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0000950144-06-004382.txt : 200605040000950144-06-004382.hdr.sgml : 2006050420060504125359ACCESSION NUMBER:0000950144-06-004382CONFORMED SUBMISSION TYPE:8-KPUBLIC DOCUMENT COUNT:89CONFORMED PERIOD OF REPORT:20060504ITEM INFORMATION:Regulation FD DisclosureITEM INFORMATION:Financial Statements and ExhibitsFILED AS OF DATE:20060504DATE AS OF CHANGE:20060504
FILER:
COMPANY DATA:COMPANY CONFORMED NAME:RAILAMERICA INC /DECENTRAL INDEX KEY:0000887637STANDARD INDUSTRIAL CLASSIFICATION:RAILROADS, LINE-HAUL OPERATING [4011]IRS NUMBER:650328006STATE OF INCORPORATION:DEFISCAL YEAR END:1231
FILING VALUES:FORM TYPE:8-KSEC ACT:1934 ActSEC FILE NUMBER:001-32579FILM NUMBER:06807185
BUSINESS ADDRESS:STREET 1:5300 BROKEN SOUND BLVD NWCITY:BOCA RATONSTATE:FLZIP:33487BUSINESS PHONE:5619946015
MAIL ADDRESS:STREET 1:5300 BROKEN SOUND BLVD NWCITY:BOCA RATONSTATE:FLZIP:33487
FORMER COMPANY:FORMER CONFORMED NAME:RAILAMERICA INCDATE OF NAME CHANGE:19920724
8-K1g01245e8vk.htmRAILAMERICA, INC.
RailAmerica, Inc.
Table of Contents
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May4, 2006
RailAmerica, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
001-32579
65-0328006
(Commission File Number)
(IRS Employer Identification No.)
5300 Broken Sound Boulevard, N.W., Boca Raton, Florida 33487
(Address of Principal Executive Offices) (Zip Code)
(561)994-6015
(Registrants Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy thefiling obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule14d-2(b) under the Exchange Act (17 CFR240.14d-2(b))
o Pre-commencement communications pursuant to Rule13e-4(c) under the Exchange Act (17 CFR240.13e-4(c))
TABLE OF CONTENTS
Item7.01. RegulationFD DisclosureItem9.01. Financial Statements, Pro Forma Financial Information and ExhibitsSIGNATURESEx-99.1: Presentation to be given by the Company on May 4, 2006
Table of Contents
Item7.01. RegulationFD Disclosure
On May4, 2006, RailAmerica, Inc. (the Company) will be hosting an Analyst/Investor Workshopin Napa, California. At this workshop the Company will be giving a presentation which includesinformation regarding the Companys strategic and marketing initiatives as well as an operationaloverview. The purpose of this Form 8-K is to furnish such presentation. Attached as an exhibit tothis Form 8-K is the text of the presentation. This exhibit is incorporated herein by reference.
The attached presentation contains forward-looking statements regarding future events and theperformance of the Company that involve risks and uncertainties that could cause actual results andactions to differ materially, including, but not limited to, the Companys Process ImprovementProject, fuel costs, foreign currency risks, weather, casualties, ClassI congestion, failure tocomplete proposed acquisitions, failure to successfully integrate recent acquisitions, failure toservice debt, failure to complete asset sales, economic conditions, customer demand, increasedcompetition in the relevant market, tax benefits/credits and others. The Company assumes noobligation to update forward-looking information to reflect actual results, changes in assumptionsor changes in other factors affecting forward-looking information. If the Company does update anyforward-looking statement, no inference should be drawn that the Company will make additionalupdates with respect to that statement or any other forward-looking statements. We refer you to thedocuments that the Company files from time to time with the Securities and Exchange Commission,such as the Form 10-K, Form 10-Q and Form 8-K, which contain additional important factors thatcould cause its actual results to differ from its current expectations and from the forward-lookingstatements contained in the attached presentation.
The information in this Form 8-K and the exhibit attached hereto shall be deemed furnishedand not deemed filed for purposes of Section18 of the Securities Exchange Act of 1934, asamended, or otherwise subject to the liabilities of that section, nor shall it be deemedincorporated by reference in any Company filing under the Securities Act of 1933, as amended.
Item9.01. Financial Statements, Pro Forma Financial Information and Exhibits
(d)The following exhibit is being furnished herewith:
Exhibit No. Description
99.1
Presentation to be given by the Company on May4, 2006, atthe Analyst/Investor Workshop in Napa, California.
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned hereunto duly authorized.
