Rails Response to COVID-19 A Joint Webinar from FTR & RFC Rails - PowerPoint PPT Presentation

Rail’s Response to COVID-19 A Joint Webinar from FTR & RFC

Rail’s Response to COVID-19 A Joint Webinar from FTR & RFC Eric Starks Todd Tranausky David Nahass William Geiger FTR Chairman & CEO FTR VP of Rail & Intermodal RFC President RFC Senior VP

Agenda § Economy & Recovery § Rail Equipment Finance Conference Takeaways § Rail Freight & Equipment Outlook § Q&A

Economy

Real GDP Q/Q change, seasonally adjusted annual rate 30.0% 13.9% 20.0% 7.9% 10.0% 4.9% 4.7% 4.4% 4.1% 0.0% -4.8% -10.0% -20.0% -22.0% -30.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 2020 2020 2020 2021 2021 2021 2021 Current Forecast Prior Forecast Source: FTR; Witte Econometrics Download Slides at: www.FTRintel.com 7

GDP Goods Transport Sector Q/Q change, seasonally adjusted annual rate 40.0% 30.0% 16.3% 20.0% 10.2% 9.1% 8.9% 8.7% 7.6% 10.0% 0.0% -10.0% -4.2% -20.0% -30.0% -40.0% -50.0% -32.0% -60.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 2020 2020 2020 2021 2021 2021 2021 Current Forecast Prior Forecast Source: FTR; Witte Econometrics Download Slides at: www.FTRintel.com 8

Industrial Production Q/Q change, index, seasonally adjusted annual rate 20.0% 9.8% 9.0% 7.1% 7.2% 6.0% 10.0% 0.0% -10.0% -1.3% -7.1% -20.0% -30.0% -40.0% -36.6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2020 2020 2020 2020 2021 2021 2021 2021 Current Forecast Prior Forecast Source: FTR; Witte Econometrics Download Slides at: www.FTRintel.com 9

UNEMPLOYMENT DURING COVID-19 Weekly initial claims for unemployment insurance benefits, seasonally adjusted 8,000 6,867 6,615 7,000 6,000 5,237 5,000 4,442 3,867 4,000 Thousands 3,307 3,176 2,687 3,000 2,446 2,126 1,877 2,000 Previous high = 695,000 in October 1982 1,000 0 3/21/2020 3/28/2020 4/4/2020 4/11/2020 4/18/2020 4/25/2020 5/2/2020 5/9/2020 5/16/2020 5/23/2020 5/30/2020 Source: FTR; U.S. Department of Labor Download Slides at: www.FTRintel.com 10

WTI CRUDE PRICE (PER BARREL) Daily price $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 F M A M J J A S O N D 1 F M A M J J A S O N D 2 F M A M J ($10) 9 0 ($20) April 20, 2020: -$37.63 ($30) Lowest price ever ($40) ($50) Source: FTR; Energy Information Administration (EIA) Download Slides at: www.FTRintel.com 11

Key Takeaways from the 2020 Rail Equipment Finance Conference A Pre- & Post-Pandemic Look FTR & RFC Joint Webinar June 9, 2020

1) Loadings: seeking stability 13

2) PSR: velocity & car demand Source: Matt Leonard / Supply Chain Dive, data from the STB 14

3) New Car Demand: Weakening 100,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 - 1979 89,581 1980 80,824 1981 46,300 1982 17,400 1983 5,900 1984 12,000 1985 11,600 1986 11,900 1987 13,800 1988 22,500 1989 29,649 1990 31,900 1991 24,589 1992 25,261 Total Railcar Deliveries 1993 35,226 1994 53,269 1995 60,615 1996 57,342 1997 49,891 1998 74,832 1999 74,044 2000 55,791 2001 34,258 2002 17,714 2003 32,176 2004 46,871 2005 68,612 2006 74,731 2007 63,156 2008 59,954 2009 21,682 2010 16,523 2011 47,350 2012 58,904 2013 53,050 2014 67,282 Source: ARCI Committee of RSI 2015 82,296 2016 62,433 2017 45,086 2018 50,803 2019 58,026 2020 39,000 ~21,000 15

4) Rental Rates: continued stress – ICE BoA BBB US Corp Index Option Adjusted Spread – ICE BoA Single-A US Corp Index Option Adjusted Spread PSR + Loadings = + Over supply 16

5) Equipment Investors: seek growth & profit Pre-pandemic Post-pandemic • Optimism • On lease assets • Long-term asset values • Secondary & new car market sales dichotomy • Utilization • Ongoing activity • Cash Flow • Downward price pressure 17

6) Equipment Investors: modal shift concern Pre-pandemic Post-pandemic • Lacking partnership • Oil Price Collapse • Collaborative growth • Sum of fears • Lessors under attack • Modal shift threat • Customers don’t feel valued • Net/net: potential for permanent lost carloads 18

