UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-51728

American Railcar Industries, Inc.

(Exact name of Registrant as Specified in its Charter)

 

North Dakota (State or Other Jurisdiction of Incorporation or Organization)		43-1481791 (I.R.S. Employer Identification Number)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such a shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Large Accelerated Filer o		Accelerated Filer þ		Non-Accelerated Filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day or the registrant’s most recently completed second fiscal quarter was approximately $114 million, based on the closing sales price of $12.08 per share of such stock on The NASDAQ Global Select Market on June 30, 2010.

As of February 28, 2011, as reported on the NASDAQ Global Select Market, there were 21,352,297 shares of common stock, par value $0.01 per share, of the Registrant outstanding.

Parts of the following document are incorporated by reference in Part III of this Form 10-K Report:

(1) Proxy Statement for the Registrant’s 2011 Annual Meeting of Shareholders — Items 10, 11, 12, 13 and 14.

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this report are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (Exchange Act). These statements involve known and unknown risks, uncertainties and other factors, which may cause our or our industry’s actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding:

	•		any financial or other information included herein based upon or otherwise incorporating judgments or estimates based upon future performance or events;
	•		the impact of the current economic downturn, adverse market conditions and restricted credit markets and the impact of the continuation of these conditions;
	•		our reliance upon a small number of customers that represent a large percentage of our revenues and backlog;
	•		the health of and prospects for the overall railcar industry;
	•		our prospects in light of the cyclical nature of our business and the current economic environment;
	•		anticipated trends relating to our shipments, revenues, financial condition or results of operations;
	•		our ability to manage overhead and variations in production rates;
	•		the highly competitive nature of the railcar manufacturing industry;
	•		fluctuations in the costs of raw materials, including steel and railcar components, and delays in the delivery of such raw materials and components;
	•		fluctuations in the supply of components and raw materials we use in railcar manufacturing;
	•		anticipated production schedules for our products and the anticipated financing needs, construction and production schedules of our joint ventures;
	•		the risks associated with potential joint ventures, acquisitions or new business endeavors;
	•		the risks associated with international operations and joint ventures;
	•		the risk of the lack of acceptance of new railcar offerings by our customers and the risk of initial production costs for our new railcar offerings being significantly higher than expected;
	•		the risk of the lack of customers entering into new railcar leases;
	•		the sufficiency of our liquidity and capital resources;
	•		the conversion of our railcar backlog into revenues;
	•		compliance with covenants contained in our unsecured senior notes;
	•		the impact and anticipated benefits of any acquisitions we may complete;
	•		the impact and costs and expenses of any litigation we may be subject to now or in the future; and
	•		the ongoing benefits and risks related to our relationship with Mr. Carl Icahn (the chairman of our board of directors and, through Icahn Enterprises L.P. (IELP), our principal beneficial stockholder) and certain of his affiliates.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify 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 materially better or worse than anticipated. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements represent our estimates and assumptions only as of the date of this report. 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 report, 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 and under “Risk Factors” set forth in Part I Item 1A of this report, as well as the risks and uncertainties discussed elsewhere in this report. We qualify all of our forward-looking statements by these cautionary statements. We caution you that these risks are not exhaustive. We operate in a continually changing business environment and new risks emerge from time to time.

AMERICAN RAILCAR INDUSTRIES, INC.

FORM 10-K

TABLE OF CONTENTS

		PAGE
PART I
Item 1. Business			4
Item 1A. Risk Factors			10
Item 1B. Unresolved Staff Comments			20
Item 2. Properties			21
Item 3. Legal Proceedings			22
Item 4. Reserved			22
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			22
Item 6. Selected Consolidated Financial Data			24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			36
Item 8. Financial Statements and Supplementary Data			37
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			77
Item 9A. Controls and Procedures			77
Item 9B. Other Information			77
PART III
Item 10. Directors, Executive Officers and Corporate Governance of the Registrant			78
Item 11. Executive Compensation			78
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			78
Item 13. Certain Relationships and Related Transactions, and Director Independence			78
Item 14. Principal Accountant Fees and Services			78
PART IV
Item 15. Exhibits and Financial Statement Schedules			78
SIGNATURES			79
EX-12.1
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1

AMERICAN RAILCAR INDUSTRIES, INC.

FORM 10-K

PART I

Item 1:		Business

INTRODUCTION

We are a leading North American designer and manufacturer of hopper and tank railcars. We also lease, repair and refurbish railcars, provide fleet management services and design and manufacture certain railcar and industrial components. 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 and those that use railcars for freight transport, or shippers, and Class I railroads. In servicing this customer base, we believe our integrated railcar repair, refurbishment and fleet management services and our railcar components manufacturing business help us further penetrate the general railcar manufacturing market. In addition, we offer our customers the opportunity to lease railcars. These products and services provide us with cross-selling opportunities and insights into our customers’ railcar needs that we use to improve our products and services and enhance our reputation.

We operate in two reportable segments: manufacturing operations and railcar services. Manufacturing operations consist of railcar manufacturing, railcar leasing and railcar and industrial component manufacturing. Railcar services consists of railcar repair, refurbishment and fleet management services. Financial information about our business segments for the years ended December 31, 2010, 2009 and 2008 is set forth in Note 21 of our Consolidated Financial Statements.

We were incorporated in Missouri in 1988, reincorporated in Delaware in January 2006 and reincorporated again in North Dakota in June 2009. Unless the context otherwise requires, references to “our company,” “we,” “us” and “our,” refer to us and our consolidated subsidiaries and our predecessors.

ADDITIONAL INFORMATION

Our principal executive offices are located at 100 Clark Street, Saint Charles, Missouri 63301, our telephone number is (636) 940-6000 and our internet website is located at http://www.americanrailcar.com.

We are a reporting company and file annual, quarterly, special reports, proxy statements and other information with the Securities and Exchange Commission (SEC). You may read and copy these materials at the Public Reference Room maintained by the SEC at Room 1580, 100 F Street N.E., Washington, D.C. 20549. You may call the SEC at 1-800-SEC-0330 for more information on the operation of the public reference room. The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Copies of our annual, quarterly, special reports, Audit Committee Charter, Code of Business Conduct and Code of Ethics for Senior Financial Officers are available on our web site at http://www.americanrailcar.com or free of charge by contacting our Investor Relations Department at American Railcar Industries, Inc., 100 Clark Street, Saint Charles, Missouri, 63301.

ARI^®, Pressureaide^®, CenterFlow^® and our railcar logo are our U.S. registered trademarks. Each trademark, trade name or service mark of any other company appearing in this report belongs to its respective holder.

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.

At our Paragould, Arkansas manufacturing complex, we primarily manufacture hopper railcars, but have the ability to manufacture many other types of railcars. At our Marmaduke, Arkansas manufacturing complex, we primarily manufacture tank railcars, but have the ability to produce other railcar types. We are currently performing railcar repair and refurbishment at these manufacturing complexes, in addition to railcar manufacturing.

Our operations now include three railcar assembly, sub-assembly and fabrication complexes, three railcar and industrial component manufacturing facilities, six railcar repair plants and ten mobile repair and mini-shop locations. 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.

We are party to three joint ventures. Our Ohio Castings Company, LLC (Ohio Castings) joint venture is able to manufacture various railcar parts for sale, through one of the joint venture partners, to third parties and the other joint venture partners. Ohio Castings was temporarily idled in June 2009 due to the weak railcar market and remained temporarily idled at December 31, 2010. Our Axis, LLC (Axis) joint venture manufactures and sells axles to the joint venture partners for use and distribution both domestically and internationally. Axis began production in the third quarter of 2009. Our Amtek Railcar Industries Private Limited (Amtek Railcar) joint venture will manufacture and sell railcars for distribution to third parties in India following the construction of a manufacturing facility. For further discussion of our joint ventures refer to Note 1 to our Consolidated Financial Statements.

OUR PRODUCTS AND SERVICES

We design, manufacture and lease 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 Operations

We primarily manufacture two types of railcars, hopper railcars and tank railcars, but have the ability to produce additional railcar types. We offer our customers the option to lease these railcars from us. We also manufacture various components for railcar and industrial markets.

Hopper railcars

We manufacture both general service and specialty hopper railcars at our Paragould complex. All of our 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 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.

Our 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. Depending upon the equipment on the railcars, they can operate in a gravity, positive pressure or vacuum pneumatic unloading environment. Since its introduction, we have improved our CenterFlow^® line of 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 designs of the shape of the railcars, joint designs, outlet mounting frames, loading hatches and discharge outlets, which enhance the cargo loading and unloading processes.

We have several versions of our hopper railcar that target specific customers and specific loads, including:

•

Grain Railcars. These railcars are a large group of hopper railcars within our general service hopper railcar product offering. These grain railcars service the food markets, starch markets and energy markets. For example, these railcars carry shipments of grain to animal feedstock processing plants, grain mills and ethanol facilities.

•

Cement and Sand Railcars. Cement and sand loads are heavier than many other loads of comparable volume, and therefore cement and sand railcars are smaller to compensate for the weight.

•

Plastic Pellet Railcars. These railcars are designed to transport, load and unload plastic pellets under precise specifications to preserve the purity of the load. Examples of such cargo would be food grade plastic pellets used in the production of food and medical product containers.

•

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. 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 and a rupture disc.

•

Ore Railcars. These railcars are designed to transport heavy ore mineral loads.

Tank railcars

We manufacture non-pressure and high pressure tank railcars at our Marmaduke complex. Our tank railcars are 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 transport products that require a pressurized state due to their liquid, semi-gaseous or gaseous nature, including chlorine, anhydrous ammonia, liquid propane and butane. 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 provides improved drainage. Many of our tank railcars feature coils that are steam-heated to decrease cargo viscosity, which speeds unloading. We can alter the design of our tank railcars to address specific customer requirements.

Other railcar types

We have the ability to produce other railcar types including intermodal, gondola and aluminum coal railcars with bottom and rotary discharge.

Railcar leasing

We offer customers the option to lease our railcars through various leasing options, including full service leases. Maintenance of leased railcars could be provided, in part, through our railcar repair and refurbishment facilities.

Component manufacturing

In addition to manufacturing railcars, we also manufacture custom and standard railcar components. Our products include tank railcar components and valves, tank heads, discharge outlets for hopper railcars, manway covers and valve body castings, outlet components and running boards for industrial and railroad customers and hitches for the intermodal market. We use these components in our own railcar manufacturing and sell certain of these products to third parties, including our competitors.

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 and other custom machined products.

Railcar Services

Our primary railcar services are repair, refurbishment and 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. Our railcar services provide us insight into our customers’ railcar needs that we can use to improve our products. These services also may create new customer relationships and enhance relationships with our existing customers.

Repair and refurbishment

Our 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.

Fleet management

Some of the principal features of our fleet management services business include maintenance planning, project management, tracking and tracing, engineering services, field engineering services, regulatory compliance, mileage audit, rolling stock taxes and online service access.

SALES AND MARKETING

We utilize an integrated marketing and sales effort to coordinate relationships in our manufacturing and services operations. We sell and market our products in North America through our sales and marketing staff, including sales representatives who sell directly to customers and catalogs through which our customers have access to our railcar and industrial components. Our marketing activities also include participation in trade shows, participation in industry forums and distribution of sales literature.

In 2010, sales to our top ten customers accounted for approximately 76.2% of our revenues. In 2010, our top three customers American Railcar Leasing LLC (ARL), GATX Corporation and Canadian National Railway Company accounted for approximately 35.4%, 13.3% and 9.5% of our consolidated revenues, respectively. ARL is an affiliate of Mr. Carl Icahn, the chairman of our board of directors and, through Icahn Enterprises L.P. (IELP), our principal beneficial stockholder.

BACKLOG

We define backlog as the number and sales value of railcars that our customers have committed in writing to purchase or lease from us that have not been recognized as revenues. Our total backlog as of December 31, 2010 and 2009 was $87.6 million and $49.5 million, respectively. We estimate that 100.0% of our December 31, 2010 backlog will be converted to revenues during 2011. Included in the railcar backlog at December 31, 2010 was $1.2 million of railcars to be sold to our affiliate, ARL. Customer orders may be subject to requests for delays in deliveries, inspection rights and other customary industry terms and conditions, which could prevent or delay backlog from being converted into revenues. Our December 31, 2010 railcar backlog did not include any railcars to be leased by us.

The following table shows our reported railcar backlog, and estimated future revenue value attributable to such backlog, at the end of the period shown. The reported backlog includes railcars relating to purchase obligations based upon an assumed product mix consistent with past orders. Changes in product mix from what is assumed would affect the dollar amount of our backlog.