RAILAMERICA, INC.
Date: May4, 2006
By:
/s/
Michael J. Howe
Name:
Michael J. Howe
Title:
Executive Vice Presidentand Chief Financial Officer (PrincipalFinancial Officer)
EX-99.12g01245exv99w1.htmEX-99.1: PRESENTATION TO BE GIVEN BY THE COMPANY ON MAY 4, 2006
exv99w1
RailAmerica 2006 Analyst/Investor Workshop
RailAmerica 2006 Analyst/Investor Workshop
Napa, California
May 4 - 5, 2006
Forward-Looking
Statements and Forecasts
This presentation contains forward-looking statements, forecasts, and information regarding future events and the futureperformance of RailAmerica, Inc. ("RailAmerica" or the "Company") that involve risks and uncertainties that could cause actualresults and actions to differ materially, including, but not limited to, the Company's Process Improvement Project, Class Icongestion, fuel costs, tax benefits/credits, foreign currency risks, weather, casualties, failure to complete proposedacquisitions, failure to successfully integrate acquisitions, failure to service debt, failure to complete asset sales, economicconditions, customer demand, increased competition in the relevant market and others. The Company refers you to the on From10-K and 10-Q that it files from time to time with the Securities and Exchange Commission,, which contain additional importantfactors that could cause actual results to differ from its current expectations and from the forward-looking statements made inthis presentation. Statements about the Company's future expectations contained in this presentation other than statements ofhistorical facts, are forward-looking statements with-in the meaning of the federal securities laws.
The forecasts included in this presentation have been prepared by RailAmerica's management based upon estimates andassumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic,competitive and regulatory uncertainties and contingencies, many of which are beyond the control of the Company, and arebased upon assumptions with respect to future business decisions that are subject to change. These forecasts are notnecessarily indicative of the Company's future results of operations.
The Company cautions against placing undue reliance on forward-looking statements or forecasts, which reflect the Company'scurrent beliefs and are based on information currently available to it as of the date a forward-looking statement or forecast ismade. The Company does not intend to update or otherwise revise these statements or forecasts to reflect circumstancesexisting after the date hereof or to reflect the occurrence of future events, even in the event the assumptions or estimatesunderlying them are shown to be in error. In the event that the Company does update any forward-looking statements orforecasts, no inference should be made that the Company will make additional updates with respect to that statement, relatedmatters, or any other forward-looking statements or forecasts.
Agenda
Biographies
CHARLES SWINBURN
Chief Executive Officer
Mr. Swinburn, has served as Chief Executive Officer of RailAmerica sinceAugust 1, 2004, and as a director of RailAmerica since February1995. Prior to joining RailAmerica as CEO, Mr. Swinburn was a litigatorwith the law firm Morgan, Lewis & Bockius, in Washington D.C. From 1990through 1993, Mr. Swinburn served as a consultant to private industry andthe government while attending law school. Prior to that time, Mr.Swinburn started up and ran Rollins Field Services, a nationwide hazardouswaste clean up firm.
Previously, Mr. Swinburn served in various capacities at the U.S.Department of Transportation, most recently as Deputy Assistant Secretaryfor Policy and International Affairs. While with the Department ofTransportation, he was instrumental in the Department's successful effortsto deregulate the railroad industry and to revitalize rail freight service inthe Northeast. He also served on Amtrak's Board of Directors and was amember of the management committee of the Alaska Railroad.
Mr. Swinburn received his B.A. degree from Princeton University in 1969,his M.B.A. from Harvard Business School in 1971 and his J.D. from theUniversity of Pennsylvania in 1993. During six years of service as anofficer in the United States Marine Corps, four of those as a pilot, Mr.Swinburn was awarded the Distinguished Flying Cross twice and the AirMedal 35 times, flying over 700 combat missions in the Vietnam war.
THOMAS L. SCHLOSSER
Senior Vice President
Western Corridor
Mr. Schlosser joined RailAmerica in the capacity of Senior VicePresident in January 2002 when RailAmerica purchased ParkSierraCorporation. From 1997 to 2002, he was President and ChiefOperating Officer of ParkSierra Rail Group. Prior to that, he wasemployed by California Northern Railroad Company, Grand TrunkWestern Railroad Company and Detroit, Toledo and IrontonRailroad where he held a variety of positions.
Mr. Schlosser is currently Vice Chairman of the American ShortLine and Regional Railroad Association's executive committee.
