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THE RAILCAR POOLING EXPERTS® POOLING | ENGINEERING & MAINTENANCE | FLEET SERVICES | RESEARCH | LOGISTICS www.ttx.com.

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Presentation on theme: "THE RAILCAR POOLING EXPERTS® POOLING | ENGINEERING & MAINTENANCE | FLEET SERVICES | RESEARCH | LOGISTICS www.ttx.com."— Presentation transcript:

1 THE RAILCAR POOLING EXPERTS® POOLING | ENGINEERING & MAINTENANCE | FLEET SERVICES | RESEARCH | LOGISTICS

2 Economic & Freight Outlook November 2012 ACACSO Meeting November 8, 2012

3 TTX Company. Copyright Confidential. 3 Welcome Today’s Agenda »TTX Overview »Economic Conditions & Outlook »Intermodal »Automotive »Boxcar

4 TTX Company. Copyright Confidential. 4 TTX Overview TTX functions as the industry’s railcar cooperative, operating under pooling authority granted by the Surface Transportation Board »$1.1 billion company, serves/owned by North America’s leading railroads »The Company owns/maintains a national pool of over 200,000 railcars: »Owners enjoy financial/operational benefits matched to business needs: »Rail customers benefit from a consistent fleet of free-running cars o Intermodal o Automotive o General Merchandise o Capital outlay elimination o Empty mile reduction o Risk mitigation

5 TTX Company. Copyright Confidential. 5 Spending Flexes, Based on Customer Needs, with nearly $5 Billion Spent Since 2000 TTX Capital Expenditures (New Railcars)

6 TTX Company. Copyright Confidential. 6 Economic Conditions

7 TTX Company. Copyright Confidential. 7 Context for the 2013 Plan Discussion »Weak and uncertain economy »Strong, domestic-driven intermodal growth »Strong automotive gains / stressed fleet »Outstanding rail service performance and velocity improvements across fleets:  Why?  Is it durable? »Growing replacement demand for other car types

8 TTX Company. Copyright Confidential. 8 Very strong industry-wide velocity improvements Weighted Average Industry MeasuresYTD vs Train Speed+7.2% Intermodal Train Speed+3.0% Terminal Dwell Time-8.1% Loads per Car+5.8% Industry Velocity Index+7.5% Source: AAR

9 TTX Company. Copyright Confidential. 9 Late 2012 Economic Climate: High Uncertainty »Europe in recession »China growth slowing »U.S. election / fiscal cliff »Still-slow job growth »Softening manufacturing »Rising food and energy prices

10 TTX Company. Copyright Confidential. 10 Risk of recession still elevated Source: Moody’s Analytics

11 TTX Company. Copyright Confidential. 11 Features of the fiscal cliff »Taxes  Expiration of the Bush tax cuts  End of the 2% payroll tax cut  New taxes from the Affordable Care Act  End of AMT indexing »Spending cuts  Sequestration of spending - part of latest debt-ceiling extension  Reduction in Medicare reimbursements  End to emergency unemployment benefits »Impact  Estimates of 3%-4% reduction of GDP from its expected level  CBO projects 1.3% first half GDP decline if nothing changed

12 TTX Company. Copyright Confidential. 12 Sources: U.S. Bureau of Labor Statistics Job growth has disappointed

13 TTX Company. Copyright Confidential. 13 The ISM manufacturing index suggests that growth may slow in coming months Source: Institute for Supply Management

14 TTX Company. Copyright Confidential. 14 Some Recent Positives »Housing showing signs of life »Low natural gas prices provide a boost »Some recent reports have been positive:  Best net job growth since February  Rebound in retail sales  Strong auto sales and production

15 TTX Company. Copyright Confidential. 15 U.S. auto sales well ahead of 2011 Source: AutoData, The Monthly Autocast Annual Forecasts 2012 – 14.2 Million 2013 – 15.0 Million 2014 – 16.0 Million

16 TTX Company. Copyright Confidential. 16 Economic Outlook

17 TTX Company. Copyright Confidential. 17 Given current uncertainty, TTX chose a modest growth scenario for 2013 Sources: Moody’s Analytics, The Wall Street Journal

18 TTX Company. Copyright Confidential. 18 GDP growth improves in 2014 Sources: Bureau of Economic Analysis, Moody’s Economy.com

19 TTX Company. Copyright Confidential. 19 Consumer spending growth will be muted until 2014 Sources: Bureau of Economic Analysis, Moody’s Economy.com

20 TTX Company. Copyright Confidential. 20 Housing will slowly recover with multi- family taking a larger share of starts Sources: Bureau of Census; Moody's Economy.com Other 2013 Total Housing Starts Forecasts Global Insight: 930,000 WSJ Consensus: 890,000 RISI: 920,000

21 TTX Company. Copyright Confidential. 21 Canada GDP growth will moderate Sources: Statistics Canada, Moody’s Economy.com

22 TTX Company. Copyright Confidential. 22 Mexico GDP growth will rebound Sources: INEGI, Moody’s Economy.com

23 TTX Company. Copyright Confidential. 23 Summary of economic assumptions Indicator GDP (annualized % change)2.1%1.8%3.1% 2.5% Consumption (annualized % Change) 2.2%2.1%2.9%3.1%2.7% Non-residential Fixed Investment (annualized % Change) 4.5%3.3%4.2%4.0%3.1% Industrial Production (yr/yr % change) 5.0%2.3% 1.5%1.4% Total Housing Starts (Thousands of starts) ,1201,3701,580 Auto Sales (Millions)