		Years ended December 31,
		2010				2009
Railcar backlog at January 1			550				4,240
New railcars delivered			(2,090	)			(3,690	)
New railcar orders			2,590				—
Railcar backlog at December 31			1,050				550
Estimated railcar backlog value at end of period (in thousands) (1)		$	87,573			$	49,501

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 delivery dates could be extended on certain orders, 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 orders will equal our reported backlog estimates or that our future revenue efforts will be successful.

SUPPLIERS AND MATERIALS

Our business depends on the adequate supply of numerous railcar components, such as railcar wheels, brakes, axles, bearings, yokes, tank railcar heads, sideframes, bolsters and other heavy castings, and raw materials, such as steel and normalized steel plate, used in the production of railcars. Due to our vertical integration efforts, including through our involvement in joint ventures, we have the current capability to produce axles, tank railcar heads and assemble wheel sets along with numerous other railcar components.

The cost of raw materials and railcar components represents more than half of the direct manufacturing costs of most of our railcar product lines. Certain of our railcar manufacturing contracts contain provisions for price adjustments 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 on to our customers. Conversely, if the price of those materials or components decreases, a discount is applied to reflect the decrease in cost.

Our customers often specify particular railcar components and the suppliers of such components. We continually monitor inventory levels to support production.

In 2010, no single supplier accounted for more than 11.2% of our total purchases and our top ten suppliers accounted for approximately 51.0% of our total purchases.

Steel

We use hot rolled steel coils, as-rolled steel plate and normalized steel plate to manufacture railcars. We can acquire hot rolled steel coils and as-rolled steel plate from several suppliers. There are a limited number of qualified domestic suppliers of the form and size of normalized steel plate that we need for our manufacturing operations, and these suppliers are our only source of this product. Normalized steel plate is a special form of heat-treated steel that is stronger and is more resistant to puncture than as-rolled steel plate. 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.

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 are mounted. We obtained a significant portion of our castings requirements from our joint venture, Ohio Castings, until production was temporarily idled in June 2009. When production idled, we began purchasing all of our castings requirements from third party vendors.

Wheels and brakes

In the past, there have been supply constraints and shortages of wheels and brakes used in railcars. Currently, there are a limited number of domestic suppliers for each of these components. In the past, we have also imported some wheels. We also obtain limited quantities of refurbished wheels from scrapped railcars.

Axles

Axles have historically been capacity constrained critical components of manufacturing railcars. Our joint venture, Axis, produces railcar axles and is our primary supplier of new axles.

COMPETITION

The railcar manufacturing industry has historically been extremely competitive and has become even more so due to the current economic environment driven by increased pricing pressures from customers. We compete primarily with Trinity Industries, Inc. (Trinity), The Greenbrier Companies, Inc. (Greenbrier) and National Steel Car Limited (National Steel) in the hopper railcar market and with Trinity, Greenbrier and Union Tank Car Company (Union Tank) in the tank railcar market. Competitors have and may continue to expand their capabilities into our focused railcar markets.

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. We compete with numerous companies in our railcar services businesses, ranging from companies with greater resources than we have to small, local companies.

In addition to price, competition in all of our markets is based on quality, reputation, reliability of delivery, customer service and other factors.

INTELLECTUAL PROPERTY

We believe that manufacturing expertise, 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 several patents and will continue to make efforts to obtain patents, when available, in connection with our product development and design activities.

EMPLOYEES

As of December 31, 2010, we had 1,598 full-time employees in various locations throughout the United States and Canada of which 18.0% were covered by domestic collective bargaining agreements at two of our repair facilities and at our Texas steel foundry. Two of these collective bargaining agreements covering 6.7% of our full-time employees expired during 2010 and new collective bargaining agreements were successfully negotiated. A collective bargaining agreement covering 11.3% of our full-time employees will expire in April 2011.

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. Because 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 subject to oversight by Transport Canada that also requires certification. To the extent that we expand our business internationally, we will increasingly be subject to the regulations of other non-U.S. jurisdictions.

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 negligent acts, and also may expose us to liability for the conduct of others or for our actions that complied 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.

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.

Certain real property we acquired from ACF Industries LLC (ACF) in 1994 has been involved in investigation and remediation activities to address contamination. ACF is an affiliate of Mr. Carl Icahn, the chairman of our board of directors and, through IELP, our principal beneficial stockholder. Substantially all of the issues identified relate to the use of this property prior to its transfer to us 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. As of the date of this report, we do not believe we will incur material costs in connection with any investigation or remediation activities relating to these properties, but we cannot assure that this will be the case. If ACF fails to honor its obligations to us, we could be responsible for the cost of such remediation.

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 condition and operations. In addition, we have historically 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 past 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 and we could face environmental claims for railcars that we sell or lease to others. 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 hazardous commodities being shipped, strict liability concepts may apply.

Item 1A:		Risk Factors

RISKS RELATED TO OUR BUSINESS

The highly cyclical nature of the railcar industry and restricted credit markets may result in lower revenues during economic downturns.

The North American railcar market has been, and we expect it to continue to be highly cyclical, resulting in volatility in demand for our products and services. The recent worldwide financial turmoil and associated economic downturn has adversely affected the overall railcar industry as well as sales of our railcars and other products and caused us to slow our production rates significantly in 2010. For example, over approximately the past three and a half years, we experienced a decrease in demand and an increase in pricing pressures in our railcar markets, and over the past four years our new railcar orders have fluctuated from approximately 2,510 in 2007, to approximately 280 in 2008, none in 2009 and approximately 2,590 in 2010. We estimate that 100.0% of our December 31, 2010 backlog will be converted to revenues during 2011 and, as a result, if we are unable to obtain new orders it would have a material adverse effect on our business and financial condition.

Most of the end users of our railcars acquire them through leasing arrangements with our leasing company customers. The current economic environment and restricted credit markets have resulted in stricter borrowing conditions and, in some cases, higher interest rates for new borrowings, either of which could increase the cost of, or potentially deter, new leasing arrangements. These factors have caused and could continue to cause our leasing company customers to purchase fewer railcars. In addition, the slow-down of the United States economy has reduced and may continue to reduce requirements for the transport of products carried by the railcars we manufacture. These factors have resulted and may continue to result in decreased demand and increased pricing pressures on the sales of railcars. Sales of other of our industrial products have also been and may continue to be adversely affected by the slowdown in industrial output. All of these factors could have a material adverse effect on our 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 our railcar manufacturing business we have four primary competitors. Any of these competitors may, from time to time, have greater resources than we do. Our current competitors may increase their participation, or new competitors may enter into, the railcar markets in which we compete. Strong competition within the industry, which has been exacerbated by the recent economic downturn, has led to pricing pressures and could limit our ability to maintain or increase prices or obtain better margins on our railcars. These pressures may intensify if consolidation among our competitors occurs. If we produce any types of railcars other than what we currently produce, we will be competing with other manufacturers that may have more experience with that railcar type.

New competitors, or alliances among existing competitors, may emerge in the railcar components industry and rapidly gain market share. We compete with numerous companies in our railcar fleet management and railcar repair services businesses, ranging from companies with greater resources than we have to small, local companies.

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 and could cause us to lose market share. 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.

We depend upon a small number of customers that represent a large percentage of our revenues. The loss of any single significant customer, a reduction in sales to any such significant customer or any such significant customer’s inability to pay us in a timely manner 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 represent a significant percentage of our railcar sales in any given year. Our top ten customers represented approximately 76.2%, 89.0% and 90.7% of our total consolidated revenues in 2010, 2009 and 2008, respectively. Moreover, our top three customers accounted for approximately 58.2%, 84.4% and 82.0% of our total consolidated revenues in 2010, 2009 and 2008, respectively. 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 results of operations. If one of our significant customers was unable to pay due to financial conditions, it 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 to which our customers have committed in writing to purchase and lease. The estimated backlog value in dollars is the anticipated revenue on the railcars included in the backlog for purchase and the estimated fair market value of the railcars included in the backlog for lease. 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. Customer orders may be subject to requests for delays in deliveries, inspection rights and other customary industry terms and conditions, which could prevent or delay our railcar backlog from being converted into revenues. 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.

To the extent we expand internationally through joint ventures or otherwise, we will increase our exposure to international economic and political risks.

Conducting business outside the United States, for example through our joint venture in India, subjects us to various risks, including changing economic, legal and political conditions, work stoppages, exchange controls, currency fluctuations, terrorist activities directed at U.S. companies, armed conflicts and unexpected changes in the United States and the laws of other countries relating to tariffs, trade restrictions, transportation regulations, foreign investments and taxation. If the joint ventures fail to obtain and maintain certifications of their railcars and railcar parts in the various countries where they may operate, they may be unable to market and sell their railcars in those countries.

In addition, unexpected changes in regulatory requirements, tariffs and other trade barriers, more stringent rules relating to labor or the environment, adverse tax consequences and price exchange controls could limit the joint venture’s operations and make the manufacturing and distribution of its products internationally more difficult. Furthermore, any material changes in the quotas, regulations or duties on imports imposed by the U.S. government and agencies or on exports by non-U.S. governments and their respective agencies could adversely affect the joint venture’s ability to import railcar parts or manufacture railcars. The uncertainty of the legal environment in countries such as India could also limit our ability to enforce effectively our rights related to our investment in our international joint venture.

The cost of raw materials and components that we use to manufacture railcars, particularly steel, are subject to escalation and surcharges and could 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 cost of raw materials, including steel, and components, including scrap metal, used in the production of our railcars, represents more than half of our direct manufacturing costs per railcar. We have provisions in certain of our current railcar manufacturing sales orders that allow us to pass on to our customers price fluctuations in and surcharges related to certain raw materials, including steel, as well as certain components. The number of customers to which we are not able to pass on price increases may increase in the future, and any such increase could adversely affect our operating margins and cash flows. Any fluctuations in the price or availability of steel, or any other material or component used in the production of our railcars, may have a material adverse effect on our business, financial condition and results of operations. Such price increases could reduce demand for our railcars. If we are not able to buy raw materials at fixed prices, or pass on price increases to our customers, we may lose railcar orders or enter into contracts with less favorable contract terms, any of which could have a material adverse effect on our business, financial condition and results of operations.

If any of our raw material or component suppliers were unable to continue their businesses, the availability or price of the materials we use could be adversely affected. Deliveries of our raw materials and components may also fluctuate depending on various factors including supply and demand for the raw material or component, or governmental regulation relating to the raw material or component, including regulation relating to importation.

Fluctuations in the supply of components and raw materials we use in manufacturing railcars, which are often only available from a limited number of suppliers, 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 railcar components, such as railcar wheels, axles, brakes, bearings, yokes, sideframes, bolsters and other heavy castings. Some of these components are only available from a limited number of domestic suppliers. Strong demand can cause industry-wide shortages of many critical components as reliable suppliers could reach capacity production levels. Supply constraints in our industry are exacerbated 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 certain components and procure many of our components on an as needed basis. 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, or refuse to do business with us for any reason, 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 and could materially adversely affect our operating results.

If any of our significant suppliers of railcar components were to shut down operations, our business and financial results could be affected as we may incur substantial delays and significant expense in finding alternative sources. The quality and reliability of alternative sources may not be the same and these alternative sources may charge significantly higher prices.

We may pursue joint ventures, acquisitions or new business endeavors that involve inherent risks, any of which may cause us not to realize anticipated benefits and we may have difficulty integrating the operations of any companies that we acquire, joint ventures that we form, or new business endeavors, which may adversely affect our results of operations.

We may not be able to successfully identify suitable joint venture, acquisition or new business endeavor opportunities or complete any particular joint venture, acquisition, business combination, other transaction or new business endeavors on acceptable terms. Our identification of suitable joint ventures opportunities, acquisition candidates and new business endeavors and the integration of new and acquired business operations involve risks inherent in assessing the values, strengths, weaknesses, risks and profitability of these opportunities. This includes their effects on our business, diversion of our management’s attention and risks associated with unanticipated problems or unforeseen liabilities. These issues may require significant financial resources that could otherwise be used for the ongoing development of our current operations.

The difficulties of integration may be increased by the necessity of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining different corporate cultures. These difficulties could be further increased to the extent we pursue opportunities internationally, such as our joint venture in India, or in new railcar markets where we do not have significant experience. In addition, we may not be effective in retaining key employees or customers of the combined businesses. We may face integration issues pertaining to the internal controls and operations functions of the acquired companies and we may not realize cost efficiencies or synergies that we anticipated when selecting our acquisition candidates. In addition, we may experience managerial or other conflicts with our joint venture partners. Any of these items could adversely affect our results of operations.

Our failure to identify suitable joint venture, acquisition opportunities or new business endeavors may restrict our ability to grow our business. If we are successful in pursuing such opportunities, 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.