DONALD D. REDFEARN
President, Chief Administrative Officer and Secretary
Mr. Redfearn has served as RailAmerica's President since June2004, as Chief Administrative Officer since January 2000 andExecutive Vice President and Secretary since December 1994. Hehas served as an officer and director of the Company since itsformation in April 1992. Mr. Redfearn joined the Company on afull-time basis in January 1996. From September 1993 untilSeptember 1995, Mr. Redfearn served as President of JenexFinancial Services, Inc., a financial consulting firm. From 1984 untilSeptember 1993, Mr. Redfearn served in various capacities at BocaRaton Capital Corporation, a publicly traded venture capital firmand former stockholder of the Company, including Senior VicePresident, Assistant Secretary and Treasurer.
Mr. Redfearn received his B.A. degree in Business Administrationfrom the University of Miami and graduated from the School ofBanking of the South at Louisiana State University. Mr. Redfearnhas been a member of the United Way Leadership Circle since2000.
R. JOE CONKLIN
Executive Vice President
Chief Operating Officer
Mr. Conklin joined RailAmerica in March 2000 as Senior VicePresident - North America Rail Group after serving as VicePresident, Field Operations for RailTex, Inc. from August 1999 toMarch 2000.
Prior to joining RailAmerica, Mr. Conklin was employed byBurlington Northern Santa Fe Railway (BNSF) and its predecessorrailroads for 23 years. Mr. Conklin held a variety of positions withBNSF, including General Superintendent Transportation, DivisionSuperintendent and Assistant General Superintendent ofTransportation. Mr. Conklin began his railroad career in 1976 inBNSF's engineering department at Gillette, Wyoming.
RAY E. STEPHENS
Vice President, Service Design
Mr. Stephens joined RailAmerica in March 2005 from BurlingtonNorthern Sante Fe Railway where he served for over 20 years inpositions of increasing responsibility. Mr. Stephens held a varietyof positions, including Trainmaster, General SuperintendentTransportation, and Assistant Vice President Seattle region. From2001 to late 2004, Mr. Stephens was Assistant Vice PresidentOperations North Lines, where he was responsible for 10,000 routemiles, 250 transportation management employees, 4,000 uniontransportation employees and a $480 million annual operatingbudget.
Mr. Stephens received his B.S./B.A. degree in AdministrativeManagement from the University of Missouri-Columbia. Mr.Stephens, who was Academic All Big Eight Conference, playedvarsity football for four years.
RICHARD TIMMONS
President
American Short Line and Regional Railroad Association
Richard Timmons became President of American Short Line and Regional RailroadAssociation (ASLRRA) September 3, 2002. ASLRRA is a trade association thatrepresents 425 short line and regional railroads, which provide local rail service in allsections of the country. Mr. Timmons represents the interests of these railroadsbefore Congress, Federal, and State regulatory agencies and on the policy andtechnical committees of the U.S. railroad industry. The association also serves as aliaison between its member railroads and the large railroads of this nation.
Prior to joining ASLRRA, Mr. Timmons was employed with Norfolk Southern Railroadas the corporation's chief political liaison to the states of Pennsylvania and New York,representing the corporation's interests in the areas of legislative and regulatorypolicy. In addition, Mr. Timmons served for 32 years in the United States Army,retiring as a Lieutenant General. His career included a range of operational, politicaland staff assignments, including Commander of the Eighth Army in Korea, Chief ofStaff of the United Nations Command in Korea, Executive Officer to the Secretary ofthe Army and Army liaison officer to the U.S. Senate.
Mr. Timmons is a graduate of the U.S. Army War College and holds a bachelor'sdegree in history from Virginia Military Institute, a master's in personneladministration from Central Michigan University and a master's in journalism from theUniversity of Alabama. He has completed postgraduate work at the Yale School ofManagement, the John F. Kennedy School of Government at Harvard University andthe U.S. Army Command and General Staff College.
Richard F. Timmons, President of the American Short Line and Regional RailroadAssociation, has been named 2006 Railroader of the Year by railroad industry tradejournal Railway Age.
THOMAS C. OWEN
Senior Vice President, Marketing & Sales
Mr. Owen joined RailAmerica in September 2001 from CSXTransportation and its predecessor railroads where he served for16 years. Mr. Owen held a variety of positions, including AssistantVice President, Sales & Marketing - Agricultural Products. Mr.Owen was also CSXT's first participant to a one-year internationalExecutive Exchange Program where he served as the CommercialManager for British Steel in Wales, U.K.
Mr. Owen received his B.S. degree in Industrial Management fromthe Georgia Institute of Technology and his M.B.A. degree from theFuqua School of Business at Duke University.
