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Company Overview
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Todays discussion covers four topics
1) Background
2) Improvements made at RailAmerica to date
3) Things were working on
4) Our plans going forward
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Fortress sees value in railroads
Favorable MacroEnvironment
Significant pricing power
Growing businesses, with continued growth in key commoditiescoal,grain, chemicals; coming soon: Honda automobiles
Limited supply: No new North American railroads (high replacement cost)
High fuel prices and increasing highway congestion further strengthenrailroads competitive position (RRs are 4x more fuel-efficient than trucks)
Long-Lived, IrreplaceableAssets
Irreplaceable infrastructure
High barriers to entry with cost of constructing new railroads prohibitivelyexpensive ($1-2mm per mile + land)
Valuable Real Estate &Right-of-Way
Revenue-growth opportunities
Substantial additional value potential
Short Lines Greater free cash flow Lower cost of operations and capex
Opportunities for improvements
Operational ImprovementPotential
Centralize key functions
Control capital spending
Streamline corporate structure
Fortress Investment Thesis
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The company operates a portfolio of 42 individual railroads in 26states and three Canadian provinces
Sizes range from 13 miles in total length to 604 miles
FECR is one of the 42 railroads and the largest revenue andEBITDA contributor in the RailAmerica family
351 miles of mainline trackbetween Miami and Jacksonville
One of North Americas
best-performing regionals
Further diversifies the portfolio
RailAmerica (minus FECR) owns or leases approximately 7,800track miles and serves over 2,300 customers
RailAmerica operates in 26 states and Canada
West Region
Southeast Region
FEC Region
Mideast Region
Northeast Region
Central Region
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7.3%
5.7%
5.4%
4.9%
4.3%3.9%
3.1%
8.6% 8.8%
9.1%
18.1%
7.5%
3.5%
3.7%
6.1%
The rails serve different customers and carry different commodities
The railroads have diverse sources of revenue
Well Diversified Revenue MixRailAmerica, Inc. 2007 Freight Revenue by Commodity (Total: $654 million)
Intermodal
Aggregates
CoalBridge
Chemicals
Metals
Auto
Farm Products
Food
Paper
Lumber
Ores
Petroleum
Minerals
Other
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And revenues have been growing
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Fortress
Acquisition
2/2007
Freight Revenues ($mil)
355 378 406 419
457
235 238
2004 2005 2006 2007 2008F
654695
RailAmerica
FECR
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Each railroad now contributes to earnings
No single property accounts for more than 10% of EBITDA
We are not a network
Portfolio diversified by commodity, by customer, by geography,and by property
% of EBITDA for Each Property
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Largest
del ivers
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We started with several underperforming propertiesand have whittled the list to three
Operating Ratio
Ranges 2006 2007 2008 YTD
+90 percent 8 4 3
Below 70 percent 15 16 21
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Case Study: West Coast Property
Written-off as unmanageable and too complicated
Operating ratio is now 17 points better
Added strong field leadership
Brought clarity of purpose
Focused on safety and operating rules
Improved service brought more business and customer growth
Began billing and collecting for all of our services Judiciously applied capital
Mastered and applied governing contracts
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Case Study: Midwest Property
Within RailAmerica the property was believed to be a perennial loser
Operating ratio has improved by 13 points
Brought in strong leadership and good, accountable management
Focused on caring, operating practices, education and training Intelligently added capital in modest amounts
Mastered and applied governing contracts
Nurtured customers yielding growth thru service
Controlled costs
Established pricing excellence and hands-on marketing
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Objective: Make RailAmerica better each day
What we are working on:
Focus on people, customers, assets, and operational excellence
Create value
Strengthen relationships with Class Is
Special attention on underperforming assets
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Goal: Become a High-Performance Organization
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Our plans going forward
Primary focus will be building the value of our $1.1B investment inthe railroad industry
Will consider other North American railroad acquisitions ifattractive
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Two last advertisements
1) We are an ideal place for industrial development
Tailored serviceWe do it your way
Sites located on short lines give the customers connections tomultiple Class Is.
Short lines have become the driveway to industrial developmentnobody stops on the expressways!
Short lines are not capacity-constrained
2) Remember the Section 45G Railroad Track Maintenance Credit
Three-year legislation expired 12/31/07
Goal: improve rail service to 12,000 short line-served employers
Strong bi-partisan support, but extension not yet enacted
Thank you.
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