Operating Lessor in Rail

Transcription

1 Operating Lessor in Rail ELA Large Ticket Conference April 25, 2006 Orlando, FL William G. Farrell Jr., President Dave B. Fate, Executive Vice President Jeffrey A. Kocim, Vice President

2 First Ask yourself how old you are.

3 Overview Are you an Operating Lessor? Significant Players The Railcar Market Keys to Success Accounting Treatment 2006 Strong Market Strategies

4 RETURN SENSITIVITY RESIDUAL VARIANCE AT Yield 20.00% 15.00% 14.97% 10.00% 8.00% 5.00% 0.00% -5.00% Residual % % -8.85%

5 Independent Lessors GE (185,000 cars) GATX (150,000 cars) First Union (75,000 cars) CIT (60,000 cars) AIG Rail Services (1,700+ today) North American Car Westinghouse PLM US Rail Chrysler Rail ITEL Flex 1,2,3 You re Out

6 North American Railcar Fleet 700, , , , , , ,000 Railroad Private 200, , ,760 78,275 23,926 7,882 U.S. Canadian Mexican

7 Fleet by Car Type % Fleet by Car Types Hoppers, 11% Other, 0.5% Tank Cars, 19% Boxcars, 10% Covered Hoppers, 30% Gondolas, 15.5% Ref Cars, 2% Flat Cars, 12% Boxcars Covered Hoppers Flat Cars Ref Cars Gondolas Hoppers Tank Cars Other

8 Age of Freightcar Fleet New Rebuilt

9 Private vs. RR Marked Cars U.S. R ai lcar F leet T o t al 1,173, U.S. Railcar Fleet Total 1,278,980 58% 42% 46% 54% Shi ppi ng/ Leasi ng Compani es Rai l r oads Shi ppi ng/ Leasi ng Compani es Rai l r oads

10 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

11 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

12 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

13 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

14 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

15

16

17

18

19 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

20 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

21 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

22 Railcar Operating Leasing Keys to Success Organization vs Business Segment Philosophy Long Term Perspective - Cyclical Deep Pockets Diversify by Term, Industry, Car, Product, Structure Know what you re investing in and why you own it Investment Discipline People: Skill Sets, Communication Flow Asset Protection IT Systems

23 Long Term Commitment Long Lived Assets years Accounting Returns grow over time to exceed Capital Lease Returns Short term Accounting Treatment not appealing

24 Margin Analysis 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Yr1 Yr4 Yr7 Yr10 Yr13 Yr16 Yr19 20 Year OPL 20 Year Cap Lse OPL portfolio

25 Long Term Commitment Long Lived Assets years Accounting Returns grow over time to exceed Capital Lease Returns Short term Accounting Treatment not appealing SOLUTION Mature Business

26 2006 Strong Market Strategies Diversify By Term, Car Type, Industry Discipline: Invest in Good and Weak Markets Avoid Car Hire Structures on New Assets Invest in Customer Relationships Rebalance Portfolio Invest in New Car Types with Aging Fleet Extend maturing leases Negotiate longer lease terms