2020 Annual NRC Annual Conference
Tom Holmes VP – Purchasing & Materials Discussion Topics
Watco Companies – Focused on Customers
Watco’s 2020 Capital Plans
Doing Business with Watco
2 A Legacy of Putting Customers First
In 1983, Charles R. “Dick” Webb and Kaye Lynne Webb founded Watco Companies with a simple vision — if you take good care of the Customer, you will win. Guided by that vision, Watco has grown into one of the world’s most respected transportation and logistics companies.
3 Building a Customer First — Safety Always Culture
Our Customer First Principles
4 Consistent Revenue Growth
~ $1B 12% CAGR
2013 2014 2015 2016 2017 2018 2019
Revenue 5 Watco Businesses
6 Our Family of Railroads
SSS 7 We’ve Got You Covered
8 Diversity of operating environments . . .
9 Watco Capital Spend Outlook Maintenance, Growth and Acquisition
2020 Maintenance spend is ~$85M
Growth and Acquisition spend depend on opportunities presented
11 Rail Project Spend by Type
Project Type ‘20 Spend
Ties & Surfacing $26.9M
Bridge Projects $20.2M
Rail Relay $12.2M
Other (Turnouts, Crossing Surface, SW Ties) $2.2M
Total Watco Track Spend $61.5M
12 Rail Divisions
Track Mark Location Miles
AARR Ann Arbor, Michigan 83 Division 1 AWRR Austin, Texas 181
GDLK Kalamazoo, Michigan 142 • Just over 3,000 miles
KO Wichita, Kansas 904 • Larger RRs, in terms
LBWR Lubbock, Texas 163 of track miles &
Pecos revenue/car loads Pecos, Texas Terminal Valley $44M in 2020 Track PVSR Pecos, Texas 33 • CapEx SKOL Cherryvale, Kansas 433
SLWC Oklahoma City, Oklahoma 275
TXNR Eunice, Texas 111
WSOR Madison, Wisconsin 685
13 Rail Divisions
Mark Location Track Miles ABS Tuscaloosa, Alabama 102 ABWR Birmingham, Alabama 24 AUT Prattville, Alabama 46 Division 2 Asheville, North BBLU 92 Carolina BHRR Birmingham, Alabama 95 • Over 1,800 miles BVRR Boise, Idaho 68 of track EIRR Twin Falls, Idaho 358 Medium RRs, in GRNW Lewiston, Idaho 97 • Kansas City Kansas City, Missouri Switch terms of track KAW Kansas City, Kansas 25 miles & revenue KNWA Belle, West Virginia 336 $11.4M in 2020 LAS Hodge, Louisiana 188 • PCC Lewiston, Idaho 230 Track CapEx Perishable Burley, Idaho Terminal Warehouse
Prattville Prattville, Alabama Switching
DREI Decatur, IL 126 ITHR Ithica, NY 40 14 Rail Divisions
Track Mark Location Miles ARS Nashville, Arkansas 63 Division 3 BBAY Bogalusa, Louisiana 6 BRSR Baton Rouge, Louisiana 26 300+ miles of JXPT Jacksonville, Florida 10 • MMT Columbia Falls, Montana 46 track MSR Bay Springs, Mississippi 29 • Smaller RRs, in PCC-CND Condon, OR Switch terms of track PSRR San Diego, California 68 PSRR-VENT Ventura, California Switch miles & revenue SACR San Antonio, Texas 8 • $3.4M in 2020 SRRR Cheyenne, Wyoming 17 Track CapEx TIBR Deridder, Louisiana 43 VSOR Vicksburg, Mississippi 24 West Lake Westlake, Louisiana Switch Entergy Wright Wright, Wyoming Switch
15 Non RR Track Investment
‘20 Track Division General Operations CapEx Division 4 Industrial Switching $190K Division A Contract Transloading-Energy $1.6M Division B Merchant Transloading 0K Division C Merchant Transloading $105K Division D Merchant/Contract Marine $225K Division E Merchant/Contract Marine $95K Mechanical Contract Rail Car Repair $450K
16 Doing Business with Watco Purchasing & Materials – Changes at Watco
2019 2020 +
Decentralized buy, minimal coordination Centralized buy
Transactional buy – Key materials with few agreements services contracted
Commodity Order processing management
Focus on Total Cost Focus on price of Ownership
Local / transactional Focused supplier vendor relationships relationships
1 P-Cards & manually 8 Web-based ordering entered P.O.’s
18 P-Card spend volume heading down
Cardholder Trending
$8,000,000 2019 P-Card Trend $7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0 01-Jan 02-Feb 03-Mar 04-Apr 05-May 06-Jun 07-Jul 08-Aug 09-Sep 10-Oct 11-Nov 12-Dec
19 Centralizing purchasing activities simplify interactions . . .
Traditionally Watco Mechanical purchased car materials locally – 35 locations
As of Jan 1, 2020, Car materials are now purchased through Centralized Purchasing Organization 3 Managers David Haskett 844-417-0221 x252223 John Weitzel 877-459-5410 x182025 Jackie Lowry 844-364-7406 x196304 20 . . . and will lead to stronger, more focused supplier relationships
Watco has been purchasing locomotive parts on P-Card, with each of 43 railroads buying for themselves
As of March 1, 2020, all locomotive materials will be purchased through Centralized Purchasing Organization
1 Manager Howard Green 205-781-5732
21 Supplier Relationship Management
Ranking Description Expectations Characteristics
Bi-annual Executive level meetings, High spend ($2M+); Strategically important Strategic supplier scorecards, joint initiatives to operations; Significant opportunities to and business under contract deliver value, impacting multiple areas
Bi-annual VP level meetings, joint High spend $1M+; Critical to operations; Critical initiatives, most business under Significant opportunities to deliver value contract
Periodic meetings, active Medium spend; Impacts operations; management of business Managed Opportunity to deliver value through active relationship, with some business management under contract
Smaller spend, but can still impact Other Manage as issues arise operations
22 Becoming and Staying a Watco Supplier
Suppliers who support Watco’s Customer First Foundation Principles • Ability to work in a safe and efficient manner, as judged by RRs • Ability to provide quality work and meet schedules • Willing to be a reliable partner • Goal is best total value: price + quality + transportation + lead-times • Long term, mutually benefiting relationships
Note: Suppliers must sign Watco’s Master Services Agreement to work on Watco Property
23 Organization Structure – Commodity Responsibilities
VP – Purchasing & Materials Tom Holmes
Dir. Purchasing Dir. Purchasing Dir. Purchasing Dir. Purchasing Projects Engineering Mechanical National Accounts Amie Proudfit John Ostrander Brian Freeman Dave Gromer [email protected] [email protected] [email protected] [email protected] Rail, Ties, Ballast, Bridge Locomotive Diesel Fuel MSA and Contract Mgt. OTM Locomotive parts Signal Materials and Terminal / Plant Equipment Travel & Lodging Services Wheelsets and Car parts
Engineering Services On-Track Services Vehicle Fleet
Construction Services Work Equipment Utilities
Safety, Office & Janitorial Supplies
24 Other Key Contacts
• Scott Adams – Vice President of Engineering [email protected]
• James Trollope – VP Operations Support [email protected]
• Alicia Stimpson - Project Management Analyst [email protected]
• Laura Blodgett - MSA Administration [email protected]
25 Watco Key Supplier Partners Thanks!
26 Thank You
Tom Holmes Vice President – Purchasing & Materials
904-563-3948
www.watcocompanies.com