If any of our joint ventures generate significant losses, it could adversely affect our results of operations. For example, if our Axis joint venture is unable to operate as anticipated, incurs significant losses or otherwise is unable to honor its obligation to us under the Axis loan, our financial results or financial position could be adversely impacted.

Our failure, or the failure of our joint ventures, to complete capital expenditure projects on time and within budget, or the failure of these projects, once constructed, to operate as anticipated could materially adversely affect our business, financial condition and results of operations.

Construction plans we may have from time to time, and the current and any future construction plans of our joint ventures are subject to a number of risks and contingencies over which we may have little control and that may adversely affect the cost and timing of the completion of those projects, or the capacity or efficiencies of those projects once constructed. If these capital expenditure projects do not achieve the results anticipated, we may not be able to satisfy our operational goals on a timely basis, if at all. If we or our joint ventures are unable to complete the construction of any of such capital expenditure projects on time or within budget, or if those projects do not achieve the capacity or efficiencies anticipated our business, financial condition and results of operations could be materially and adversely affected. For example, if Amtek Railcar is unable to start up operations effectively and in a timely manner or incurs significant losses at the onset of operations, our results of operations or financial position could be adversely impacted.

Uncertainty surrounding acceptance of our new railcar offerings by our customers, and costs associated with those new offerings, 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 our current railcar markets and new railcar markets. Any new or modified railcar design that we develop may not gain widespread acceptance in the marketplace and any such product may not be able to compete successfully with existing railcar designs or new railcar designs that may be introduced by our competitors. Furthermore, we may experience significant initial costs of production of new railcar product lines related to training, labor and operating inefficiencies. 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.

If we lose any of our executive officers or key employees, our operations and ability to manage the day-to-day aspects of our business may be materially adversely affected.

Our future performance will substantially depend on our ability to retain and motivate our executive officers and key employees, both individually and as a group. If we lose any of our executive officers or key employees, which have many years of experience with our company and within the railcar industry and other manufacturing industries, or are unable to recruit qualified personnel, our ability to manage the day-to-day aspects of our business may be materially adversely affected. As a result of less demand and increased competition for some of our railcar products, we have implemented production slowdowns and are managing our overhead costs in order to improve our manufacturing efficiencies. We may lose the services of key employees due to production slowdowns or otherwise, we may not be able to rehire such personnel, and suitable new key employees may not be available, if and when our production needs later increase. The loss of the services of one or more of our executive officers or key employees, who also have strong personal ties with customers and suppliers, could have a material adverse effect on our business, financial condition and results of operations. We do not currently maintain “key person” life insurance.

Equipment failures, delays in deliveries or extensive damage to our facilities, particularly our railcar manufacturing complexes in Paragould or Marmaduke, Arkansas, could lead to production or service curtailments or shutdowns.

An interruption in manufacturing capabilities at our complexes in Paragould or Marmaduke or at any of our component manufacturing facilities, whether as a result of equipment failure or any other reason, could reduce, prevent or delay production of our railcars or railcar and industrial components, which could alter the scheduled delivery dates to our customers and affect our production schedule. This could result in the termination of orders, the loss of future sales and a negative impact to our reputation with our customers and in the railcar industry, all of which could materially adversely affect our business and results of operations.

All of our facilities are subject to the risk of catastrophic loss due to unanticipated events, such as fires, earthquakes, explosions, floods, tornados or weather conditions. We may experience plant shutdowns or periods of reduced production as a result of equipment failures, loss of power, delays in equipment 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.

Our entry into the railcar leasing market may deplete cash, cause us to compete directly with our customers and adversely affect our results of operations.

We will utilize existing cash to manufacture railcars we lease to customers, while cash from lease revenue will be received over the life of the lease or leases relating to those railcars. Depending upon the number of railcars that we lease and the amount of cash used in other operations, our cash balances could be depleted, which may limit our ability to support operations, maintain or expand our existing business, or take advantage of new business opportunities. We could also experience significant defaults on leases that could further constrain cash.

We may begin to compete with certain of our significant customers through our entry into the railcar leasing market. Some of our railcar manufacturing competitors also produce railcars for use in their own railcar leasing fleet, competing directly with our new railcar leasing business and with leasing companies, some of which are our largest customers.

The failure to enter into commercially favorable railcar leases, re-lease or sell railcars upon lease expiration and successfully manage existing leases could materially adversely affect our business, results of operations or financial condition.

We are subject to a variety of environmental, health and safety 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 public and employee health, safety 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 may expose us to liability for the conduct of others or for our actions that complied with all applicable laws at the time these actions were taken. They may also expose us to liability for claims of personal injury or property damage related to alleged exposure to hazardous or toxic materials. Despite our intention to be in compliance, we cannot guarantee that we will at all times comply with all such requirements. The cost of complying with these requirements may also increase substantially in future years. If we violate or fail to comply with these requirements, 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.

Our failure to maintain and comply with environmental permits that we are required to maintain could result in fines, penalties or other sanctions and could have a material adverse effect on our results of operations. Future events, such as new environmental regulations, changes in or modified interpretations of existing laws and regulations or enforcement policies, newly discovered information 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.

In addition to environmental, health and safety 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.

The variable purchase patterns of our railcar customers and the timing of completion, customer acceptance and shipment of orders may cause our revenues and income from operations to vary substantially each quarter, which could result in significant fluctuations in our quarterly results.

Railcar sales comprised approximately 62.7%, 79.1% and 86.0% of our total consolidated revenue in 2010, 2009 and 2008, respectively. Our results of operations in any particular quarterly period may be significantly affected by the number and type of railcars manufactured and shipped in that period, which is impacted by customer needs that vary greatly year to year, as discussed above. The customer acceptance and title transfer or customer acceptance and shipment of our railcars determines when we record the revenues associated with our railcar sales. Given this, the timing of customer acceptance and title transfer or customer acceptance and shipment of our railcars could cause fluctuations in our quarterly and annual results. The railroads could potentially go on strike or have other service interruptions, which could ultimately create a bottleneck and potentially cause us to slow down or halt our shipment and production schedules, which could have a materially adverse affect on our financial results.

As a result of these fluctuations, we believe that comparisons of our sales and operating results between quarterly periods within the same year and between quarterly periods within different years may not be meaningful and, as such, these comparisons should not be relied upon as indicators of our future performance.

Our unsecured senior notes contain, and any additional financing we may obtain could contain, covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions.

Complying with the covenants under our unsecured senior notes may limit our management’s discretion by restricting our ability to:

•

incur additional debt;

•

redeem our capital stock;

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enter into certain transactions with affiliates;

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pay dividends and make other distributions;

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make investments and other restricted payments; and

•

create liens.

Certain covenants, including those that restrict our ability to incur additional indebtedness and issue disqualified or preferred stock, become more restrictive if our fixed charge coverage ratio, as defined, is less than 2.0 to 1.0 as measured on a rolling four-quarter basis. Any additional financing we may obtain could contain similar or more restrictive covenants. As of December 31, 2010, based on the Company’s fixed charge coverage ratio, as defined and as measured on a rolling four-quarter basis, certain of these covenants, including the Company’s ability to incur additional debt, have become further restricted. Our ability to comply with any covenants may be adversely affected by general economic conditions, political decisions, industry conditions and other events beyond our control. As a result, we cannot assure you that we will be able to comply with these covenants as they apply to us or when and if they become applicable to us. Our failure to comply with these covenants should they become applicable to us, could result in an event of default, which could materially and adversely affect our operating results, our financial condition and liquidity.

If there were an event of default related to our outstanding unsecured senior notes, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. We cannot assure you that our assets or cash flow would be sufficient to fully repay amounts due under any of our financing arrangements if accelerated upon an event of default, or that we would be able to repay, refinance or restructure the payments under any such arrangements.

Companies affiliated with Mr. Carl Icahn are important to our business.

We manufacture railcars and railcar components and provide railcar services for companies affiliated with Mr. Carl Icahn, our principal beneficial stockholder through IELP and the chairman of our board of directors. We are currently subject to agreements, and may enter into additional agreements, with certain of these affiliates that are important to our business. To the extent our relationships with affiliates of Mr. Carl Icahn change due to the sale of his interest in us, such affiliates or otherwise, our business, results of operations and financial condition may be materially adversely affected.

An affiliate of Mr. Carl Icahn accounted for approximately 35.4%, 28.2% and 24.5% of our consolidated revenues in 2010, 2009 and 2008, respectively. This revenue is primarily attributable to our sale of railcars to ARL, a railcar leasing company owned by affiliates of Mr. Carl Icahn, which currently purchases all of its railcars from us, but is not required to do so in the future. Our railcar backlog at December 31, 2010 included $1.2 million of railcars to be sold to our affiliate, ARL.

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.

As of December 31, 2010, the employees at our sites covered by collective bargaining agreements collectively represent approximately 18.0% of our total workforce. A collective bargaining agreement covering 11.3% of our full-time employees will expire in April 2011. 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 union workforce will remain positive nor can we guarantee that union organizers will not be successful in future attempts to organize our railcar manufacturing employees or employees at some of our other facilities. If our workers were to engage in a strike, work stoppage or other slowdown, 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.

Changes in assumptions or investment performance related to pension and other postretirement benefit plans that we sponsor could materially adversely affect our financial condition and results of operations.

We are responsible for making funding contributions to two of our three pension plans and are liable for any unfunded liabilities that may exist should the plans be terminated. Under certain circumstances, such liability could be senior to our unsecured senior notes. 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, which could have a material adverse effect on our financial condition and results of operations. There is no assurance that interest rates will remain constant or that our pension fund assets can earn the expected rate of return, and our actual experience may be significantly more negative. Our pension expenses and funding may also be greater than we currently anticipate if our assumptions regarding plan earnings and expenses turn out to be incorrect.

We also provide certain postretirement benefits for certain of our salaried and hourly employees and retirees. Our postretirement benefit obligations and related expense with respect to these postretirement benefits also increase or decrease based on several factors and could have a similarly material adverse effect on our financial condition and results of operations due to changes in these factors.

Our manufacturer’s warranties expose us to potentially significant claims.

We may be subject to significant warranty claims in the future relating to workmanship and materials. 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.

Our substantial indebtedness, as a result of our outstanding unsecured senior notes, could adversely affect our operations and financial results and prevent us from fulfilling our obligations under the notes.

Our substantial indebtedness, consisting of our $275.0 million of unsecured senior notes, could have important consequences to our investors. For example, it could:

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make it more difficult for us to satisfy our obligations with respect to the notes;

	•		increase our vulnerability to general economic and industry conditions;
	•		require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, which would reduce the availability of our cash flow to fund working capital, capital expenditures, expansion efforts and other general corporate purposes;

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limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

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place us at a competitive disadvantage compared to our competitors that have less debt; and

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limit, among other things, our ability to borrow additional funds for working capital, capital expenditures, general corporate purposes or acquisitions.

These consequences could have a significant adverse effect on our business, financial condition and results of operations. In addition, as of December 31, 2010, based on the fixed charge coverage ratio, as defined and as measured on a rolling four-quarter basis, certain of the covenants in the indenture governing our unsecured senior notes, including our ability to incur additional debt, have become further restricted. Failure to comply with covenants in the indenture could result in an event of default, which, if not cured or waived, could have a significant adverse effect on us.

Despite our substantial indebtedness, we may still be able to incur substantially more debt, as may our subsidiaries, which could further exacerbate the risks associated with our substantial indebtedness.

Despite our restrictions under our unsecured senior notes, including restrictions relating to our fixed charge coverage ratio described above, we may be able to incur future indebtedness, including secured indebtedness, and this debt could be substantial. Any additional secured borrowings by us and any borrowings by our subsidiaries would be senior to the notes. If new debt is added to our, or our subsidiaries’, current debt levels the related risks that we or they now face could be magnified.

We may not be able to generate sufficient cash flow to service all of our obligations, including our obligations under our unsecured senior notes and we may not be able to refinance our indebtedness on commercially reasonable terms.

Our ability to make payments on and to refinance our indebtedness, including the indebtedness incurred under our unsecured senior notes, and to fund planned capital expenditures, strategic transactions, joint venture capital requirements or expansion efforts will depend on our ability to generate cash in the future. This, to a certain extent, is subject to economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

Our business may not be able to generate sufficient cash flow from operations and there can be no assurance that future borrowings will be available to us in amounts sufficient to enable us to pay our indebtedness as such indebtedness matures and to fund our other liquidity needs. If this is the case, we will need to refinance all or a portion of our indebtedness on or before maturity, and we cannot assure you that we will be able to refinance any of our indebtedness, including our unsecured senior notes, on commercially reasonable terms, or at all. We could have to adopt one or more alternatives, such as reducing or delaying planned expenses and capital expenditures, selling assets, restructuring debt, or obtaining additional equity or debt financing. These financing strategies may not be effected on satisfactory terms, if at all. Our ability to refinance our indebtedness or obtain additional financing and to do so on commercially reasonable terms will depend on our financial condition at the time, the indenture governing the notes, restrictions in any agreements governing our indebtedness and other factors, including the condition of the financial markets and the railcar industry.