KEVIN D. GOINS
National Director, Distribution Services
Mr. Goins joined RailAmerica in 2004 with over 15 years ofwarehouse operations and logistics experience. In his presentcapacity he oversees RailAmerica's North American Warehousingand transloading initiative for all 42 railroads. Prior to RailAmerica,Mr. Goins spent 4 years with CSX Transportation and 8 years withNucor Corporation in various operations and logistics roles. Mr.Goins has a high level of logistics and operations experience,including two Nucor mill startups, and overseeing CSXTransportation's MetalNet Warehouse network for the Eastern halfof the United States, Canada, and Mexico.
Mr. Goins served his country in the United States Marine Corps andholds a B.S. in Business Administration from St. Louis University.
KENDALL "KEN" F. KOFF
Vice President, Engineering
Ken Koff joined RailAmerica in March 2004. Mr. Koff currentlyserves as Vice President Engineering - RailAmerica OperationsSupport Group. In his role Mr. Koff is responsible for directing andoverseeing all maintenance and engineering activities forRailAmerica. Mr. Koff began his railroad career 30 years ago (1975)starting in the Engineering Department with the Chicago &Northwestern Transportation Company. Mr. Koff has advancedthrough a number of management positions during his careerincluding Roadmaster, Engineer Track & Structures, ProjectEngineer, Chief Engineer, Vice President Engineering, and VicePresident of Operations.
Mr. Koff is a contributor to railroad-related organizations andactively supports many of these groups. He previously served as amember of the Roadmasters' board of directors and is aRoadmasters' Association past president. Ken holds membership inthe American Association of Railroad Superintendents and theAmerican Railway and Maintenance of Way Association.
MICHAEL J. HOWE
Executive Vice President
Chief Financial Officer
Mr. Howe joined RailAmerica in May 2000 with over 30 years ofexperience in finance, operations and systems management,including 18 years in the transportation industry. Prior to joiningRailAmerica, Mr. Howe was Vice President & Chief Financial Officerat SurfAir, Inc., an international transportation services company.Prior to SurfAir, he was employed by Circle International and wasresponsible for Treasury and financial reporting. He was alsoemployed by CSX Corporation for seven years in various seniormanagement positions, including Chief Financial Officer at CSXLogistics Information Services and Senior Director at CSXCommercial Services.
Earlier in his career, Mr. Howe spent several years with theinternational accounting firm of Deloitte & Touche in both the taxand audit areas. Mr. Howe, a CPA, received both his B.B.A. andM.B.A. in Accounting from the University of North Florida.
RailAmerica's Five Year StrategicPlan
Charles Swinburn
Chief Executive Officer
RailAmerica's Vision
TO BE THE PREEMINENT PROVIDER OFNORTH AMERICAN SHORT LINE ANDREGIONAL RAILROAD SERVICES, AS SEEN BYOUR CUSTOMERS, EMPLOYEES, SUPPLIERS,SHAREHOLDERS AND CLASS I RAILROADPARTNERS
RailAmerica's Core Values & StrategicPriorities
Safety must always come ahead of production
Our Employees are individually and collectively important andare to be treated with respect and dignity
Superior Customer Service is essential to our growth andprofitability
Successful Local Management of our railroads is key to oursuccess as a corporation
Our Shareholders deserve our best efforts
Safety
Five Year Goals & Metrics
Maintain our personal injury frequency ratio below 2.0
Improve our casualty and insurance expenses to below 4% ofrevenue
Five Year Strategic Initiatives
Training
Risk based capital investment
Communication
Dedicated Safety Funds
Service
Five Year Goals & Metrics
Average at least 5% annual "same railroad" revenue growth
By 2010, achieve railcar performance measures consistent withthe rail industry (Class I's)
Five Year Strategic Initiatives
RADS
Shipper projects
Class I cooperation
Scheduled railroading
Superior customer service
Cost Control
Five Year Goals & Metrics
Improve the efficiency and cost-effectiveness of our railroadoperations
Reduce our operating ratio to 80% or less by 2010
Five Year Strategic Initiatives
Remote control
One man crews
Increased IT usage
Dashboard
Scheduled railroading
Improve car turn times
Asset Utilization
Five Year Goals & Metrics
Implement system-wide car performance measures by 2008
Average car days on-line
Car performance vs. plan
Achieve 93% locomotive availability
Five Year Strategic Initiatives
Improve car turn times
Maintain roads fit for purpose
Optimum efficiency plans
Right size locomotive fleets
Consider new high HP locomotives
Capital Structure
Five Year Goals & Metrics
Maintain net debt to capital at 55% or lower
Interest expense not to exceed 5% of revenue
By 2010, bring the leverage ratio to below 3.40
Five Year Strategic Initiatives
Increase revenue, profitability and cash flow through priorinitiatives
