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Watco Perishable Express Midwest Association of Rail Shippers July 17, 2018 Customer First Safety Always! 1 Agenda Quick (I promise) Watco Overview Existing perishable supply chain issues Perishable Express supply chain


  1. Watco Perishable Express – Midwest Association of Rail Shippers July 17, 2018 Customer First – Safety Always! 1

  2. Agenda • Quick (I promise) Watco Overview • Existing perishable supply chain issues • Perishable Express supply chain • Questions/Discussion

  3. Customer First Foundation Principles Customer First - Safety Always! Value Our Customers Earn their business every day by providing Safe, Accurate, and • Timely Service Create solutions that deliver value for our Customers and Watco • over the long-term Value Our People SAFE Service, ALWAYS • Be Honest and Fair • Safely Improve Every Day Always do the right thing and always try to find a better way • Build a tremendous future by making decisions that protect our • Customer, Team, Community, and Environment Customer First – Safety Always! 3

  4. Watco Overview Geographic Diversity We operate 38 railroads, 31 mechanical shops, 87 terminal and port operations, and 31 switching locations in 37 States, 1 Canadian Province, Australia, and Mexico. Customer ♦ Commodity ♦ Geography ♦ Service 4

  5. Watco Overview Unique Services Offering Transportation Services Terminal and Port Services 53% of 2017 Revenue 25% of 2017 Revenue Second largest short line operator (largest private 87 Terminal and Port Operations • • operator) in North America with 38 short line railroads Transload Terminals • in the U.S. and Australia Marine Terminals • +440 locomotives Specialty Terminals • • +4,200 railcars • +5,100 track miles Service Offerings • • +1MM car loads transported or switched Dedicated Contract Facilities • • 31 switching and other operations Merchant Terminals • • Operations in 29 states and Australia • Mechanical Services Supply Chain Services 14% of 2017 Revenue 8% of 2017 Revenue Opportunity to solve Customer supply chain needs Formed joint venture with The Greenbrier Companies • • effective July 18, 2014 (“GBW”) Provides repair and maintenance services 15 Supply Chain Service Centers • • End to End solutions 31 mechanical facilities • • Tank Shops • Freight Car Shops +25,000 Licensed Motor Carriers Under • • TTX Shops Contract • Mobile Repair • Customer ♦ Commodity ♦ Geography ♦ Service 5

  6. Perishable Express Goals Initially: Protecting rail shipments of our shortline’s biggest commodity (fresh potatoes) by innovating service, facilities, and equipment (the Supply Chain) Now: Building a new supply chain using the most efficient equipment and new technology with the rail industry’s best service to build incremental perishable rail traffic

  7. Eastern Idaho Railroad

  8. Things To Fix • Service: 20-30 day one-way cycle time • Equipment: Retiring 50’ ARMN fleet - 2.5:1 truck conversion • Damage: Consistent 5-20% damage per rail load due to existing slip sheet pallet loading • Dunnage: Customers paying $500-750 per load to secure slip sheet pallet loading (particularly in fresh shipments) • Loading/Unloading Time: Slip sheet pallet loading/unloading takes 5-6 people 4-5 hours per car to load/unload a car

  9. Learn About The Market: Current Truck Lanes

  10. Burley, ID - Market Customer First – Safety Always!

  11. Idaho Falls, ID - Market Customer First – Safety Always!

  12. What We Did • Service: Use Class 1 premium service • Equipment: Use the largest most efficient car • Damage/Dunnage/Loading & Unloading: Use new technology Bundled Pricing and Tracking “Farm to Table” •

  13. What is Perishable Express • Burley Warehouse • New Car, New Equipment (Racks, Rollers) – 72ft Car, 4:1 truck conversion – Racks, eliminates dunnage, speeds loading, reduces damage, gets down to “pallet level” customer) • Service (UP “Food Train”, NS Intermodal) • Bundled “farm to table” pricing and tracking using Watco Supply Chain Services • Not just fresh potatoes now (butter, onions, frozen potatoes) – flexible to ship multiple commodities per load Truck competitive product to the Northeast (and soon to be Midwest)for Idaho Shippers

  14. Train Service UP Food Train • – EIRR connects at Minidoka and Idaho Falls and hits the Food Train at Pocatello – < 3 days Pocatello to Global 3/Rochelle; Train ZWACYP – UP intermodal train (Rochelle – Chicago) connects to NS; Train IG3AH NS Intermodal • – Cars run on priority UPS intermodal trains Ashland Ave/Chicago – Harrisburg, then Harrisburg – Bethlehem; Trains 24Z and 22V Total transit time Burley – Bethlehem has ranged from 7-11 days (the 11 day trip was during the blizzard of early 2017)

  15. A Sight For Sore Eyes – Getting Through Chicago

  16. Origination Terminal – Watco acquired the Burley, ID Warehouse to feed Food Network. – Developed a trucking strategy with a local Idaho trucker to deliver product from customer sheds to the Warehouse. – Joint marketing with customers to win business.

  17. Destination- Bethlehem, PA Customer First – Safety Always!

  18. Equipment - Refrigerated Boxcar Specs • Partnered with ARX (Fed Ex freight movement/rack system) • GBRX and TILX Refrigerated Boxcar Specs o ~179,000 lb. net weight o 20 Racks / 80 pallets per railcar o 4:1 Truck to boxcar conversion

  19. The Rack and Rollers System

  20. Loading

  21. Inside the Car

  22. Total Package • Utilizes Patented Racking / Roller System o Eliminates damage o No dunnage o No blocking/bracing o Faster and safer load / unload • Premium Rail Service o 7-9 day normal service o Truck competitive o Added capacity o Manifest to Intermodal

  23. Customer First – Safety Always! 7

  24. Where are we today? • Fully integrated and flexible supply chain – Trucks – Warehouses – Rail – “One Price” • 4 Cars In Service / 21 In Service by 3Q • 3 Tables In Service • LCL “Pallet Level” Shipping via the rack system – Mixed products – Mixed customers

  25. Commodities • Eastbound Examples of shippers utilizing Perishable Express – Fresh potatoes from Burley, ID to NJ for cruise ships – Fresh onions for restaurants in NY, NJ – Mixed loads of fresh onions and potatoes for grocery stores. – Frozen butter for croissants for LeCoq Cuisine in CT and for cookies for David’s Cookies in PA and NJ – Frozen French fries from Caldwell, ID to PA. – Frozen potatoes products from Caldwell to New England destinations.

  26. What’s Next • 21 total cars in service by 3Q • 5 tables in service by 2Q • Setting up additional origins and destinations – Rochelle, IL (Midwest Market) • Turn Nampa (BVRR interchange) on to UP Food Train • Continued fleet expansion • Developing Backhauls – Shipped our first backhaul last week (Boston Beer Co. and other NE micro brews to Seattle from Bethlehem) – 3x 2000+ mile loaded hauls in a month

  27. Future Destination - Rochelle, IL Customer First – Safety Always!

  28. The Secret Sauce • Focused Origins and Destinations • Must connect well with intermodal/premium service network • Shortline or Class 1 delivery: Both work • Extremely short turn time on equipment

  29. Thank You

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