If we do not generate sufficient cash flow from operations and additional borrowings, refinancings or proceeds of asset sales are not available to us, we may not have sufficient cash to enable us to meet all of our obligations, including payments on the unsecured senior notes.

Our investment activities are subject to risks that may adversely affect our results of operations, liquidity and financial condition.

From time to time we may invest in marketable securities, or derivatives thereof, including higher risk equity securities and high yield debt instruments. These securities are subject to general credit, liquidity, market risks and interest rate fluctuations that have affected various sectors of the financial markets and caused overall tightening of the credit markets and the decline in the stock markets. The market risks associated with any investments we may make may have a negative adverse effect on our results of operations, liquidity and financial condition.

Our investments at any given time also may become highly concentrated within a particular company, industry, asset category, trading style or financial or economic market. In that event, our investment portfolio will be more susceptible to fluctuations in value resulting from adverse economic conditions affecting the performance of that particular company, industry, asset category, trading style or economic market than a less concentrated portfolio would be. As a result, our investment portfolio could become concentrated and its aggregate return may be volatile and may be affected substantially by the performance of only one or a few holdings.

For reasons not necessarily attributable to any of the risks set forth in this Form 10-K (for example, supply/demand imbalances or other market forces), the prices of the securities in which we invest may decline substantially.

As a public company, we may have reduced access to resources of, and benefits provided by, entities affiliated with Mr. Carl Icahn.

We believe that our relationship with entities affiliated with Mr. Carl Icahn has, in many cases, provided us with a competitive advantage in identifying and attracting partners for critical supply and buying arrangements. If we were unable to participate in these supply and buying group arrangements, our manufacturing costs could increase and our results of operations and financial condition may be materially adversely affected.

If ACF does not, or is unable to, honor its remedial or indemnity obligations to us regarding environmental matters, such environmental matters may have a material adverse effect on our business, financial condition or results of operations.

Certain real property we acquired from ACF in 1994 has been involved in investigation and remediation activities to address contamination. ACF is an affiliate of Mr. Carl Icahn, the chairman of our board of directors and, through IELP, our principal beneficial stockholder. Substantially all of these issues identified relate to the use of this property prior to its transfer to us 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. As of the date of this report, we do not believe we will incur material costs in connection with any investigation or remediation activities relating to these properties, but we cannot assure that this will be the case. If ACF fails to honor its obligations to us, we could be responsible for the cost of such remediation. 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 we may incur that are not covered by adequate insurance or indemnification will also increase our costs and have a negative impact on our profitability.

As a public company, we are required to comply with the reporting obligations of the Exchange Act and are required to comply with 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 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 are 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. If we fail to achieve and maintain the adequacy of our internal controls, 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 Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent fraud. 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.

Increasing insurance claims and expenses could lower profitability and increase business risk.

Increased insurance 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.

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.

Various patent, copyright, trade secret and trademark laws 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. As we expand internationally, through our joint ventures or otherwise, we become subject to the risk that foreign intellectual property laws will not protect our intellectual property rights to the same extent as intellectual property laws in the U.S.

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 market our products, negatively affect our competitive position and materially adversely affect our business and results of operations.

Our pending or future patent applications held by us may not result in an issued patent and, if patents are issued to us, such patents may not provide meaningful protection against competitors or against competitive technologies. The United States Federal courts may invalidate our patents or find them unenforceable. Competitors may also be able to design around our patents. 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, result in the payment of substantial damages or royalties, and 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 our 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:

•

cease selling or using any of our products that incorporate the asserted intellectual property, which would adversely affect our revenue;

•

pay substantial damages for past use of the asserted intellectual property;

•

obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and

•

redesign or rename, in the case of trademark claims, our products to avoid infringing the intellectual property rights of third parties, which may be costly and time-consuming even if possible.

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.

Our failure to comply with regulations imposed by federal and foreign agencies could negatively affect our financial results.

New regulatory rulings and regulations from federal or foreign regulatory agencies may impact our financial condition and results of operations. If we fail to comply with the requirements and regulations of these agencies that impact our manufacturing, safety and other processes we may face sanctions and penalties that could materially adversely affect our results of operations.

Reductions in the availability of energy supplies or an increase in energy costs may increase our operating costs.

Various factors including hostilities between the United States and foreign power or natural disasters 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 and the energy sources we use to manufacture our railcars. Future limitations on the availability or consumption of petroleum products 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 the value of our inventory, long-lived assets and/or goodwill, which could materially adversely affect our financial condition and results of operations.

We may be required to reduce inventory carrying values using the lower of cost or market approach 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. Future events could cause us to conclude that impairment indicators exist and that goodwill associated with our acquired businesses is impaired. Any resulting impairment loss related to reductions in the value of our long-lived assets or our goodwill could materially adversely affect our financial condition and results of operations.

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived assets may not be recoverable. As discussed in Note 9 to our Consolidated Financial Statements, no triggering events occurred in 2010. We perform an annual goodwill impairment test as of March 1 of each year. As discussed in Note 10, to our Consolidated Financial Statements, no impairment loss was noted in 2010. Assumptions used in our goodwill impairment tests regarding future operating results of our reporting units could prove to be inaccurate. This could cause an adverse change in our valuation and thus any of our long-lived assets or goodwill impairment tests may have been flawed. Any future impairment tests are subject to the same risks.

If we face labor shortages or increased labor costs, our growth and results of operations could be materially adversely affected.

Due to the competitive nature of the labor markets in which we operate and the cyclical nature of the railcar industry, the resulting employment cycle increases our risk of not being able to retain, recruit and train the personnel we require in our railcar manufacturing and other businesses, particularly in periods of economic expansion. 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 price of our common stock is subject to volatility.

The market price for our common stock has varied between a high closing sales price of $22.31 per share and a low closing sales price of $6.59 in the past twenty four months. This volatility may affect the price at which you could sell our common stock. In addition, the broader stock market has experienced price and volume fluctuations. This volatility has affected the market prices of securities issued by many companies for reasons unrelated to their operating performance and may adversely affect the price of our common stock. The price for our common stock is likely to continue to be volatile and subject to price and volume fluctuations in response to market and other factors, including the other factors discussed in these risk factors.

In the past, following periods of volatility in the market price of their stock, many companies have been the subject of securities class action litigation. If we became involved in securities class action litigation in the future, it could result in substantial costs and diversion of our management’s attention and resources and could harm our stock price, business, prospects, results of operations and financial condition.

Various other factors could cause the market price of our common stock to fluctuate substantially, including financial market and general economic changes, changes in governmental regulation, significant railcar industry announcements or developments, the introduction of new products or technologies by us or our competitors, and changes in other conditions or trends in our industry or in the markets of any of our significant customers.

Other factors that could cause our stock’s price to fluctuate could be actual or anticipated variations in our or our competitors’ quarterly or annual financial results, financial results failing to meet expectations of analysts or investors, changes in securities analysts’ estimates of our future performance or of that of our competitors and the general health and outlook of our industry.

Our stock price may decline due to sales of shares beneficially owned by Mr. Carl Icahn through IELP.

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. Of our outstanding shares of common stock, approximately 54.3% are beneficially owned by Mr. Carl Icahn through IELP. Mr. Carl Icahn is also the chairman of our board of directors.

Certain stockholders are contractually 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 these agreements will be entitled to participate in such registration. By exercising their registration rights, and selling a large number of shares, these holders could cause the price of our common stock to decline. Approximately 11.6 million shares of common stock are covered by such registration rights.

Mr. Carl Icahn exerts significant influence over us and his interests may conflict with the interest of our other stockholders.

Mr. Carl Icahn, the chairman of our board of directors, controls approximately 54.3% of the voting power of our capital stock, through IELP, and is able to control or exert substantial influence over us, including the election of our directors and controlling most matters requiring board or stockholder approval, including business strategies, mergers, business combinations, acquisitions or dispositions of significant assets, issuances of common stock, incurrence of debt or other financing and the payment of dividends. 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 our stock.

Mr. Carl Icahn owns, 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. Carl Icahn, competes directly with our other customers and may compete directly with us in the railcar leasing business and ACF has supplied us and our competitors with critical components. ACF has previously manufactured railcars for us. Mr. Carl Icahn and entities controlled by him may also pursue acquisitions or business opportunities that may be complementary to our business. Our articles of incorporation allow Mr. Carl Icahn, entities controlled by him, and any director, officer, member, partner, stockholder or employee of Mr. Carl 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. To the extent that conflicts of interest may arise among us, Mr. Carl Icahn and his affiliates, those conflicts may be resolved in a manner adverse to us or you.

We are a “controlled company” within the meaning of the NASDAQ Global Select Market rules and therefore we are not subject to all of the NASDAQ Global Select Market corporate governance requirements.

As we are a “controlled company” within the meaning of the corporate governance standards of the NASDAQ Global Select Market, we have elected, as permitted by those rules, not to comply with certain governance requirements. For example, our board of directors does not have a majority of independent directors, our officers’ compensation is not determined by our independent directors, and director nominees are not selected or recommended by a majority of independent directors. As a result, we do not have a majority of independent directors and we do not have a nominating committee nor do we have a compensation committee consisting of independent members.

Payments of cash dividends on our common stock may be made only at the discretion of our board of directors and may be restricted by North Dakota law. Our unsecured senior notes contain provisions that limit our ability to pay dividends.

Our board of directors has suspended dividend payments indefinitely and may, at its discretion, continue to refuse to declare future dividends depending 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, our unsecured senior notes restrict our ability to declare and pay dividends on our capital stock. Furthermore, North Dakota law imposes restrictions on our ability to pay dividends. Accordingly, we may not be able to pay dividends in any given amount in the future, or at all.

We are governed by the North Dakota Publicly Traded Corporations Act. Interpretation and application of this act is scarce and such lack of predictability could be detrimental to our stockholders.

The North Dakota Publicly Traded Corporations Act, which we are governed by, was only recently enacted and, to our knowledge no other companies are yet subject to its provisions and interpretations of its likely application are scarce. Although the North Dakota Publicly Traded Corporations Act specifically provides that its provisions must be liberally construed to protect and enhance the rights of stockholders in publicly traded corporations, this lack of predictability could be detrimental to our stockholders.

Item 1B:		Unresolved Staff Comments

None

Item 2:		Properties

Our headquarters is located in St. Charles, Missouri. We lease this facility from an entity owned by Mr. James Unger, vice chairman of our board of directors pursuant to a lease agreement that expires December 31, 2021, as described in Note 20 to our Consolidated Financial Statements.

The following table presents information about our railcar manufacturing and components manufacturing facilities as of December 31, 2010:

						Lease
				Leased or		Expiration
Location		Use		Owned		Date
Paragould, Arkansas		Railcar manufacturing		Owned			N/A
Marmaduke, Arkansas		Railcar manufacturing		Owned			N/A
Jackson, Missouri		Railcar components manufacturing		Owned			N/A
Kennett, Missouri		Railcar subassembly and small components manufacturing		Owned			N/A
Longview, Texas		Steel foundry		Owned			N/A
St. Charles, Missouri		Aluminum foundry and machining		Leased			2/28/2011	(1)

The following table presents information about our railcar services facilities as of December 31, 2010 where we provide railcar repair, cleaning, maintenance and other services:

				Lease
		Leased or		Expiration
Location		Owned		Date
Longview, Texas		Owned			N/A
Goodrich, Texas		Owned			N/A
North Kansas City, Missouri		Owned			N/A
Tennille, Georgia		Owned			N/A
Milton, Pennsylvania		Owned			N/A	(1)
La Porte, Texas		Owned			N/A	(2)
Bude, Mississippi		Leased			4/30/2011	(3)
Sarnia, Ontario		Leased			10/31/2026	(4)
Gonzales, Louisiana		Leased			3/31/2013	(5)
Green River, Wyoming		Leased			12/1/2017	(6)

Item 3:		Legal Proceedings

We were named the defendant in a wrongful death lawsuit, Nicole Lerma v. American Railcar Industries, Inc., filed on August 17, 2007 in the Circuit Court of Greene County, Arkansas Civil Division. The court reached a verdict in our favor on May 24, 2010. The plaintiff did not appeal the decision within the timeframe allowed.

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 that if the outcome was unfavorable, could have a material adverse effect on our business, financial condition and results of operations.