Pay down debt
State / community loans and grants
Maintain Liquidity
Five Year Goals & Metrics
Produce annual operating cash flow (EBITDA minus CapitalExpenditures) of at least 15% of revenue by 2010
Five Year Strategic Initiatives
Increase revenue, profitability and cash flow through priorinitiatives
Optimize capital program ROI
Process Improvement Project
Five Year Goals & Metrics
Enhance simplicity and effectiveness of our business processes
Implement strategic purchasing
Reduce our administrative costs
Enhance efficiency / effectiveness of our organizationalstructure
Track Maintenance Tax Credit Extension
Five Year Goals & Metrics
Obtain an extension of the track maintenance investment taxcredit for 2008 and future years
Five Year Strategic Initiatives
Support ASLRRA in legislative efforts
Individual railroad managers and employees communicate withelected representatives
Enlist support of our suppliers
Employees
Five Year Goals & Metrics
Fully develop our employees' talents
Continue to improve and implement our employeecommunication program
Obtain willing employee participation in achieving ourcorporate vision and goals
Five Year Strategic Initiatives
Training at all levels
Management Development Programs
Increased communication
Information Technology
Five Year Goals & Metrics
By 2007, fully integrate the use of IT into our operations andcorporate management to improve productivity
Five Year Strategic Initiatives
Implement Management Tools
Dashboard
Scorecard
Planning
Budgeting
Support Operating Improvements
Handhelds
Shipper Tools
Trackside Readers
Service Scheduling
Acquisitions/Dispositions
Five Year Goals & Metrics
Through acquisitions, average at least 5% annual revenuegrowth
Through dispositions of non-performing railroads, increaseprofitability of entire portfolio of railroads
Five Year Strategic Initiatives
Acquisition focus on:
Complementing existing railroads
Strong cash flow, solid customer base, low capital needs
Pricing freedom
Existing railroads:
Programs to turn around non-performers
Dispose of properties that cannot be turned around
Process Improvement Project (PIP)
Donald Redfearn
President
Case for Change
RailAmerica has grown through acquisitions
Many railroads had their own processes, proceduresand organization
Evolved into duplicative roles and functions
Have grown corporate staff to support acquired lines
Resulted in:
Complexity
Inefficiency
Increased SG&A
Diversified accountability
Five Year Plan
PIP as Strategic Initiative
Objective: Improve Efficiency and Profitability
Board of Directors approved plan in Q4 2005
Engaged iServiceX in late 2005
Analysis phase began in Q1 2006
Design phase in Q2 2006
Implementation planning in Q2 and Q3 2006
Implementation to commence in the second half of theyear
The Process
Formed 5 work groups to focus on specific areas
Teams consist of several cross functional members
The 5 work groups are
Organizational Effectiveness
Strategic Sourcing
Order to Cash
Purchase to Pay
Information Technology
Current Expectations
Currently projected to result in savings of $10 to $15million annually, to be realized beginning in 2007
Approximately 2/3 of the savings estimated to be realizedfrom reduction in operating costs
Approximately 1/3 of the savings estimated to be realizedfrom reduction of capital costs
Summary
The Process Improvement Project is projected toimprove efficiency and enhance shareholder value
Safety
Joe Conklin
Executive Vice President
Chief Operating Officer
Total Reportable Derailments and Injuries
2005
2006
2006
2005
25
16
16
7
First Quarter FRA Reportable TrainIncidents
First Quarter FRA ReportablePersonal Injuries
2005 2006 RA 3.49 1.51 Shortline 3.78 3.34 Industry 2.1 1.84
Per 200,000 person hours worked
First Quarter Personal Injury Frequency Ratio
Safety Training Improvements
Computer Based Training (CBT)
Engineer School - National Academy of RailroadScience
Ground School Program Enhancements
Derailment Prevention & Analysis Training
Focused Operations Testing
Railroad Security Training
Service Design
Ray Stephens
Vice President,
Service Design
Role of Service Design
Develop and implement performance and operationalmetrics to reduce costs, improve asset utilization andcustomer service
Develop and lead implementation of servicescheduling
Lead implementation of IT initiatives for theOperations Group in the areas of cost reduction andservice improvement
Performance / Operational Metrics
Daily Operations Dashboard
Web based with interactive drill down capability
Carloads / Revenue
Railcar inventories
Delayed cars
Cycle times
Value for all levels of the Company
Future development
Expense metrics
Real time data
Cycle Time vs. Car Hire
Car hire and cycle times have been trending down
RailAmerica car hire budget for 2006 = $22 million
Class I's are demanding reduced car cycles from the short lines
2005 average car cycle time = 8 days
2006 target is .5 day reduction in cycle time
2007 target is an additional .5 day reduction in cycle time
