FMR Joe Frye, Jr. Transportation Solutions, Inc. V.P. - - PowerPoint PPT Presentation

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FMR Joe Frye, Jr. Transportation Solutions, Inc. V.P. - - PowerPoint PPT Presentation

Nov 23, 2023 124 likes •335 views

FMR Joe Frye, Jr. Transportation Solutions, Inc. V.P. Transportation & Logistics Railroad Perspective: Past Defines the Future FMR Transportation Solutions FMR Transportation Solutions, Inc. FMR Mission FMR Transportation Solutions

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FMR

Transportation Solutions

Railroad Perspective: Past Defines the Future

FMR

Transportation Solutions, Inc.

Joe Frye, Jr. V.P. Transportation & Logistics

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FMR

FMR Mission FMR

Transportation Solutions

Transportation Solutions, Inc.

  • FMR Transportation Solutions is a non-asset based consulting group located

in Roanoke, VA offering transportation management, supply chain analysis, logistical strategies, and consulting services designed to enhance client- based operations.

  • Our goal is to offer single-source logistical support focused on transportation

savings and improved asset utilization while increasing client value.

  • FMR’s business is based on building solid relationships with our customers

while meeting their unique business requirements.

  • The cornerstone of the FMR organization is the dedication and integrity

demonstrated by it’s founding partners.

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`

Outline

 Brief Railroad Regulatory History  Railroad Traffic Volumes  Issues Facing the Rail Industry  2017 Outlook  Summary

FMR

Presentation Outline FMR

Transportation Solutions

Transportation Solutions, Inc.

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This presentation contains forward-looking statements. These forward- looking statements may include statements of goals, intentions, earnings expectations, and industry expectations. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions. Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are

  • made. Because forward-looking statements are subject to assumptions and

uncertainties, actual results or future events could differ, possibly materially, from those that we anticipate in our forward-looking statements.

FMR

Forward-Looking Statements FMR

Transportation Solutions

Transportation Solutions, Inc.

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“Those who fail to learn from history are doomed to repeat it.”

Paraphrased statement of Sir Winston Churchill

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Quote From History FMR

Transportation Solutions

Transportation Solutions, Inc.

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Transportation Act of 1958

 Revised Sec. 15a of the Interstate Commerce Act (rule of rate making).

Ingot Molds Court Decision (1965)

 ICC determined rail rate to be unlawful since it did not cover fully allocated costs and because it impinged upon the low cost mode’s ability to assert its inherent cost advantage.

Regional Railroad Reorganization Act of 1973 (The “3-R” Act)

 Interim funding for bankrupt railroads; authorized creation of the Consolidated Rail Corporation (Conrail).

The Railroad Revitalization & Regulatory Reform Act of 1976 (The“4-R” Act)

 Established basic outlines of regulatory reform in the rail industry.  Gave final approval for operation of Conrail (effective 4/1/76).

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Significant Regulatory Actions FMR

Transportation Solutions

Transportation Solutions, Inc.

Significant Regulatory Actions Impacting the Railroad Industry

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The Staggers Rail Act of 1980 (and its continuing impact)

 Rates ‒ ICC/STB maintained the authority to set maximum rate levels. ‒ Allowed for railroad contract rates. ‒ Today’s average rail rate is 42% lower (inflation-adjusted) than in 1980. ‒ Enabled rail carriers to reinvest > $600 billion into operations since 1980.  Ease of Abandonment ‒ Increased ease of Class-1 railroads to divest themselves of unprofitable and light density rail lines. ‒ Re-emergence of Short Line Railroads. ‒ Currently > 500 short line & regional railroads (approx. 48,000 total rail miles).  Safety (post 1980) ‒ Train accident rate reduced 78% (39% lower since 2000). ‒ Employee injury rate 84% lower (down 48% since 2000). ‒ Grade crossing accidents reduced 81% (42% lower since 2000).

FMR

Significant Regulatory Actions FMR

Transportation Solutions

Transportation Solutions, Inc.

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Overall Rail Volume FMR

Transportation Solutions Source: Association of American Railroads

5,000 10,000 15,000 20,000 25,000 30,000 35,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 31,459 30,625 26,005 29,209 29,997 28,375 28,830 30,221 29,440 26,587 Carloads (000)

Railroad Volume (Class-1)

Transportation Solutions, Inc.

FMR

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Coal Traffic FMR

Transportation Solutions Source: Association of American Railroads (2016 segment data unavailable)

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 7,480 7,713 6,842 7,065 7,055 6,204 5,952 6,110 5,442 Carloads (000)

Coal Volume

Transportation Solutions, Inc.

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  • Steady decline

(post 2008 peak)

  • Reduced export coal
  • Impact of natural gas
  • 300+ coal-fired units

retired since 2012

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Chemical Traffic FMR

Transportation Solutions Source: Association of American Railroads (2016 segment data unavailable)

500 1,000 1,500 2,000 2,500 3,000 3,500 2007 2008 2009 2010 2011 2012 2013 2014 2015 2,756 2,645 2,418 2,814 2,912 2,887 3,205 3,349 3,289 Carloads (000)

Chemicals Volume

Transportation Solutions, Inc.