Item 4:		Reserved

PART II

Item 5:		Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock has been traded on the NASDAQ Global Select Market under the symbol ARII since January 20, 2006. There were approximately 12 holders of record of common stock as of February 26, 2011 including multiple beneficial holders at depositories, banks and brokers listed as a single holder of record in the street name of each respective depository, bank or broker.

The following table shows the price range of our common stock by quarter for the years ended December 31, 2010, 2009 and 2008:

		Prices
Year Ended December 31, 2010		High				Low
Quarter ended March 31, 2010		$	12.38			$	8.90
Quarter ended June 30, 2010			19.03				12.06
Quarter ended September 30, 2010			16.13				10.39
Quarter ended December 31, 2010			22.31				15.01

Year Ended December 31, 2009		High				Low
Quarter ended March 31, 2009		$	11.44			$	6.59
Quarter ended June 30, 2009			9.44				6.83
Quarter ended September 30, 2009			12.72				7.30
Quarter ended December 31, 2009			12.12				9.76

Year Ended December 31, 2008		High				Low
Quarter ended March 31, 2008		$	25.51			$	15.81
Quarter ended June 30, 2008			22.28				16.78
Quarter ended September 30, 2008			23.00				15.04
Quarter ended December 31, 2008			15.63				6.10

Dividend Policy and Restrictions

We declared cash dividends of $0.03 per share in every quarter of 2006, 2007 and 2008 and the first two quarters of 2009 before our board of directors suspended the dividend indefinitely. Any future 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 any borrowing arrangements and other factors our board of directors considers relevant. Additionally, the indenture relating to our unsecured senior notes contains certain covenants that may restrict our payments of dividends if certain conditions are present.

Performance Graph

The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

The following graph illustrates the cumulative total stockholder return on our Common Stock during the period from January 20, 2006, the date our Common Stock began trading on the NASDAQ Global Select Market, through December 31, 2010, and compares it with the cumulative total return on the NASDAQ Composite Index and DJ Transportation Index. The comparison assumes $100 was invested on January 20, 2006, in our Common Stock and in each of the foregoing indices and assumes reinvestment of dividends, if any. The performance shown is not necessarily indicative of future performance.

Item 6:		Selected Consolidated Financial Data.

The following table sets forth our selected consolidated financial data for the periods presented. The consolidated statements of operations and cash flow data as of and for the years ended December 31, 2010, 2009 and 2008 and the consolidated balance sheet data as of December 31, 2010 and 2009 are derived from our audited consolidated financial statements and related notes included elsewhere in this annual report. The consolidated statements of operations and cash flow data for the years ended December 31, 2007 and 2006 and the consolidated balance sheet data as of December 31, 2008, 2007 and 2006 are derived from our historical consolidated financial statements not included in this filing. See “Index to Consolidated Financial Statements.”

		Years ended December 31,
		2010				2009				2008				2007				2006 (7)
		($ in thousands, except per share data)
Consolidated statement of operations data:
Revenues
Manufacturing operations (1)		$	206,094			$	365,329			$	757,505			$	648,124			$	597,913
Railcar services (2)			67,469				58,102				51,301				50,003				48,139
Total revenues			273,563				423,431				808,806				698,127				646,052
Cost of revenues
Manufacturing operations			(210,269	)			(329,025	)			(682,744	)			(568,023	)			(537,344	)
Railcar services			(54,353	)			(47,015	)			(41,653	)			(41,040	)			(38,020	)
Total cost of revenues			(264,622	)			(376,040	)			(724,397	)			(609,063	)			(575,364	)
Gross profit			8,941				47,391				84,409				89,064				70,688
Income related to insurance recoveries, net			—				—				—				—				9,946
Gain on asset conversion, net			—				—				—				—				4,323
Selling, administrative and other (3)			(25,591	)			(25,141	)			(26,535	)			(27,379	)			(28,399	)
Operating (loss) earnings			(16,650	)			22,250				57,874				61,685				56,558
Interest income (4)			3,519				6,613				7,835				13,829				1,504
Interest expense			(21,275	)			(20,909	)			(20,299	)			(17,027	)			(1,372	)
Other income (5)			394				20,869				3,657				—				—
(Loss) income from joint venture			(7,789	)			(6,797	)			718				881				(734	)
(Loss) earnings before income tax expense			(41,801	)			22,026				49,785				59,368				55,956
Income tax benefit (expense)			14,795				(6,568	)			(18,403	)			(22,104	)			(20,752	)
Net (loss) earnings		$	(27,006	)		$	15,458			$	31,382			$	37,264			$	35,204
Less preferred dividends			—				—				—				—				(568	)
Net (loss) earnings available to common shareholders		$	(27,006	)		$	15,458			$	31,382			$	37,264			$	34,636
Weighted average shares outstanding-basic (6)			21,302				21,302				21,302				21,274				20,667
Net (loss) earnings per common share-basic (6)		$	(1.27	)		$	0.73			$	1.47			$	1.75			$	1.68
Weighted average shares outstanding-diluted (6)			21,302				21,302				21,302				21,357				20,733
Net (loss) earnings per common share-diluted (6)		$	(1.27	)		$	0.73			$	1.47			$	1.74			$	1.67
Dividends declared per common share		$	—			$	0.06			$	0.12			$	0.12			$	0.12
Consolidated balance sheet data (at year end):
Cash and cash equivalents		$	318,758			$	347,290			$	291,788			$	303,882			$	40,922
Net working capital			362,763				374,965				376,106				380,111				126,086
Property, plant and equipment, net			181,255				199,349				206,936				175,166				130,293
Total assets			654,367				664,364				679,654				654,384				338,926
Total liabilities			346,591				328,724				364,929				363,396				88,746
Total shareholders’ equity			307,776				335,640				314,725				290,988				250,180
Consolidated cash flow data:
Net cash (used in) provided by operating activities		$	(12,141	)		$	84,143			$	44,603			$	60,219			$	29,967
Net cash used in investing activities			(16,692	)			(26,842	)			(54,110	)			(67,434	)			(51,704	)
Net cash provided by (used in) financing activities			294				(1,917	)			(2,564	)			270,164				33,967
Effect of exchange rate changes on cash and cash equivalents			7				118				(23	)			11				—

You should read this information together with “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 annual report.

Item 7:		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 in this annual report. 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, including as a result of the factors we describe under “Risk Factors” and elsewhere in this annual report. See “Special note regarding forward-looking statements” appearing at the beginning of this report and “Risk Factors” set forth in Item 1A of this report.

OVERVIEW

We are a leading North American designer and manufacturer of hopper and tank railcars. We also lease, repair and refurbish railcars, provide fleet management services and design and manufacture certain railcar and industrial components. 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 consist of railcar manufacturing, railcar leasing and railcar and industrial component manufacturing. Railcar services consist of railcar repair and refurbishment services and fleet management services.

The North American railcar market has been, and we expect it to continue to be highly cyclical. The recent economic downturn and restricted credit markets have seen modest improvements but had a negative effect on the railcar manufacturing market in which we compete, resulting in increased competition and significant pricing pressures in 2010. This downturn adversely affected the sales of our railcars and other products and caused us to slow our production rates in 2010 as compared to 2009, resulting in a significant decrease in comparable shipments and revenues. For the year ended December 31, 2010 we reported a net loss.

Throughout 2010, railcar loadings have increased and the number of railcars in storage has decreased, as reported by an independent third party industry analyst. Along with these improvements, which may or may not continue, we have received an increased number of requests for quotations and were successful in securing approximately 2,590 railcar orders in 2010. We believe that these improvements appear to indicate that the railcar market has begun and will continue to improve and based in part on these factors, we currently expect our railcar orders and shipments to increase in 2011, as compared to 2010. We cannot assure you that the railcar market will continue to improve or that our railcar orders and shipments will increase.

Our railcar services segment experienced growth due to increased volumes at railcar repair plants and railcar repair projects completed at our railcar manufacturing facilities. These higher volumes along with our seasoned workforce have generated additional efficiencies in completing repair projects. We plan to continue to utilize available capacity at these facilities for certain repair projects in 2011.

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.

		Years ended December 31,
		2010				2009				2008
Revenues
Manufacturing operations			75.3	%			86.3	%			93.7	%
Railcar services			24.7	%			13.7	%			6.3	%
Total revenues			100.0	%			100.0	%			100.0	%
Cost of revenues
Manufacturing operations			(76.8	%)			(77.7	%)			(84.4	%)
Railcar services			(19.9	%)			(11.1	%)			(5.2	%)
Total cost of revenues			(96.7	%)			(88.8	%)			(89.6	%)
Gross profit			3.3	%			11.2	%			10.4	%
Selling, administrative and other expenses			(9.4	%)			(5.9	%)			(3.3	%)
(Loss) earnings from operations			(6.1	%)			5.3	%			7.1	%
Interest income			1.3	%			1.6	%			1.0	%
Interest expense			(7.8	%)			(4.9	%)			(2.5	%)
Other income			0.1	%			4.9	%			0.5	%
(Loss) earnings from joint venture			(2.8	%)			(1.6	%)			0.1	%
(Loss) earnings before income tax expense			(15.3	%)			5.3	%			6.2	%
Income tax benefit (expense)			5.4	%			(1.6	%)			(2.3	%)
Net (loss) earnings			(9.9	%)			3.7	%			3.9	%

Year ended December 31, 2010 compared to year ended December 31, 2009

Revenues

Our revenues in 2010 decreased 35.4% to $273.6 million from $423.4 million in 2009. This decrease was attributable to a decrease in revenues from manufacturing operations partially offset by an increase in revenues from railcar services.

Our manufacturing operations revenues decreased 43.6% to $206.1 million in 2010 from $365.3 million in 2009. The primary reasons for the decrease in revenues were a decrease in railcar shipments and an overall decrease in average selling prices due to competitive pricing and a change in product mix. Our shipments in 2010 were approximately 2,090 railcars as compared to approximately 3,690 railcars in 2009.

In 2010, our manufacturing operations revenues included $81.9 million, or 29.9% of our total consolidated revenues, from transactions with ARL, compared to $105.2 million, or 24.8% of our total consolidated revenues from transactions with ARL and ACF, in 2009. ARL and ACF are affiliated companies controlled by Mr. Carl Icahn.

Our railcar services revenues increased 16.1% to $67.5 million in 2010 from $58.1 million in 2009. This increase was primarily attributable to higher volumes at railcar repair plants and the utilization of our railcar manufacturing facilities for railcar repair projects. In 2010, our railcar services revenues included $15.0 million, or 5.5% of our total consolidated revenues, from transactions with ARL, as compared to $14.4 million, or 3.4% of our total consolidated revenues, in 2009. ARL is an affiliated company controlled by Mr. Carl Icahn.

Gross profit

Our gross profit decreased to $8.9 million in 2010 from $47.4 million in 2009. Our gross profit margin decreased to 3.3% in 2010 from 11.2% in 2009. This decrease in overall gross profit margin was primarily driven by a decrease in our gross profit margins from our manufacturing operations.

Our gross profit margin for our manufacturing operations decreased to a loss of 2.0% in 2010 as compared to a profit of 9.9% in 2009. This decrease was primarily attributable to lower shipments, lower average selling prices and the impact of fixed costs in a low production environment.

Our gross profit margin for railcar services increased to 19.4% in 2010 from 19.1% in 2009. This increase was primarily attributable to increased volumes at railcar repair plants and repair projects performed at our railcar manufacturing facilities.

Selling, administrative and other expenses

Our selling, administrative and other expenses increased in 2010 to $25.6 million from $25.1 million in 2009. The increase of $0.5 million was primarily attributable to a $3.1 million increase in stock based compensation expense, partially offset by a decrease in incentive compensation, outside services and a non-recurring legal settlement recorded in 2009. The increase in stock based compensation expense was due to increased expense related to our stock appreciation rights (SARs), which was driven by an increase in the stock price in 2010 as compared to 2009.

Interest expense and interest income

Net interest expense for 2010 was $17.8 million, representing $3.5 million of interest income and $21.3 million of interest expense, as compared to $14.3 million of net interest expense for 2009, representing $6.6 million of interest income and $20.9 million of interest expense.

The $3.1 million decrease in interest income from 2009 to 2010 was primarily attributable to the higher interest rate that was earned on corporate bonds purchased and sold in 2009, as the sale proceeds were reinvested at a lower rate of return. The $0.4 million increase in interest expense from 2009 to 2010 was primarily due to a decrease in capitalized interest caused by a decrease in capital expenditures.