One day reduction in cycle time represents 12.5% decrease
All roads have cycle time reduction targets and are currentlybeing measured vs. these targets
Q1 2006 car hire 4.2% of revenue vs. 5.8% of revenue in Q12005
Cycle Time vs. Car Hire
August 2004 - March 2006
A Changing Environment for Railroad Services
Class I leaders acknowledge the dramatic change inthe demand for their services and are altering theirbehavior accordingly
"Today our company has more business demand than weare able to fulfill - a situation that I haven't seen during my45-year career." - Dick Davidson, Union Pacific
"We will price around those who do not understand the fulllogistics chain." - Rob Ritchie, Canadian Pacific
"The fundamental difference between the new managementand the old was that the new people saw themselves as assetmanagers rather than railroad operators." - Larry Kaufman,commenting on BNSF
Service Scheduling
Developing in-house with RailAmerica IT Department
Will measure each railroad's performance against apreset service plan
Each railroad will generate an on-plan percentage thatwill roll up to the RailAmerica level
RailAmerica will have the ability to publish daily,weekly, M-T-D and Y-T-D on-plan percentage reports
Service scheduling will eliminate the so called "blackhole"
Will provide the ability to refine cycle targets by road
Operations Group IT Initiatives
Train crew handheld event reporting
Shipper tools
AEI installations
One man crew operations
Remote control locomotive operations
Dashboard Demonstration
The RailAmerica dashboard was recentlydemonstrated for one of our Class I partners and asenior level executive from that railroad commented, "I wish we had something like this."
Marketing & Sales
Tom Owen
Senior Vice President
Marketing & Sales
It All Starts With The Customer
RailAmerica has roughly 1,700 activefreight paying customers
Top 10 = 29% of all carloads
Top 100 = 69%
No national accounts (only a fewcustomers have facilities on multipleRailAmerica roads)
The number of customers per roadvaries from as few as 6 up to 180
The Class I's are our customers inmany cases
2005 Top 10 Accounts
In 2005, RailAmerica Interchanged 1.2 Million Carloadswith the Class I roads
To Serve our Dispersed Customer Base, RailAmerica's SalesForce is Strategically Positioned Across North America
Marketing & Sales Managers
SDIY
VCRR
CFNR
SJVR
ARZC
CORP
PSAP
CSCD
OTVR
KYLE
MNA
AGR
DGNO
TNER
KRR
EARY
CPDR
SCRF
VSRR
NCVA
CA
TPW
ISRR
IORY
CIND
HESR
MSR
MMRR
GR
SOR
GEXR
OVR
NECR
CSO
CBNS
CERA
CFE
PCN
RSS
BXN
MSTR
Increased pricing freedom
Capital investment in customer projects
Industrial development progress
Expansion of RailAmerica Distribution Services
There Have Been Several Significant CommercialDevelopments in the Past Year that will Impact Growth
Improvement driven by:
Negotiation with Class I carrier
Disproportionate traffic growth on free pricing roads
We will be seeking to drive this figure even higher
Possible renegotiation of certain handling lineagreements
Acquisition growth to include pricing freedom
Prioritize industrial development growth on free pricingroads
The Percent of Total Traffic Where RailAmericaControls Pricing Increased From 27% to 34%
Created a pool of capital dollars to fund high ROI projectsspecifically tied to committed carload growth
Projects compete for the funds based on ROI and strategicvalue
In 2005, RailAmerica invested:
$4.4 MM in 9 major projects
....that will generate 24K carloads, $7.0 MM revenueannually
....with an average ROI well above our hurdle rate of15%
Investing Our Own Capital into Projects withCustomers has Successfully Grown Traffic
Our Industrial Development Focus is Gaining Tractionand Yielding Attractive Results
Since Q1 2005
Announcements on 14 major projects with annualizedtraffic of 39,000 cls, $15.0MM revenue
Includes both green field and expansion projects
Project pipeline looks strong
Online site database nearing completion
Placing additional resources on ID
Our Recent Wins Reflect Considerable DiversityAcross Commodities, Customers, and Geography
Our Project Pipeline Reflects an Increasing Intereston Roads with Access to Multiple Class I Railroads
Offer alternatives in the face of Class I service problems
Insure long term competitiveness of freight rates
Multiply the effective sourcing and shipping options
RailAmerica Distribution Services
Kevin Goins
National Director,
Distribution Services
RailAmerica Distribution Services (RADS)
Work with warehouses and transloaders to extendmarket reach for our customers
Call on National Accounts to generate newopportunities for RailAmerica properties
Provide logistic solutions for on- and off-linecustomers to better utilize rail
Lead effort for RailAmerica's industrial developmentgrowth
A Brief History
Began efforts in 2004
Inventoried all warehouses & transloaders
Initiated calls on national accounts
GE, Regal Beloit, Blue Linx, Nucor, Alcoa, 84Lumber, GM, Sysco Foods, etc.
