the purpose of determining any liability under the
    Securities Act, each post-effective amendment that contains a
    form of prospectus shall be deemed to be a new registration
    statement relating to the securities offered therein, and the
    offering of such securities at the time shall be deemed to be
    the initial
bona fide
offering thereof.
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Table of Contents
Signatures
Pursuant to the requirements of the Securities Act of 1933 (as
amended, the "Securities Act"), American Railcar
Industries, Inc. has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Charles, State of Missouri, on
December 12, 2005.
American Railcar Industries, Inc.
By:
/s/ James J. Unger
Name: James J. Unger
Title:   President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed by the following persons
in the capacities and on the dates indicated.
Title
Date
Signature
/s/ James J. Unger
Name:
    James J. Unger
President and Chief Executive Officer (principal executive
    officer) and Director
December 12, 2005
/s/ William P. Benac
Name:
    William P. Benac
Chief Financial Officer (principal financial officer)
December 12, 2005
/s/ Michael E. Vaughn
Name:
    Michael E. Vaughn
Controller (principal accounting officer)
December 12, 2005
/s/ Vincent J. Intrieri
Name:
    Vincent J. Intrieri
Director
December 12, 2005
/s/ Jon F. Weber
Name:
    Jon F. Weber
Director
December 12, 2005
/s/ Keith Meister
Name:
    Keith Meister
Director
December 12, 2005
II-5
Table of Contents
Exhibit index
Exhibit
No.
Description of Exhibit
1
.1
Form of Underwriting Agreement by and among UBS Securities LLC,
    Bear, Stearns & Co. Inc. and American Railcar
    Industries, Inc.**
2
.1
Form of Agreement and Plan of Merger between American Railcar
    Industries, Inc. (Missouri) and American Railcar Industries,
    Inc. (Delaware)*
3
.1
Certificate of Incorporation of American Railcar Industries,
    Inc. (Delaware)*
3
.2
Bylaws of American Railcar Industries, Inc. (Delaware)*
3
.3
Form of Certificate of Ownership and Merger of American Railcar
    Industries, Inc. (Missouri) and American Railcar Industries,
    Inc. (Delaware)*
4
.1
Specimen Common Stock Certificate of American Railcar
    Industries, Inc. (Delaware)*
4
.2
Form of Registration Rights Agreement*
5
.1
Opinion of Brown Rudnick Berlack Israels LLP**
10
.1
Asset Transfer Agreement dated as of October 1, 1994 by and
    among ACF Industries, Incorporated, American Railcar Industries,
    Inc. and Carl C. Icahn*
10
.2
License Agreement dated as of October 1, 1994 by and
    between ACF Industries, Incorporated and American Railcar
    Industries, Inc. as Licensee*
10
.3
License Agreement dated as of October 1, 1994 by and
    between American Railcar Industries, Inc. and ACF Industries,
    Incorporated as Licensee*
10
.4
Manufacturing Services Agreement dated as of October 1,
    1994 between ACF Industries, Incorporated and American Railcar
    Industries, Inc., as ratified and amended on June 30, 2005*
10
.5
Amended and Restated Railcar Servicing Agreement dated as of
    June 30, 2005 between American Railcar Industries, Inc. and
    American Railcar Leasing LLC*
10
.6
Business Consultation Agreement for Human Resources Consultation
    between ACF Industries LLC and American Railcar Industries, Inc.