Other income

Other income of $0.4 million was recognized in 2010 related to realized gains on the sale of a portion of our investment in Greenbrier common stock. During 2009, we sold our investment in corporate bonds resulting in a realized gain of $23.9 million partially offset by a $2.9 million other-than-temporary impairment of our investment in Greenbrier common stock and a realized loss of less than $0.1 million on the sale of 7,000 shares of Greenbrier common stock. See further discussion of our short-term investment activity in Note 3 to our Consolidated Financial Statements.

(Loss) earnings from joint ventures

Loss from joint ventures was $7.8 million in 2010 as compared to $6.8 million in 2009. In 2010, due to weak demand, Axis reported a loss, of which our share was $6.3 million, Ohio Castings reported a loss, of which our share was $1.0 million and Amtek Railcar and US Railcar Company LLC (USRC) both reported a loss, of which our combined share was $0.5 million. In 2009, Axis reported a loss, of which our share was $5.0 million and Ohio Castings reported a loss, of which our share was $1.8 million. During 2009, Ohio Castings was temporarily idled due to the weak railcar market and remained temporarily idled at December 31, 2010.

Income tax benefit (expense)

In 2010, we reported an income tax benefit of $14.8 million as compared to an income tax expense of $6.6 million for 2009. The effective tax rate for 2010 was 35.4% as compared to 29.8% for 2009. During 2010, we recorded a valuation allowance for a deferred tax asset that became unrealizable. We plan to file for a loss carry-back to prior years. In 2009, we recorded a one-time $1.0 million adjustment to accrued taxes due to certain tax benefits becoming recognizable.

Year ended December 31, 2009 compared to year ended December 31, 2008

Revenues

Our revenues in 2009 decreased 47.6% to $423.4 million from $808.8 million in 2008. This decrease was attributable to a decrease in revenues from manufacturing operations partially offset by an increase in revenues from railcar services.

Our manufacturing operations revenues decreased 51.8% to $365.3 million in 2009 from $757.5 million in 2008. The primary reasons for the decrease in revenues were decreased railcar shipments due to weak demand and a decrease in surcharges reflected in selling prices, partially offset by a change in product mix. During 2009, we decreased our workforce and production rates at our manufacturing plants due to reduced demand resulting in lower shipments. Our shipments in 2009 were approximately 3,690 railcars as compared to approximately 7,970 railcars in 2008. Approximately 220 of the shipments in 2009 were related to our railcar manufacturing agreement with ACF, which generated $19.0 million in revenues, as compared to approximately 960 railcar shipments in 2008, which generated $100.3 million in revenues. Our agreement with ACF terminated in March 2009, as described in Note 20 to our Consolidated Financial Statements.

In 2009, our manufacturing operations revenues included $105.2 million, or 24.8% of our total consolidated revenues, from transactions with ARL and ACF, compared to $182.8 million, or 22.6% of our total consolidated revenues, in 2008. ARL and ACF are affiliated companies controlled by Mr. Carl Icahn.

Our railcar services revenues increased 13.3% to $58.1 million in 2009 from $51.3 million in 2008. This increase was primarily attributable to expansions at our railcar repair facilities and the railcar repair work performed at one of our railcar manufacturing facilities. In 2009, our railcar services revenues included $14.4 million, or 3.4% of our total consolidated revenues, from transactions with ARL, as compared to $15.3 million, or 1.9% of our total consolidated revenues, in 2008. ARL is an affiliated company controlled by Mr. Carl Icahn.

Gross profit

Our gross profit decreased to $47.4 million in 2009 from $84.4 million in 2008. Our gross profit margin increased to 11.2% in 2009 from 10.4% in 2008. The increase in overall gross profit margin was primarily driven by an increase in railcar services and effective cost management, all partially offset by a decrease in railcar shipments.

Our gross profit margin for our manufacturing operations remained constant at 9.9% for both 2009 and 2008. This was primarily attributable to fixed overhead cost control measures and strong labor efficiencies at most of our manufacturing locations offset by lower volumes.

Our gross profit margin for railcar services increased to 19.1% in 2009 from 18.8% in 2008. This increase was primarily attributable to labor efficiencies, increased volume and a favorable mix of work.

Selling, administrative and other expenses

Our selling, administrative and other expenses decreased in 2009 to $25.1 million from $26.5 million in 2008. The decrease of $1.4 million was primarily attributable to decreased workforce and other cost cutting measures partially offset by a legal settlement and an increase in stock based compensation expense of $0.9 million. The increase in stock based compensation expense was due to increased expense for SARs, which was driven by a trend of increasing stock price levels in 2009 as compared to a trend of decreasing stock price levels in 2008.

Interest expense and interest income

Net interest expense for 2009 was $14.3 million, representing $6.6 million of interest income and $20.9 million of interest expense, as compared to $12.5 million of net interest expense for 2008, representing $7.8 million of interest income and $20.3 million of interest expense.

The $1.2 million decrease in interest income from 2008 to 2009 was primarily attributable to lower interest rates. The $0.6 million increase in interest expense from 2008 to 2009 was due to a decrease in capitalized interest.

Other income

During 2009, we sold corporate bonds we had invested in resulting in a realized gain of $23.9 million partially offset by a $2.9 million other-than-temporary impairment of our investment in Greenbrier common stock and a realized loss of less than $0.1 million on the sale of 7,000 shares of Greenbrier common stock. See further discussion of our short-term investment activity in Note 3 to our Consolidated Financial Statements.

(Loss) earnings from joint ventures

Loss from joint ventures was $6.8 million in 2009 as compared to earnings from joint ventures of $0.7 million in 2008. In 2009, due to weak demand, Axis reported a loss, of which our share was $5.0 million and Ohio Castings reported a loss, of which our share was $1.8 million. In 2008, Axis reported a loss, of which our share was $1.1 million and Ohio Castings reported net income, of which our share was $1.8 million. During 2009, Ohio Castings was temporarily idled due to the weak railcar market.

Income tax expense

In 2009, we reported income tax expense of $6.6 million as compared to $18.4 million for 2008. The effective tax rate for 2009 was 29.8% as compared to 37.0% for 2008. The decrease in the effective tax rate in 2009 was primarily attributable to a one-time $1.0 million adjustment to accrued taxes due to certain tax benefits becoming recognizable during 2009.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2010, we had net working capital of $362.8 million, including $318.8 million of cash and cash equivalents. Our cash position at December 31, 2010 consists of cash proceeds from our unsecured senior notes issued in February 2007, net cash proceeds from our short-term investment activity and overall cash used in operations.

Outstanding and Available Debt

Unsecured senior notes

In February 2007, we issued $275.0 million of unsecured senior fixed rate notes, which were subsequently exchanged for registered notes in March 2007 (Notes). The offering resulted in net proceeds to us of approximately $270.7 million. The terms of the Notes contain restrictive covenants, including limitations on our ability to incur additional debt, issue disqualified or preferred stock, make certain restricted payments and enter into certain significant transactions with stockholders and affiliates. As of December 31, 2010, our fixed charge coverage ratio, as defined and as measured on a rolling four-quarter basis, is less than 2.0 to 1.0 and based on this ratio, certain of these covenants, including our ability to incur additional debt, have become further restricted. As of December 31, 2010, and for the year then ended, we were in compliance with all of our covenants under the Notes.

Commencing on March 1, 2011, the redemption price is set at 103.75% of the principal amount of our unsecured senior notes plus accrued and unpaid interest, and declines annually until it is reduced to 100.0% of the principal amount of our unsecured senior notes plus accrued and unpaid interest from and after March 1, 2013. Our unsecured senior notes are due in full plus accrued unpaid interest on March 1, 2014.

Cash Flows from Operating Activities

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.

Our net cash used in operating activities for the year ended December 31, 2010 was $12.1 million. Our net loss of $27.0 million was impacted by non-cash items including depreciation and amortization expense of $24.3 million, joint venture losses of $7.8 million, stock based compensation of $5.4 million (relating to SARs that settle in cash) and other smaller items.

Cash used in operating activities included an increase of $13.3 million of accounts receivable (including those from affiliates), an increase of $9.9 million of inventory and an increase of $13.2 million of income taxes receivable. Cash provided by operating activities included an increase of $12.1 million in accounts payable (including those to affiliates), an increase in accrued expenses and taxes of $0.5 million, a decrease of $2.2 million in prepaid expenses and other current assets and a decrease of $0.8 million in interest receivable, due from affiliates.

The increase in accounts receivable and inventory was primarily due to increased sales and production levels in December 2010 as compared to December 2009. The increase in income taxes receivable was primarily due to our net loss of $27.0 million. The increase in accrued expenses and taxes was primarily due to an increase in accrued stock based compensation (relating to SARs that settle in cash) at December 31, 2010 compared to December 31, 2009. The increase in accounts payable is primarily due to an increase in production and inventory levels and the timing of payments in 2010 compared to 2009. The decrease in prepaid expenses and other current assets is primarily due to a decrease in advances to the workers’ compensation insurance carrier and the timing of corporate insurance payments in 2010 as compared to 2009. The decrease in interest receivable is primarily attributable to the sale of corporate bonds in 2009.

Cash Flow from Investing Activities

Net cash used in investing activities was $16.7 million for the year ended December 31, 2010. This amount includes $6.1 million of purchases of property, plant and equipment, $14.9 million of equity contributions and loans to our Ohio Castings, Axis, Amtek Railcar and USRC joint ventures, partially offset by a $4.2 million cash inflow from the sale of short-term investments. The $6.1 million in capital expenditures was primarily for the purchase of equipment at multiple locations and for projects to improve operating efficiencies and maintenance activities. Some of these purchases are described in further detail below under “Capital Expenditures.”

Capital expenditures

We continuously evaluate facility requirements based on our strategic plans, production requirements and market demand and may elect to change our level of capital investments in the future. These investments are all based on an analysis of the estimated rates of return and impact on our profitability. We could pursue opportunities to reduce our costs through vertical integration of component parts. From time to time, we may expand our business, domestically or abroad, by acquiring other businesses or pursuing other strategic growth opportunities including, without limitation, joint ventures.

Capital expenditures for the year ended December 31, 2010 were $6.1 million, including costs that were capitalized related to refurbishment and replacement of existing assets and facilities, improvements for cost reduction purposes and expansion activities at our railcar repair facilities that were completed during 2010.

Future Liquidity

We believe that our existing cash balance of $318.8 million will provide sufficient liquidity to meet our expected operating requirements over the next twelve months. We expect our future cash flows from operations to be impacted by the state of the credit markets and the overall economy, the number of our railcar orders and shipments and our production rates. Our future liquidity may also be impacted by the number of our new railcar orders leased versus sold.

Our long-term liquidity is contingent upon future operating performance and our ability to continue to meet financial covenants under our indenture and any other indebtedness we may enter into, and our ability to repay or refinance our indebtedness as it becomes due. We may also require additional capital in the future to fund capital expenditures, acquisitions or other investments. These capital requirements could be substantial.

Our operating performance may also be affected by other matters discussed under “Risk Factors,” and trends and uncertainties discussed in this discussion and analysis, as well as elsewhere in this annual report. These risks, trends and uncertainties may also materially adversely affect our long-term liquidity.

Our current capital expenditure plans for 2011 include projects that we expect will maintain equipment, improve efficiencies and reduce costs and various capital expenditures related to 2010 projects that have carried over into 2011. These capital expenditure plans may also include expenditures to further integrate our supply chain. We cannot assure that we will be able to complete any of our projects on a timely basis or within budget, if at all.

Other potential projects, including possible strategic transactions that could complement and expand our business units, will be evaluated to determine if the project or opportunity is right for us. We anticipate that any future expansion of our business will be financed through existing resources, cash flow from operations, term debt associated directly with that project or other new financing. We cannot guarantee that we will be able to meet existing financial covenants or obtain term debt or other new financing on favorable terms, if at all.

Dividends

During each quarter since our initial public offering in January 2006 until the second quarter of 2009, our board of directors declared cash dividends of $0.03 per share of our common stock to stockholders of record as of a given date. The last dividend was declared in May 2009 and paid in July 2009.

Subsequently, in August 2009, our board of directors indefinitely suspended our quarterly dividend payments and any decision to pay future dividends will be at the discretion of our board of directors and will depend upon our operating results, strategic plans, capital improvements, financial condition, debt covenants and other factors, including provisions of our indenture.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2010, and the effect that these obligations and commitments are expected to have on our liquidity and cash flow in future periods.