Generated wealth of new leads; project pipeline grew
Succeeded in converting projects into new traffic
Added two Directors in Q4 2005 to manage growth
Projects Coming Online
MNA Springfield, MO
New 50,000 sq ft climate controlled warehouse
Q3 '06 1,000 new cls / yr
ARZC Phoenix, AZ
Attracted new traffic to existing transload
Q2 '06 1,200 new cls / yr
CFE Stark County, IN
Sysco Foods building new 600,000 sq ft D.C.
Q4 '07 1,200 new cls in the first year
Five year projection of 3,300 cls / yr
Projects in the Pipeline
CFE Remington, IN
New multi-commodity transload center to service the Chicago andsurrounding areas 1,125 cls/yr
New bulk terminal to service large chemical companies and autoindustry 800 cls/yr
KRR Durant, OK
New auto parts distribution center to service Dallas-Fort Worth area1,500 cls/yr
MNA Springfield, MO
Sugar processing plant to serve food manufacturers w/i 150 mileradius 1,000 cls/yr
AGR Mobile, AL
New 10 acre transload focused on MS/LA rebuilding
Q3 '06 1,350 cls/yr
Advantages For Customers
Large selection of North American warehouses
Access to multiple Class I's via RADS transloaders
Logistics help penetrating new markets
Site selection for new plants or new distribution
centers
New website allows shippers access to specific
information on all warehouses and transloaders
www.rads.railamerica.com
RADS - Right Product at the Right Time
Customers - Provides them alternatives for shippingby rail
Class I RR's - Better asset utilization and marketpenetration with less work
RailAmerica - Creates new ways to generaterevenue-short and long term
Engineering
Ken Koff
Vice President,
Engineering
Capital Investment in the Physical Plant
Our physical plant capital spending falls intothe three following categories:
Maintenance capital - Routine recurring capital investmentthat replaces track and structures to allow the physical plantto remain in constant safe state of repair.
Capital improvement - Investment in the physical plant of therailroad that results in an addition or a betterment/upgrade tothe physical plant.
Business Development - Investment in the assets of aRailAmerica company that result in a ROI of 15% or more.
Capital
What drives our capital spending?
Safety
Risk management
Fit for purpose
Achieving railroad optimum efficiency
Lease requirements
Standards of track quality required under terms of the lease
Investment in assets
Revenue enhancement high ROI projects
Regulatory requirements
Complying with FRA, EPA, State, and local laws and regulations
Capital Process & Timeline
May 15 - Capital request forms are available to local railroadmanagers
July 15 - Completed forms are submitted to the Regional ChiefEngineers
September 10 - joint inspection complete and prioritized,estimated and sent to Administrative Chief Engineer
October 1 - First draft estimates are complete and in review byVice President Engineering
Prior to November 1 - plan is revised and finalized in scope
November 15 - Final capital plan is complete
Capital Process & Timeline (cont.)