7) Intermodal: growth & expansion? 19

8) Locomotive: continued struggles Pre-pandemic Post-pandemic • Tier IV pricing • Similar dynamics to railcars • PSR & loadings challenges • EPA emissions • Remanufacturing bright spot • Auctions likely 20

Rail Freight & Equipment Outlook 21

Why do you buy a Rail Car? TO MOVE FREIGHT! 22

TOTAL: COVID-19 Rail Freight Recovery Index N.A. Carload (100 = Full recovery to pre-pandemic volumes) 105 Rail Freight Recovery Index: Carload Full Recovery 100 Phase 95 Restart 90 Phase 85 Shutdown 80 Phase 75 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / / / / / / / / / / / / / / / / 1 8 5 1 8 5 2 9 7 4 1 8 4 1 8 5 2 9 6 3 0 6 3 0 7 1 1 2 / / 1 2 2 / 1 2 2 / 1 1 2 / / 1 2 3 / 1 2 2 2 2 3 4 5 5 6 / / / / / / / / / / / / / / / / / / 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 Last Updated: 6/3/2020 Source: AAR, FTR Analysis by FTR | Transportation Intelligence™ of AAR Weekly Rail Traffic Report Download Slides at: www.FTRintel.com 23

INTERMODAL: COVID-19 Rail Freight Recovery Index N.A. INTERMODAL (100 = Full recovery to pre-pandemic volumes) Rail Freight Recovery Index: Intermodal 110 105 Full Recovery 100 Phase 95 Restart Phase 90 Shutdown Phase 85 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / / / / / / / / / / / / / / / / 1 8 5 1 8 5 2 9 7 4 1 8 4 1 8 5 2 9 6 3 0 6 3 0 7 1 1 2 / / 1 2 2 / 1 2 2 / 1 1 2 / / 1 2 3 / 1 2 2 2 2 3 4 5 5 6 / / / / / / / / / / / / / / / / / / 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 Last Updated: 6/3/2020 Source: AAR, FTR Analysis by FTR | Transportation Intelligence™ of AAR Weekly Rail Traffic Report Download Slides at: www.FTRintel.com 24

ESF: COVID-19 Rail Freight Recovery Index Economically Sensitive Freight (excludes Ag/Petro/Coal) (100 = Full recovery to pre-pandemic volumes) 105 Rail Freight Recovery Index: ESF Full Recovery 100 Phase 95 90 Restart Phase 85 80 Shutdown 75 Phase 70 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / / / / / / / / / / / / / / / / 1 8 5 1 8 5 2 9 7 4 1 8 4 1 8 5 2 9 6 3 0 6 3 0 7 1 1 2 / / 1 2 2 / 1 2 2 / 1 1 2 / / 1 2 3 / 1 2 2 2 2 3 4 5 5 6 / / / / / / / / / / / / / / / / / / 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 Last Updated: 6/3/2020 Source: AAR, FTR Analysis by FTR | Transportation Intelligence™ of AAR Weekly Rail Traffic Report Download Slides at: www.FTRintel.com 25

AUTOMOTIVE: COVID-19 Rail Freight Recovery Index (100 = Full recovery to pre-pandemic volumes) 120 Rail Freight Recovery Index: Automotive Full Recovery 100 Phase 80 Restart 60 Phase 40 Shutdown 20 Phase 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / / / / / / / / / / / / / / / / 1 8 5 1 8 5 2 9 7 4 1 8 4 1 8 5 2 9 6 3 0 6 3 0 7 1 1 2 / / 1 2 2 / 1 2 2 / 1 1 2 / / 1 2 3 / 1 2 2 2 2 3 4 5 5 6 / / / / / / / / / / / / / / / / / / 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 Last Updated: 6/3/2020 Source: AAR, FTR Analysis by FTR | Transportation Intelligence™ of AAR Weekly Rail Traffic Report Download Slides at: www.FTRintel.com 26

Grain Carloads Exceeding 5 Year Average N.A. Grain Carloads 4 Week Avg. Ending 05/30/20 5% 38 36 0% 34 32 Thousands -5% 30 Y/Y % 28 -10% 26 24 -15% 22 -20% 20 9 9 9 9 0 0 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 - - - - - - - - - - - - - - - - - - - - - - - - - - n n n n l l g g g p p t t v v c c b b b r r r r y y u u c c a a p p a a u u u u u e e o o e e a a e e e J J O O M M A A N N D D M M J J A A A S S J J F F F Carloads Vs. Prev. Year Carloads 5 Year Average - 4 Week Mov Avg. Source: AAR, FTR Analysis Download Slides at: www.FTRintel.com 27