		Payments due by Period
																		After 5
Contractual Obligations		Total				1 year				2-3 years				4-5 years				years
		(in thousands)
Operating Lease Obligations 1		$	13,081			$	1,083			$	2,047			$	2,354			$	7,597
Purchase Obligations 2			—				—				—				—				—
Senior Unsecured Notes 3			275,000				—				—				275,000				—
Interest Payments on Senior Unsecured Notes 4			72,188				20,625				41,250				10,313				—
Pension and Postretirement Funding 5			7,924				1,205				2,583				2,453				1,683
Total		$	368,193			$	22,913			$	45,880			$	290,120			$	9,280

We have excluded from the contractual obligations table above, our gross amount of unrecognized tax benefits of $1.6 million. While it is uncertain as to the amount, if any, of these unrecognized tax benefits that will be settled by means of a cash payment, we do not currently expect any significant changes to our unrecognized tax benefits within the next twelve months.

In July 2007, we entered into an agreement with Axis to purchase new railcar axles. We do not have any minimum volume purchase requirements under this agreement.

Contingencies

In connection with our investment in Ohio Castings, we have guaranteed a $2.0 million state loan that provides for purchases of capital equipment, of which $0.2 million was outstanding as of December 31, 2010. The state loan is scheduled to be fully paid off in June 2011. The two other partners of Ohio Castings have made identical guarantees of this obligation.

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 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. Certain real property we acquired from ACF in 1994 has been involved in investigation and remediation activities to address contamination. ACF is an affiliate of Mr. Carl Icahn, the chairman of our board of directors and, through IELP, our principal beneficial stockholder. Substantially all of the issues identified relate to the use of this property prior to its transfer to us 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. As of the date of this report, we do not believe that we will incur material costs in connection with any investigation or remediation activities relating to these properties, but we cannot assure that this will be the case. If ACF fails to honor its obligations to us, we could be responsible for the cost of such remediation. 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.

We were named the defendant in a wrongful death lawsuit, Nicole Lerma v. American Railcar Industries, Inc., filed on August 17, 2007 in the Circuit Court of Greene County, Arkansas Civil Division. The court reached a verdict in our favor on May 24, 2010. The plaintiff did not appeal the decision within the timeframe allowed.

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 that if the outcome was unfavorable, could have a material adverse effect on our business, financial condition and results of operations.

Axis Loan

Axis entered into a credit agreement in December 2007 (as amended, the Axis Credit Agreement). During 2009, we, through ARI Component and the other initial partner acquired this loan from the lenders party thereto, with each party acquiring a 50.0% interest in the loan for $29.5 million, the then outstanding principal amount of the portion of the loan we acquired. The total commitment under the term loan is $60.0 million with an additional $10.0 million commitment under the revolving loan. ARI Component is responsible to fund 50.0% of the loan commitments. The balance outstanding on these loans, due to ARI Component, was $31.9 million of principal and $3.6 million of accrued interest, both as of December 31, 2010. ARI Component’s share of the remaining commitment on these loans was $3.1 million as of December 31, 2010. See Note 11 for further information regarding this transaction and the terms of the underlying loan.

We are in discussions with Axis and the other initial partner of Axis regarding the potential renegotiation of the term loans, as it is not currently anticipated that Axis will be able to repay the term loans in accordance with the Axis Credit Agreement, beginning March 31, 2011. We cannot guarantee that any renegotiation will be accomplished on commercially acceptable terms, if at all, or in a timely manner.

CRITICAL ACCOUNTING ESTIMATES AND POLICIES

We prepare our Consolidated Financial Statements in accordance with U.S. GAAP (Generally Accepted Accounting Principles). 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. Estimates and assumptions are periodically evaluated and may be adjusted in future periods. A summary of our significant accounting policies are described in Note 2 to our Consolidated Financial Statements included elsewhere in this annual report. 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 title transfer, which is when the risk for any damage or loss with respect to the railcars passes to the customer. Paint and lining work may be outsourced to an independent contractor and, as a result, the sale for the railcar may be recorded after customer acceptance when it leaves the manufacturing plant and the sale for the lining work may be separately recorded following completion of that work by the contractor, customer acceptance and final shipment. Revenues from railcar leasing are recognized on a straight-line basis over the life of the lease. 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 is recognized upon completion and shipment of railcars from our plants. Revenue for fleet management services is recognized as performed.

Inventory

Inventories are stated at the lower of cost or market, and include the cost of materials, direct labor and manufacturing overhead. We allocate fixed production overheads to the costs of conversion based on the normal capacity of our production facilities. If any of our production facilities are not operating at normal capacity, unallocated production overheads are recognized as a current period charge. 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. When recorded, our reserves are intended to reduce the carrying value of our inventory to its net realizable value.

Long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived assets may not be recoverable. During the year ended December 31, 2010, no triggering events occurred. The criteria for determining impairment of 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 long-lived assets. If the long-lived assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the long-lived assets exceeds the fair value of the long-lived assets. The estimated fair value of the long-lived assets is measured by estimating the present value of the future discounted cash flows to be generated.

The North American railcar market has been, and we expect it to continue to be highly cyclical, generally fluctuating in correlation with the U.S. economy. While the economy and the railcar market remained weak throughout 2010, we believe that this downturn is temporary, reflecting the cyclical nature of the industry, and that railcar orders will recover in the future. Independent third party industry analysts are also forecasting the railcar market to recover as the economy improves. As a result, at this time, we do not believe that the decline in our shipments and revenues, which we view as temporary, warrants an impairment analysis of our long-lived assets. Therefore, an impairment analysis was not performed for the year ended December 31, 2010. However, we intend to continue to monitor our long-lived assets for impairment in response to events or changes in circumstances.

Goodwill

At December 31, 2010, we had $7.2 million of goodwill recorded in conjunction with a past business acquisition, all allocated to a reporting unit that is part of our manufacturing operations segment. We evaluate goodwill for impairment at least annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Whether an impairment of goodwill is required is determined by comparing the carrying value of the assets to their fair value, which is determined using a combination of methods, including management’s best estimate of future discounted cash flows expected to result from the business. If the estimated fair value is less than the carrying value, goodwill is considered impaired and the impairment recognized equals such difference. We performed the annual impairment test as of March 1, 2010, noting no adjustment was required.

We utilized the market and income approaches and significant assumptions, discussed below, in the March 1, 2010 impairment test.

Market Approach

The market approach produces indications of value by applying multiples of enterprise value to revenue as well as enterprise value to earnings before depreciation, amortization, interest and taxes. The multiples indicate what investors are willing to pay for comparable publicly held companies. When adjusted for the risk level and growth potential of the subject company relative to the guideline companies, these multiples are a reasonable indication of the value an investor would attribute to the subject company.

Income Approach

The income approach considers the subject company’s future sales and earnings growth potential as the primary source of future cash flow. We prepared a five year financial projection for the reporting unit and used a discounted net cash flow method to determine the fair value. Net cash flow consists of after-tax operating income, plus depreciation, less capital expenditures and working capital needs. The discounted cash flow method considers a five-year projection of net cash flow and adds to those cash flows a residual value at the end of the projection period.

Significant estimates and assumptions used in the evaluation were forecasted revenues and profits, the weighted average cost of capital and tax rates. Forecasted revenues of the reporting unit were estimated based on historical trends of our plants that the reporting unit supplies parts to, which are driven by the railcar market forecast. Forecasted margins were based on historical experience. The reporting unit does not have a selling, administrative or executive staff, therefore, an estimate of salaries and benefits for key employees was added to selling, administrative and other costs. The weighted average cost of capital was calculated using our estimated cost of equity and debt.

All of the above estimates and assumptions were determined by management to be reasonable based on the knowledge and information at the time of the evaluation. As such, this carries a risk of uncertainty. There could be significant fluctuations in the cost of raw materials, unionization of our workforce or other factors that might significantly affect the reporting unit’s cost structure and negatively impact the projection of financial performance. If the railcar industry forecasts or our market share were to change significantly, the fair value of the reporting unit would be materially adversely impacted. Other events that might occur that could have a negative effect would be a natural disaster that would render the facility unusable, a significant litigation settlement, a significant workers’ compensation claim or other event that would result in a production shut down or significant expense to the reporting unit.

The March 1, 2010 evaluation equally weighted the values derived from each approach to arrive at the fair value of the reporting unit. The resulting fair value exceeded the carrying value by over 20% resulting in no impairment.

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. On a quarterly basis, we assess the adequacy of our warranty liability based on changes in these factors. Actual results differing from estimates could have a material effect on results from operations in the event that unforeseen warranty issues were to occur.

Income Taxes

For financial reporting purposes, income tax expense or benefit 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 from that 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 consolidated financial statements when management considers them probable of occurring and the amount reasonably estimable.

We recognize deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities. We regularly evaluate for recoverability our deferred tax assets and establish a valuation allowance, if necessary, based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of tax-planning strategies. We consider whether it is more likely than not that some portion or that all of the deferred tax assets will be realized. As of December 31, 2010, we had approximately $4.9 million in net deferred tax liabilities (net of $13.2 million of deferred tax assets). As of December 31, 2010, we have established a valuation allowance of $0.8 million for one deferred tax asset that is set to expire in 2011. For all other deferred tax assets, we consider it more likely than not that we will have taxable income in the future that will allow us to realize our deferred tax assets, and there are no other valuation allowances recorded at this time. It is possible that some or all of our deferred tax assets could ultimately expire unused. As of December 31, 2010, we had $14.9 million in current income taxes receivable and $0.2 million in long-term income taxes receivable.

Pension and Postretirement Benefits

Pension and other postretirement benefit costs and liabilities are dependent on assumptions used in calculating such amounts. The primary assumptions include factors such as discount rates, expected investment return on plan assets, mortality rates and retirement rates, as discussed below:

Discount rates

The discount rate assumptions used to determine the December 31, 2010 benefit obligations and the 2011 expense amounts were 5.25% for our pension plans and 5.31% for our postretirement benefit plans. We review these rates annually and adjust them to reflect current conditions. We deemed these rates appropriate based on the Citigroup Pension Discount curve analysis along with expected payments to retirees.

Expected return on plan assets

Our expected return on plan assets for our funded pension plans of 7.5% for 2010 is derived from detailed periodic studies, which include a review of asset allocation strategies, anticipated future long-term performance of individual asset classes, risks (standard deviations) and correlations of returns among the asset classes that comprise the plans’ asset mix. While the studies give appropriate consideration to recent plan performance and historical returns, the assumptions are primarily long-term, prospective rates of return.

Mortality and retirement rates

Mortality and retirement rates are based on actual and anticipated plan experience.

In accordance with GAAP, actual results that differ from the assumptions are accumulated and amortized over future periods and, therefore, generally affect recognized expense and the recorded obligation in future periods. While management believes that the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect our pension and postretirement obligations and future expense.

The following information illustrates the sensitivity to a change in certain assumptions for our pension plans:

						Effect on December 31,
		Effect on 2011 Pre-Tax				2010 Projected
Change in Assumption		Pension Expense				Benefit Obligation
		($ in thousands)
1% decrease in discount rate			171				2,463
1% increase in discount rate			(176	)			(2,243	)
1% decrease in expected return on assets			132				N/A
1% increase in expected return on assets			(132	)			N/A

The following information illustrates the sensitivity to a change in certain assumptions for our postretirement benefit plan:

		Effect on 2011 Pre-Tax				Effect on December 31,
		Postretirement Service				2010 Projected
Change in Assumption		Cost and Interest Cost				Benefit Obligation
		($ in thousands)
1% decrease in discount rate			—				13
1% increase in discount rate			—				(10	)

This sensitivity analysis reflects the effects of changing one assumption. Various economic factors and conditions often affect multiple assumptions simultaneously and the effects of changes in key assumptions are not necessarily linear.

Environmental

Certain real property we acquired from ACF in 1994 has been involved in investigation and remediation activities to address contamination. ACF is an affiliate of Mr. Carl Icahn, the chairman of our board of directors and, through IELP, our principal beneficial stockholder. Substantially all of the issues identified relate to the use of this property prior to its transfer to us 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. As of the date of this report, we do not believe that we will incur material costs in connection with any investigation or remediation activities relating to these properties, but we cannot assure that this will be the case. If ACF fails to honor its obligations to us, we could be responsible for the cost of such remediation. Further, we cannot assure that we will not become involved in future litigation or other proceedings, or that we will be able to recover under our indemnity provisions if we were found to be responsible or liable in any litigation or proceeding, or that such costs would not be material to us.

Stock Based Compensation

Our share-based awards have included stock options, SARs and restricted stock awards. We use the Black-Scholes model to estimate the fair value of our equity instrument awards and other share based awards issued under the 2005 Equity Incentive Plan. The Black-Scholes model requires estimates of the expected term of the equity award, future volatility, dividend yield, forfeiture rate and the risk-free interest rate. We estimate the expected term of SARs based on SEC Staff Accounting Bulletins Official Text Topic 14D2, which addressed the expected term aspect of the Black-Scholes model. It stated that companies that did not have adequate exercise history on equity instruments were allowed to use the “simplified method” prescribed by the SEC, which called for an average of the vesting period and the expiration period of grants with “plain vanilla” characteristics. These characteristics included service based vesting, instruments granted at the money along with certain other requirements.