Approved Projects sheets are sent to Purchasing
Purchasing note time requirements, total material needs
Purchase requisition created by purchasing
Using RA's Standard Bidding Documents contractcapital is competitively bid and awarded
Safety - Risk Management
Development and review of the risk profile ofour Railroads
Safety trend/history
Commodities handled
Speed of operation
Rail condition
Geography
CAPITAL -- The RailAmerica Advantage
Chief Engineerdevelops plansand contracts
EmpowerLocal Mgmt
Develop &Monitor CapitalProgram
BetterCapitalUtilization
Moreunits forsame $
OptimizedCapital andRiskManagement
ProductivityImprovements
Capital Targeted SpecificallyToward Risk Mitigation
Targeted Capital Investment
Derailment Grid
Basic Criteria
High Frequency > 6 incidents
High Cost > $25,000per incident (average)
80/20 Rule & Trends
Focused Capital Investment
RailAmerica has achieved a reduction in track causedderailments. In part this is attributable to focused riskbased investment in our track structure
RESULTS
Comparing 2005 to 2006 - 1st quarter, RailAmerica hadachieved an improvement of 62.5% less track causedderailments
(same store comparison FRA reportable track caused derailments)
2006 - Assigning Capital
Capital Bucket
Rail Replacement
Ties installation
Track Surfacing
Bridge Repair
All other projects
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$100 $
$20.0 M
$18.3 M
$5.8 M
$3.2 M
$6.4 M
$53.7 M
Total 2006 Capx
To the Right places for the Right reasons
FY 2006 Capital Plan by
Major Work Items
Major Work ItemsMajor Work Items
Tie Replacement and Rail Installation accountfor approximately 71.4% of Capital Spend
Physical Plant Improvements
Recent Improvements.....
In 2004, 17.5% of RailAmerica's main-line wasbolted 100 lb. rail or lighter rail (rolled between 1900- - 1940)
In 2006, RailAmerica has reduced the total 100 lb. orlighter rail to approximately 14.5% of its system rail
Physical Plant Improvements
Future improvements .........
Strong emphasis on rail
2006 Rail program - This year we will lay 60.39 track miles- -- $20.0 million
Many railroads will benefit
OVRR is in year 2 of a 5 year program to replace 150 miles of 100lb. bolted rail
CORP is in year 2 of a 5 year program to replace over 40 miles of100 lb. bolted and curve rail
Other railroads benefiting - GEXR, NECR, KRR, SJVR. etc.
Capital Process - Now & Going Forward
Continue to focus on managing risk and ROI
Continue to update multi-year plans for railroads
Identifying material and services (contract labor) so as tobetter lever our acquisition position
Aggressively pursue procurement options
Material purchasing - Tie and Rail Strategy
Contract Labor Competitive Bidding
Long term contracts
Strategic alliances; other options
Aggressively pursue public/private partnerships usingFederal, State, and local programs
Improving the Operating Ratio and
Free Cash Flow
Mike Howe
Chief Financial Officer
2010 Operating Ratio and
Free Cash Flow Targets
An operating ratio of 80% or lower
Improve free cash flow from 3.75% to 10% ofrevenue*
Cash flow is defined as operating income plus depreciation & amortization and thebook value of sold assets, less cash interest, cash taxes and capital expenditures
Projected Operating Ratio Improvement
Operating Ratio Improvement - Revenue
Operating leverage from top line growth
Acquisitions
Target of 5% per year
Class I divestitures
Industrial companies
Stand alone short lines
Organic
Target of 5% per year
RADS
Industrial Development
Targeted capital investments
Increasing pricing freedom
Increased car velocity (dashboard)
Greater assessorial charges (i.e. demurrage)
Improved Processes (PIP)
Operating Ratio Improvement - Expenses
Labor - 30.9% of revenue
PIP
Organizational effectiveness
More efficient processes
Increased use of technology
Handhelds
Shipper tools
Service scheduling
Trackside readers
Equipment Rents - 12.1% of revenue
Car management
Locomotive maintenance
Service Design
Operating Ratio Improvement - Expenses(continued)
Purchased Services - 7.7% of revenue
PIP
Strategic sourcing
Diesel Fuel - 11.0% of revenue
Hedging
Operating practices
Strategic sourcing
Casualty and Insurance - 5.5% of revenue
Safety
Claim management best practices
Total cost of insurance
Materials - 2.4% of revenue
PIP
Strategic sourcing
Operating Ratio Improvement - Expenses(continued)
Joint Facilities - 2.9% of revenue
Operating practices
Other Expenses - 8.3% of revenue
PIP
Strategic sourcing of T&E
Improved process efficiency
Depreciation - 7.4% of revenue
PIP
Strategic sourcing
Locomotive Strategy
Risk Adjusted Capital Expenditures
Projected Cash Flow Improvement
Improved Operating Ratio at 80%
No Federal cash taxes in 2010 or before
Except some small amount of AMT
Reduced debt or interest rate equals reduced cash uses
Risk adjusted approach to allocating capital
Improved working capital management (PIP)
RailAmerica 2006 Analyst/Investor Workshop
Napa, California
May 4 - 5, 2006
May 4 - 5, 2006May 4 - 5, 2006
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