FMR

  • Growth in Crude & NGL

(2012 thru 2015)

  • Strengthened

petrochemical and resins market

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Agriculture & Consumer Products Traffic FMR

Transportation Solutions Source: Association of American Railroads (2016 segment data unavailable)

500 1,000 1,500 2,000 2,500 3,000 3,500 2007 2008 2009 2010 2011 2012 2013 2014 2015 3,174 3,227 2,993 3,377 3,304 3,087 3,047 3,218 3,161 Carloads (000)

AG Volumes

Transportation Solutions, Inc.

FMR

  • 2007 - 2008 record corn

demand

  • 2012 & 2013 US drought

severely limited domestic grain production

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Intermodal Traffic FMR

Transportation Solutions Source: Association of American Railroads (2016 segment data unavailable)

2,000 4,000 6,000 8,000 10,000 12,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 11,167 10,636 8,943 10,042 10,478 10,127 10,401 10,964 11,234 Carloads (000)

Intermodal Volume

Transportation Solutions, Inc.

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  • Steady growth

(pre & post recession)

  • Growth via highway

conversions

  • Increased CapEX

(routes, new or expanded terminals)

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2015 Rail Segment Volume FMR

Transportation Solutions Source: Association of American Railroads (2016 segment data unavailable)

Transportation Solutions, Inc.

FMR

3,161 3,727 5,442 1,065 3,289 11,234 1,522

2015 Rail Segment Volume

AG METCON Coal CH Intermodal

Carloads (000)

Auto PPR

  • Intermodal comprised 38%
  • f rail volume in 2015

(compared to 32% in 2008)

  • Coal comprised 19% of rail

volume in 2015 (compared to 25% in 2008)

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Rail Volume (‘15 vs ‘07) FMR

Transportation Solutions Source: Association of American Railroads (2016 segment data unavailable)

Transportation Solutions, Inc.

FMR

  • 0.4%
  • 6.0%
  • 27.2%
  • 3.9%

19.3% 0.6%

  • 15.9%
  • 30.0%
  • 20.0%
  • 10.0%

0.0% 10.0% 20.0% 30.0%

Segment Volume (‘15 vs ‘07)

AG METCON Coal Paper/Forest Chemicals Intermodal Auto

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 Political and Economic Uncertainties  Changing Commodity Mix  Increased Regulation and “Open Access”  Investment in Positive Train Control (“PTC”)  Electronically-Controlled Pneumatic Brake Mandate (“ECP”)

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Railroad Industry Issues FMR

Transportation Solutions

Transportation Solutions, Inc.

Issues Facing the Railroad Industry

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Intermodal

 Tightening truck capacity  Growth forecast above GDP  Challenged international market

Coal

 Coal comps encouraging with market normalization  Natural gas pricing pressures  Export favorable due to global supply pressure

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Commodity Outlook FMR

Transportation Solutions

Transportation Solutions, Inc.

2017 Commodity Outlook

Industrial Products

 Gains in plastics and associated feed stocks  Continued crude and NGL headwinds (pipelines)  Flat auto market  Optimistic grain harvest (increased exports)  Modest gains in construction & housing  Improvement in metals  Phosphates/fertilizers growth

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Outlook FMR

Transportation Solutions

Transportation Solutions, Inc.

2017 Railroad Outlook

Operations

 Reduced CapEX  Continued focus on productivity gains  Ongoing asset rationalization  Continued alignment of resources with demand

Economic Picture

 2 ½ - 3% volume growth  RPU growth > rail inflation

Investor Expectations

 Deliver shareholder value (long-term)  Improved operating ratio  Judicious cost control management

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Closing Thoughts

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Conclusion FMR

Transportation Solutions

Transportation Solutions, Inc.

While 2017 should show modest growth, the railroads are going through a difficult period and are somewhat reinventing themselves. The challenges of a changing commodity mix and potential regulatory mandates are significant, and any attempt to increase regulation will ultimately be detrimental to the rail industry. Today’s railroads are more efficient, productive and safer than ever before. However, increased regulation could impede the railroads’ ability to earn the capital needed to continue reinvestment in their infrastructure, which would impact service and safety. This would be harmful to the railroads, to rail shippers, and to the public as a whole. So as we look to 2017 and to the future of America’s rail system, let’s not ignore the lessons learned, or lessons that should have been learned from the past.

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FMR

Contact Information

FMR

Transportation Solutions

Transportation Solutions, Inc.

FMR Transportation Solutions, Inc.

3959 Electric Road, SW, Suite: 207 Roanoke, VA 24018

Joe Frye, Jr. (540) 556-3087 jlfrye@fmrtrans.com Randy McFarland (540) 556-3088 rlmcfarland@fmrtrans.com Bob Raber (540) 266-8053 rhraber@fmrtrans.com

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FMR

Transportation Solu lutions, In Inc.

FMR

Transportation Solutions

Thank You…..

Joe Frye, Jr. V.P. Transportation & Logistics