Both our stock options and SARs have fair value estimates that are generated from the Black-Scholes calculation. This calculation requires inputs as mentioned above that may require some judgment or estimation. We use our best judgment at the time of the grant to estimate fair value on the stock options to record the expense of those options over the vesting period of those options. All SARs granted are classified as liabilities on the consolidated balance sheet, given that they settle in cash, and thus, must be revalued every period. As such, the fair value estimates on the SARs we granted to our employees are subject to volatility inherent in the stock price since it is based on current market values at the end of every period. Stock based compensation on all equity awards is expensed using a graded vesting method over the vesting period of the instrument.

As of December 31, 2010, all compensation costs related to stock options and restricted stock have been recognized. As of December 31, 2010, unrecognized compensation costs related to the unvested portion of outstanding SARs were approximately $2.8 million and are expected to be recognized over a weighted average period of approximately 26 months.

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 determined by the market close price. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instrument. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision.

Recent accounting pronouncements

In June 2009, the Financial Accounting Standards Board issued authoritative guidance to amend the accounting and disclosure requirements for variable interest entities (VIE). The new guidance requires on-going assessments to determine the primary beneficiary of a VIE and amends the primary beneficiary assessment and disclosure requirements. This guidance was effective for the first interim and annual reporting period that begins after November 15, 2009. This guidance did not have a material impact on the consolidated financial statements.

OFF BALANCE SHEET ARRANGEMENTS

There were no off balance sheet arrangements in 2010.

Item 7A:		Quantitative and Qualitative Disclosures About Market Risk

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 represents more than half of our direct manufacturing costs per railcar. Given the significant volatility in the price of raw materials, this exposure can affect our costs of production. We believe that the risk to our margins and profitability has been somewhat reduced by the variable pricing provisions in place with certain of our current railcar manufacturing contracts. These contracts 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 certain of our customers any increased raw material and component costs with respect to the railcars we plan to produce and deliver to them during 2011. We believe that we currently have excellent supplier relationships and do not currently anticipate that material constraints will limit our production capacity. Such constraints may exist if railcar production was to increase beyond current levels, or other economic changes were to occur that affect the availability of our raw materials.

Item 8:		Financial Statements and Supplementary Data

American Railcar Industries, Inc.

Index to Consolidated Financial Statements

		Page
Audited Consolidated Financial Statements of American Railcar Industries, Inc.
Report of Grant Thornton LLP Independent Registered Public Accounting Firm			38
Report of Grant Thornton LLP Independent Registered Public Accounting Firm			39
Consolidated Balance Sheets as of December 31, 2010 and 2009			40
Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008			41
Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008			42
Consolidated Statement of Stockholders’ Equity and Comprehensive Income for the years ended December 31, 2010, 2009 and 2008			43
Notes to Consolidated Financial Statements			44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
American Railcar Industries, Inc.

We have audited American Railcar Industries, Inc. and Subsidiaries’ (a North Dakota Corporation) internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). American Railcar Industries, Inc. and Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on American Railcar Industries, Inc. and Subsidiaries’ internal control over financial reporting 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 effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, American Railcar Industries, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of American Railcar Industries, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive (loss) income, and cash flows for each of the three years in the period ended December 31, 2010, and our report dated March 1, 2011 expressed an unqualified opinion.

/s/ GRANT THORNTON LLP

St. Louis, Missouri
March 1, 2011

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors
American Railcar Industries, Inc.

We have audited the accompanying consolidated balance sheets of American Railcar Industries, Inc. and Subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity and comprehensive (loss) income, and cash flows for each of the three years in the period ended December 31, 2010. 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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Railcar Industries, Inc. and Subsidiaries as of December 31, 2010 and 2009, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), American Railcar Industries, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 1, 2011 expressed an unqualified opinion.

/s/GRANT THORNTON LLP

St. Louis, Missouri
March 1, 2011

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

		As of
		December 31,				December 31,
		2010				2009
Assets
Current assets:
Cash and cash equivalents		$	318,758			$	347,290
Short-term investments — available for sale securities			—				3,802
Accounts receivable, net			21,002				11,409
Accounts receivable, due from affiliates			4,981				1,356
Income taxes receivable			14,939				1,768
Inventories, net			50,033				40,063
Deferred tax assets			3,029				2,018
Prepaid expenses and other current assets			2,654				4,898
Total current assets			415,396				412,604
Property, plant and equipment, net			181,255				199,349
Deferred debt issuance costs			1,951				2,568
Interest receivable, due from affiliates			187				982
Goodwill			7,169				7,169
Investment in and loans to joint ventures			48,169				41,155
Other assets			240				537
Total assets		$	654,367			$	664,364
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	29,334			$	16,874
Accounts payable, due to affiliates			275				576
Accrued expenses and taxes			5,095				4,515
Accrued compensation			11,054				8,799
Accrued interest expense			6,875				6,875
Total current liabilities			52,633				37,639
Senior unsecured notes			275,000				275,000
Deferred tax liability			7,938				7,120
Pension and post-retirement liabilities, net of current			6,707				6,279
Other liabilities			4,313				2,686
Total liabilities			346,591				328,724
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, 50,000,000 shares authorized, 21,316,296 and 21,302,296 shares issued and outstanding at December 31, 2010 and 2009, respectively			213				213
Additional paid-in capital			238,947				239,617
Retained earnings			67,209				94,215
Accumulated other comprehensive income			1,407				1,595
Total stockholders’ equity			307,776				335,640
Total liabilities and stockholders’ equity		$	654,367			$	664,364

See Notes to the Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

		For the Years Ended December 31,
		2010				2009				2008
Revenues:
Manufacturing operations (including revenues from affiliates of $81,905, $105,216 and $182,760 in 2010, 2009 and 2008, respectively)		$	206,094			$	365,329			$	757,505
Railcar services (including revenues from affiliates of $15,041, $14,434 and $15,338 in 2010, 2009 and 2008, respectively)			67,469				58,102				51,301
Total revenues			273,563				423,431				808,806
Cost of revenues:
Manufacturing operations			(210,269	)			(329,025	)			(682,744	)
Railcar services			(54,353	)			(47,015	)			(41,653	)
Total cost of revenues			(264,622	)			(376,040	)			(724,397	)
Gross profit			8,941				47,391				84,409
Selling, administrative and other (including costs from affiliates of $627, $616 and $606 in 2010, 2009 and 2008, respectively)			(25,591	)			(25,141	)			(26,535	)
(Loss) earnings from operations			(16,650	)			22,250				57,874
Interest income (including interest income from affiliates of $2,620, $986 and $34 in 2010, 2009 and 2008, respectively)			3,519				6,613				7,835
Interest expense			(21,275	)			(20,909	)			(20,299	)
Other income (including income related to affiliates of $17, $9 and zero in 2010, 2009 and 2008, respectively)			394				20,869				3,657
(Loss) earnings from joint ventures			(7,789	)			(6,797	)			718
(Loss) earnings before income tax expense			(41,801	)			22,026				49,785
Income tax benefit (expense)			14,795				(6,568	)			(18,403	)
Net (loss) earnings		$	(27,006	)		$	15,458			$	31,382
Net (loss) earnings per share — basic and diluted		$	(1.27	)		$	0.73			$	1.47
Weighted average shares outstanding — basic and diluted			21,302				21,302				21,302

See Notes to the Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

		For the Years Ended December 31,
		2010				2009				2008
Operating activities:
Net (loss) earnings		$	(27,006	)		$	15,458			$	31,382
Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:
Depreciation			23,597				23,405				20,148
Amortization of deferred costs			699				718				812
Loss on disposal of property, plant and equipment			33				222				308
Stock based compensation			5,358				1,174				473
Income related to reversal of stock based compensation for stock options			—				—				(411	)
Change in interest receivable, due from affiliates			796				(982	)			—
Change in joint venture investment as a result of loss (earnings)			7,789				6,797				(718	)
Unrealized loss (gain) on derivative assets			—				88				(88	)
(Benefit) provision for deferred income taxes			(438	)			1,492				1,093
Provision (adjustment) for losses on accounts receivable			113				(101	)			695
Item related to investing activities:
Realized loss (gain) on derivative assets			—				10				(684	)
Realized gain on sale of short-term investments — available for sale securities			(379	)			(23,825	)			(2,589	)
Impairment of short-term investments — available for sale securities			—				2,884				—
Changes in operating assets and liabilities:
Accounts receivable, net			(9,664	)			28,483				(6,976	)
Accounts receivable, due from affiliates			(3,625	)			8,928				6,892
Income taxes receivable			(13,171	)			(1,768	)			—
Inventories, net			(9,925	)			57,260				(3,869	)
Prepaid expenses and other current assets			2,244				331				(215	)
Accounts payable			12,446				(25,366	)			(5,667	)
Accounts payable, due to affiliates			(301	)			(4,617	)			2,326
Accrued expenses and taxes			(486	)			(5,517	)			1,980
Other			(221	)			(931	)			(289	)
Net cash (used in) provided by operating activities			(12,141	)			84,143				44,603
Investing activities:
Purchases of property, plant and equipment			(6,144	)			(15,047	)			(52,433	)
Sale of property, plant and equipment			163				71				4
Purchases of short-term investments — available for sale securities			—				(36,841	)			(27,857	)
Sales of short-term investments — available for sale securities			4,180				60,795				23,631
Realized (loss) gain on derivative assets			—				(10	)			684
Proceeds from repayment of note receivable from affiliate			—				—				658
Investments in and loans to joint ventures			(14,891	)			(35,810	)			(672	)
Sale of investment in joint venture			—				—				1,875
Net cash used in investing activities			(16,692	)			(26,842	)			(54,110	)
Financing activities:
Common stock dividends			—				(1,917	)			(2,556	)
Proceeds from stock option exercises			294				—				—
Repayment of debt			—				—				(8	)
Net cash provided by (used in) financing activities			294				(1,917	)			(2,564	)
Effect of exchange rate changes on cash and cash equivalents			7				118				(23	)
(Decrease) increase in cash and cash equivalents			(28,532	)			55,502				(12,094	)
Cash and cash equivalents at beginning of year			347,290				291,788				303,882
Cash and cash equivalents at end of year		$	318,758			$	347,290			$	291,788

See Notes to the Consolidated Financial Statements.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (LOSS)

(In thousands)

																						Accumulated
										Common								Additional				other				Total
		Comprehensive				Retained				Stock-				Common				paid-in				comprehensive				stockholders’
		income (loss)				earnings				Shares				stock				capital				income (loss)				equity
January 1, 2008						$	51,314				21,302			$	213			$	239,621			$	(160	)		$	290,988
Net earnings		$	31,382				31,382																				31,382
Currency translation adjustment			(428	)																			(428	)			(428	)
Unrealized loss on short-term investment, net of tax effect of $1,673			(2,577	)																			(2,577	)			(2,577	)
Minimum pension liability adjustment, net of tax effect of $1,249			(1,975	)																			(1,975	)			(1,975	)
Comprehensive income		$	26,402																								—
Effect of pension measurement date change							(105	)																			(105	)
Dividends on common stock							(2,556	)																			(2,556	)
Additional paid-in capital reduction due to stock option forfeiture																			(113	)							(113	)
Stock option expense																			109								109
Balance December 31, 2008						$	80,035				21,302			$	213			$	239,617			$	(5,140	)		$	314,725
Net earnings		$	15,458				15,458																				15,458
Currency translation adjustment			1,246																				1,246				1,246
Effect of short-term investment activity, net of tax effect of $478			888																				888				888
Impairment of short-term investments, net of tax effect of $1,197			1,687																				1,687				1,687
Minimum pension liability adjustment, net of tax effect of $1,509			2,914																				2,914				2,914
Comprehensive income		$	22,193																								—
Dividends on common stock							(1,278	)																			(1,278	)
Balance December 31, 2009						$	94,215				21,302			$	213			$	239,617			$	1,595			$	335,640
Net loss		$	(27,006	)			(27,006	)																			(27,006	)
Currency translation adjustment			511																				511				511
Minimum pension liability adjustment, net of tax effect of $243			(393	)																			(393	)			(393	)
Amortization of postretirement adjustment, net of tax effect of $189			(306	)																			(306	)			(306	)
Comprehensive loss		$	(27,194	)																							—
Proceeds from stock options exercises											14								294								294
Tax deficiency related to stock option exercises																			(34	)							(34	)
Purchase of fixed assets from affiliate																			(930	)							(930	)
Balance December 31, 2010						$	67,209				21,316			$	213			$	238,947			$	1,407			$	307,776