24 TTX Company. Copyright Confidential. 24 Intermodal Outlook

25 TTX Company. Copyright Confidential. 25 International intermodal drivers »Imports (GDP and consumer spending) »Fuel prices and competition from trucking »Transloads »Port choices / Panama Canal expansion »Railroad initiatives / Service offerings »Origin region and “near-shoring” developments

26 TTX Company. Copyright Confidential. 26 Sources: PIERS, TTX U.S. container imports will hit a new peak in 2014

27 TTX Company. Copyright Confidential. 27 Transpacific traffic will continue to dominate imports Sources: PIERS, TTX

28 TTX Company. Copyright Confidential. 28 All water share will gain a few more points and then flatten out around 33% Sources: PIERS, TTX

29 TTX Company. Copyright Confidential. 29 Estimated percentage of containerized imports moving inland by rail Canada West Coast ~ 77% 1.5 mm Import TEU’s; 1.1 mm Intermodal TEU’s Vancouver ~ 55% IPI & 18% transload Prince Rupert ~ 99% IPI U.S. West Coast ~ 67% 9.1 mm Import TEU’s; 6.1 mm Intermodal TEU’s LA/LB% ~ 37% IPI & 30% transload Oakland ~ 30% IPI & 20% transload PNW ~ 50% IPI & 24% transload Mexico West Coast ~ 33% 1.2 mm Import TEU’s; 395k Intermodal TEU’s Manzanillo ~ 20% IPI Lazaro Cardenas ~ 57% IPI Canada East Coast ~ 48% 712k Import TEU’s; 340k Intermodal TEU’s Montreal ~ 40% Halifax ~ 80% U.S. East Coast ~ 17% 5.1 mm Import TEU’s; 885k Intermodal TEU’s NYC ~ 13% Norfolk ~ 30% Charleston / Savannah ~ 18% Gulf ports – minimal Percentage moving inland by rail is TTX’s current estimate TEU volume numbers use 2011 full year data

30 TTX Company. Copyright Confidential. 30 International rail volume forecast U.S. and Canada Sources: IANA, AAR, TTX

31 TTX Company. Copyright Confidential. 31 TTX will cut 48-ft wells to improve railroad efficiency for returning international traffic

32 TTX Company. Copyright Confidential. 32 Domestic intermodal drivers »GDP and consumer spending »Fuel prices »Import-related transloading »Truck equipment capacity and driver supply »Short-haul growth »Domestic container fleet capacity »Rail service levels

33 TTX Company. Copyright Confidential. 33 Sources: FTR Associates Tight trucking supply reflects investment in replacement capacity rather than growth

34 TTX Company. Copyright Confidential. 34 Source: FTR Associates Driver supply is a concern, and will worsen with new HOS rules and economic recovery

35 TTX Company. Copyright Confidential. 35 Trucking inputs are outpacing inflation… Sources: FTR Associates, Freight Rate Index,TheTruckersReport.com, various annual reports U.S. trucker costs, fuel and productivity held constant 4.6% 5.8% 3.4%

36 TTX Company. Copyright Confidential. 36 Intermodal market share has room to grow Sources: IHS Global Insight/TTX

37 TTX Company. Copyright Confidential. 37 Sources: FTR, IANA, TTX Rail market share domestic intermodal 1% share change = approximately 250,000 moves quarterly

38 TTX Company. Copyright Confidential. 38 Sources: TTX Domestic fleet growth continues; a singular 53-ft footprint and emerging segments

39 TTX Company. Copyright Confidential. 39 Domestic container volume forecast U.S. and Canada Sources: IANA, AAR, TTX

40 TTX Company. Copyright Confidential. 40 Trailer volume forecast U.S. and Canada Sources: IANA, AAR, TTX

41 TTX Company. Copyright Confidential. 41 Intermodal volume forecast U.S. and Canada Sources: IANA, AAR, TTX

42 TTX Company. Copyright Confidential. 42 Automotive Outlook

43 TTX Company. Copyright Confidential. 43 Key Factors Driving Network Changes »NA light vehicle production expected to increase 20% in 2012 »Increased production in Mexico »Decreased production in Canada »More intra-Mexico traffic: plants to ports »Increased auto production in North America vs. Imports »Fewer production locations mean longer empty hauls to next available load Source: TTX

44 TTX Company. Copyright Confidential. 44 Auto production will outpace auto sales Sources: Monthly Autocast

45 TTX Company. Copyright Confidential. 45 Boxcar Outlook

46 TTX Company. Copyright Confidential. 46 Boxcar loads will grow as housing comes back, and will remain steady Sources: AAR, TTX, FTR

47 TTX Company. Copyright Confidential. 47 Industry-wide boxcar fleet continues to decline Source: AAR

48 TTX Company. Copyright Confidential. 48 Sources: TTX Standardizing has improved consistency for shippers and velocity for railroads

49 TTX Company. Copyright Confidential. 49 © Copyright 2012 TTX Company : : CONFIDENTIAL


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