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American Railcar Industries' CEO Discusses Q2 2012 Results - Earnings Call Transcript

There has been a recent slowdown of orders for covered hoppers and railcar builders are managing production rates to focus on fulfilling orders in the existing backlog. A recent report by the Chemical Weekly indicated that significant new ethanol capacity in the form of new plants will be coming online between 2013 and 2017. These new plants are expected to add over 20 billion pounds of capacity to the market. We expect this will generate new orders for classic covered hopper railcars as the industry currently has a shortage of this railcar type.

ARI’s backlog continues to remain strong with 6,800 railcars on order for both sale and lease at the end of June. We received orders for approximately 2,810 railcars during the second quarter of 2012. At the end of June, we had approximately 1,620 railcars in our backlog to be manufactured for our lease customers.

We continue to heavily invest in our railcar lease fleet, offering to our customers another avenue to use our quality products. We have booked our first hopper orders to be delivered in the first quarter of 2013 and we’re quoting new tank car railcar orders for delivery in late 2013 and into 2014.

We continue to benefit from vertical integration projects that we put in place over the past several years significantly improving margins as production volumes have reached higher levels. These projects included internally manufactured tank heads, railcar axels and castings producing other railcar fabricated components and assembling our own wheel sets.

During the past 18 to 24 months, we have hired a significant number of employees to ramp our production to current levels. These workers have been well trained and are working efficiently. Our railcar manufacturing facilities are in close proximity giving us the additional flexibility to move workers between hopper and tank railcar manufacturing plants as demand requires.

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