TTX 2013 Outlook

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THE RAILCAR POOLING EXPERTS® www.ttx.com

POOLING | ENGINEERING & MAINTENANCE | FLEET SERVICES | RESEARCH | LOGISTICS

Economic & Freight Outlook November 2012 ACACSO Meeting

November 8, 2012

TTX Overview

Economic Conditions & Outlook

Intermodal

Automotive

Boxcar Welcome Today’s Agenda 3

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: o Intermodal o Automotive o General Merchandise » Owners enjoy financial/operational benefits matched to business needs: o Empty mile reduction o Capital outlay elimination o Risk mitigation » Rail customers benefit from a consistent fleet of free-running cars

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

Economic Conditions

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

Very strong industry-wide velocity improvements Weighted Average Industry Measures

Train Speed Intermodal Train Speed Terminal Dwell Time Loads per Car Industry Velocity Index

YTD vs. 2011

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

Risk of recession still elevated

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

Job growth has disappointed

The ISM manufacturing index suggests that growth may slow in coming months

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

U.S. auto sales well ahead of 2011

Economic Outlook

Given current uncertainty, TTX chose a modest growth scenario for 2013

GDP growth improves in 2014

Sources: Bureau of Economic Analysis, Moody’s Economy.com

Consumer spending growth will be muted until 2014

Sources: Bureau of Economic Analysis, Moody’s Economy.com

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 20

Canada GDP growth will moderate

Sources: Statistics Canada, Moody’s Economy.com

Mexico GDP growth will rebound

Sources: INEGI, Moody’s Economy.com

Summary of economic assumptions Indicator

GDP (annualized % change) Consumption (annualized % Change) Non-residential Fixed Investment (annualized % Change) Industrial Production (yr/yr % change) Total Housing Starts (Thousands of starts) Auto Sales (Millions)

2012

2.1% 2.2% 4.5% 5.0% 720 14.2

2013

1.8% 2.1% 3.3% 2.3% 800 15.0

2014

3.1% 2.9% 4.2% 2.3% 1,120 15.9

2015

3.1% 3.1% 4.0% 1.5% 1,370 16.2

2016

2.5% 2.7% 3.1% 1.4% 1,580 16.4

Intermodal Outlook

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

U.S. container imports will hit a new peak in 2014

Transpacific traffic will continue to dominate imports

All water share will gain a few more points and then flatten out around 33%

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 • •

Canada East Coast ~ 48% 712k Import TEU’s; 340k Intermodal TEU’s

Montreal ~ 40% Halifax ~ 80% • • •

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

• • • •

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

International rail volume forecast U.S. and Canada

TTX will cut 48-ft wells to improve railroad efficiency for returning international traffic

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

Tight trucking supply reflects investment in replacement capacity rather than growth

Driver supply is a concern, and will worsen with new HOS rules and economic recovery

Trucking inputs are outpacing inflation…

U.S. trucker costs, fuel and productivity held constant 4.6% 3.4% 5.8% Sources: FTR Associates, Freight Rate Index,TheTruckersReport.com, various annual reports TTX Company. Copyright 2012. Confidential.

Intermodal market share has room to grow

Rail market share domestic intermodal 1% share change = approximately 250,000 moves quarterly

Domestic fleet growth continues; a singular 53-ft footprint and emerging segments

Domestic container volume forecast U.S. and Canada

Trailer volume forecast U.S. and Canada

Intermodal volume forecast U.S. and Canada

Automotive Outlook

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 TTX Company. Copyright 2012. Confidential.

Auto production will outpace auto sales

Boxcar Outlook

Boxcar loads will grow as housing comes back, and will remain steady

Industry-wide boxcar fleet continues to decline

Standardizing has improved consistency for shippers and velocity for railroads

TTX 2013 Outlook

Transcript TTX 2013 Outlook

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