    dated April 1, 2005*
10
.7
Business Consultation Agreement for Engineering Services between
    ACF Industries LLC and American Railcar Industries, Inc. dated
    April 1, 2005*
10
.8
Guaranty of the Master Lease Agreement dated September 30,
    1999 between The CIT Group, Inc./ Equipment Financing, Inc. and
    American Railcar Industries, Inc., as amended by ACF Industries,
    Incorporated for the benefit of American Railcar Industries,
    Inc.*
10
.9
Loan Agreement dated as of July 1, 1996 between The
    Industrial Development Authority of the City of Jackson,
    Missouri and American Railcar Industries, Inc.*
10
.9.A
Bond Guaranty Agreement dated as of July 1, 1996 by and
    among American Railcar Industries, Inc., ACF Industries,
    Incorporated and Fleet National Bank, as Trustee*
10
.9.B
Deed of Trust and Security Agreement dated as of July 1,
    1996 from American Railcar Industries, Inc. to E. Sid
    Douglas, III, as Mortgage Trustee and The Industrial
    Development Authority of The City of Jackson, Missouri as Issuer
    and Secured Party*
10
.10
Loan Agreement dated as of June 1, 1995 between The
    Industrial Development Authority of The City of Kennett,
    Missouri and American Railcar Industries, Inc.*
10
.10.A
Bond Guaranty Agreement dated as of June 1, 1995 by and
    among American Railcar Industries, Inc., ACF Industries,
    Incorporated and Fleet National Bank, as Trustee*
10
.10.B
Deed of Trust and Security Agreement dated as of June 1,
    1995 from American Railcar Industries, Inc. to E. Sid
    Douglas, III as Mortgage Trustee and The Industrial
    Development Authority of the City of Kennett, Missouri as Issuer
    and Secured Party*
10
.11
Lease Agreement dated as of April 1, 1995 between the City
    of Paragould, Arkansas as Lessor and American Railcar
    Industries, Inc. as Lessee*
10
.11.A
Bond Guaranty Agreement by and among American Railcar
    Industries, Inc. and ACF Industries, Incorporated and Fleet
    National Bank, as Trustee*
10
.12
Amended and Restated Services Agreement dated as of
    June 30, 2005 between American Railcar Leasing LLC and
    American Railcar Industries, Inc.*
10
.13
Indenture of Lease between St. Charles Properties and ACF
    Industries, Incorporated for the property located at Clark and
    Second Streets, St. Charles, MO, dated March 1, 2001
    together with the Assignment and Assumption of Lease dated
    April 1, 2005 among ACF Industries LLC (as successor to ACF
    Industries, Incorporated), American Railcar Industries, Inc. and
    St. Charles Properties*
II-6
Table of Contents
Exhibit index
Exhibit
No.
Description of Exhibit
10
.14
Promissory Note by American Railcar Industries, Inc. in favor of
    Arnos Corp. dated as of December 17, 2004*
10
.15
Exchange and Redemption Agreement dated as of June 30,
    2005 among American Railcar Industries, Inc., Hopper
    Investments, LLC, Highcrest Investors Corp., Buffalo Investors
    Corp. and American Railcar Leasing, LLC*
10
.16
Loan and Security Agreement dated as of March 10, 2005
    among American Railcar Industries, Inc. as Borrower, the lenders
    from time to time party thereto, and North Fork Business Capital
    Corporation, as Agent*
10
.17
Corbitt Equipment Acquisition Agreement*
10
.18
Multi-Year Purchase and Sale Agreement dated as of July 29,
    2005 between American Railcar Industries, Inc. and The CIT
    Group/ Equipment Financing, Inc.*†
10
.19
American Railcar Industries, Inc. 2005 Equity Incentive Plan*
10
.20
Employment Agreement dated as of July 20, 2005 between
    American Railcar Industries, Inc. and William P. Benac*
10
.21
Promissory Note by American Railcar Industries, Inc. in favor of
    ACF Industries Holding Corp. dated as of January 1, 2005*
10
.22
Assignment and Assumption, Novation and Release dated as of
    June 30, 2005 by and between ACF Industries Holding, Inc.,
    American Railcar Industries, Inc., Gunderson Specialty Products,
    Inc., Gunderson, Inc., Castings, LLC, ASF-Keystone, Inc., Amsted
    Industries Incorporation and Ohio Castings Company, LLC*
10
.23
Interest Transfer Agreement dated as of June 30, 2005 by
    and between ACF Industries Holding, Inc. and American Railcar
    Industries, Inc.*
10
.24
Form of Redemption Agreement between American Railcar
    Industries, Inc. and Vegas Financial Corp. *
10
.25
Ohio Castings Company, LLC Amended and Restated Limited
    Liability Company Agreement, dated as of June 20, 2003*
10
.26
Employment Agreement between American Railcar Industries, Inc.
    and James J. Unger, dated as of November 18, 2005*
10
.27
Letter Agreement between American Railcar Industries, Inc. and
    James J. Unger, dated as of November 18, 2005*
10
.28
Form of Option Agreement*
10
.29
American Railcar Industries, Inc. 2005 Executive Incentive Plan*
10
.30
Employment Agreement dated as of December 1, 2005 between
    American Railcar Industries, Inc. and James A. Cowan*
21
.1
Subsidiaries of American Railcar Industries, Inc.*
23
.1
Consent of Grant Thornton LLP*
23
.2
Consent of Grant Thornton LLP*
23
.3
Consent of KPMG LLP*
23
.3
Consent of Brown Rudnick Berlack Israels LLP (included in
    Exhibit 5.1)**
23
.4
Consent of Global Insight *
24
.1
Powers of Attorney*
99
.1
Consent of James M. Laisure*
99
.2
Consent of James C. Pontious*
*
Filed herewith.
**
To be filed by amendment.
†
Confidential treatment has been requested for the redacted
    portions of this agreement. A complete copy of this agreement,
    including the redacted portions, has been filed separately with
    the Securities and Exchange Commission.
II-7