12 rai fec presentation

8/10/2019 12 RAI FEC Presentation

1/15

Company Overview


2/15

Todays discussion covers four topics

1) Background

2) Improvements made at RailAmerica to date

3) Things were working on

4) Our plans going forward

1


3/15


4/15

3

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


5/15

4

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


6/15

5

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


7/15

And revenues have been growing

6

Fortress

Acquisition

2/2007

Freight Revenues ($mil)

355 378 406 419

457

235 238

2004 2005 2006 2007 2008F

654695

RailAmerica

FECR


8/15

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

7

Largest

del ivers


9/15


10/15

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

9


11/15

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

10


12/15

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

11


13/15

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

12

Goal: Become a High-Performance Organization


14/15

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

13


15/15

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.

14

12 rai fec presentation

Documents