Transcript Slide 0

American Commercial Lines Inc.
Fourth Annual Indiana Logistics Summit
James L. Adams, Vice President of
Governmental Policy
November 14, 2006
Forward Looking Statements & EBITDA
This presentation includes certain “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 including without limitation the EBITDA margin potential of 20-25%. These forward-looking
statements are based on management’s present expectations and beliefs about future events. As with any projection
or forecast, these statements are inherently susceptible to risks, uncertainty and changes in circumstance. Important
factors could cause actual results to differ materially from those expressed or implied by the forward-looking
statements and should be considered in evaluating the outlook of American Commercial Lines Inc. Risks and
uncertainties are detailed from time to time in American Commercial Lines Inc.’s and its subsidiaries’ filings with the
SEC, including the Form 10-K for the year ended December 31, 2005 filed by American Commercial Lines Inc. with
the SEC. American Commercial Lines Inc. is under no obligation to, and expressly disclaims any obligation to, update
or alter its forward-looking statements, whether as a result of changes, new information, subsequent events or
otherwise.
Management considers EBITDA to be a meaningful indicator of operating performance and uses it as a measure to
assess the operating performance of the Company’s business segments. EBITDA provides us with an understanding
of the Company’s revenues before the impact of investing and financing transactions and income taxes. EBITDA
should not be construed as a substitute for net loss or as a better measure of liquidity than cash flow from operating
activities, which is determined in accordance with generally accepted accounting principles (“GAAP”). EBITDA
excludes components that are significant in understanding and assessing our results of operations and cash flows. In
addition, EBITDA is not a term defined by GAAP and as a result our measure of EBITDA might not be comparable to
similarly titled measures used by other companies.
However, the Company believes that EBITDA is relevant and useful information, which is often reported and widely
used by analysts, investors and other interested parties in our industry. Accordingly, the Company is disclosing this
information to permit a more comprehensive analysis of its operating performance.
1
ACL at a Glance
• A leading barge transportation provider and marine
transportation manufacturer operating on the Inland
Waterways since 1915
• Lowest cost mode of transportation
• Best industry supply / demand fundamentals in 25 years
• Early stages of a projected $2 billion dry cargo barge
replacement cycle benefiting manufacturing operations
(Jeffboat)
• EBITDA margin potential of 20-25%
• Proven management team with extensive transportation and
turnaround experience
2
Barge Transportation Industry
$765 billion transportation market
Pipeline
Intermodal
1.1%
Air
Water
1.8%
1.1%
Rail
3.9%
4.3%
87.7%
Truck
Source: American Trucking Association.
3.76 Trillion Ton Miles by mode
28.0%
Truck
16.5%
Water
39.8%
Railroad
15.3%
Pipelines
0.4% Other
Source: U.S. Bureau of Transportation Statistics.
3
Lowest Cost, Cleanest & Safest Mode of
Transportation
Barge
Rail
Truck
1 Barge
15 Railcars
58 Trailer Trucks
0.72¢
2.24¢
26.61¢
Ton-mile per gallon of fuel(3)
514
202
59
Cleanest - Carbon Monoxide(4)
0.2
0.6
1.9
Safest - Injuries(5)
0.09
21.77
NA
Equivalent Units(1)
Lowest Cost
Cost per ton-mile (in cents)(2)
(1) Source: Iowa Department of Transportation.
(2) Source: Wilson, Transportation of America (19 th edition, 2002).
(3) Source: U.S. Army Corps of Engineers.
(4) Source: EPA, Emission Control Lab. Carbon monoxide pollutants (in
pounds) produced by moving one ton of cargo 1,000 miles.
(5) Source: Haulk, Allegheny Institute for Public Policy Report. Injury rate
per billion ton-miles.
4
Favorable Barge Supply Fundamentals
Dry Cargo Barges in Operation by Year of Construction
1,800
1,600
Dry Cargo Barges
1,400
1,200
1,000
800
600
400
2005
2004
2003
2002
2000
2001
1999
1998
1997
1996
1995
1994
1992
1993
1991
1990
1989
1988
1987
1986
1985
1984
1982
1983
1981
1980
1979
1978
1977
1976
1974
1975
1973
0
1972
200
ITC
•
•
•
•
Approximately 17,800 dry cargo barges in operation today, of which 23% were built between 1979
and 1981
Average barge life is approximately 25 - 30 years
High steel prices have accelerated scrapping of old equipment and limited new builds
Barge attrition is forecasted at 4,800 units over the next 5 years, which represents 27% of the
current industry dry cargo fleet
5
Source: Informa Economics, Inc. and Criton
Current Barge Supply Trends
Total Cargo Barge Construction & Retirements (1998 – 2005)
1,000
500
939
931
831
655
596
0
(617)
(500)
(1,019)
(1,201)
(862)
(1,139)
280
(947)
510
(942)
Net=322
(1,000)
328
(714)
Net=(386)
Net=(207)
Net=(88)
Net=(667) Net=(432)
Net=(543)
Net=(370)
(1,500)
1998
1999
2000
2001
Barge Retirements
2002
2003
2004
2005
Barge Construction
•
Decreasing capacity has led to higher contract rates
•
2005 was the seventh consecutive year in which the number of barge retirements
outnumbered new barges constructed
•
2006 is expected to be the eighth consecutive year of net barge capacity reduction
6
Source: Informa Economics, Inc.
Steady Demand Dynamics
Historical Mississippi River System Freight Volume
High visibility given long-term nature of
contracts (>12 months) and stability of
demand
500
400
300
200
100
Source: Waterborne Commerce Statistics Center, U.S. Army Corps of Engineers.
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
0
1985
•
Demand growth expected to further
accelerate given rail operational and
capacity constraints
600
1984
•
Stable, predictable demand for river
transported commodities (e.g. coal, steel,
grain and petroleum)
Tons (millions)
•
7
Stable Liquid Cargo Pricing Trends
ACL Liquid Rates - Fuel Neutral
13% Liquid Increase
Trailing Twelve Months Rate
per Cargo Ton-Mile
$18
$17
$16
$15
$14
$13
•
Very stable supply / demand fundamentals
•
Liquid accounts for approximately 20% of ACL’s tonnage
•
2005 – Liquid cargo a “rational” market
Q3 '06
Q2 '06
Q1 '06
Q4' 05
Q3' 05
Q2' 05
Q1' 05
Q4' 04
Q3' 04
Q2' 04
Q1' 04
Q4' 03
Q3' 03
Q2' 03
Q1' 03
Q4' 02
Q3' 02
Q2' 02
Q1' 02
Q4' 01
Q3' 01
Q2' 01
Q1' 01
Q4' 00
$12
8
Strong Dry Cargo Pricing Trends
ACL Grain and Bulk Rates - Fuel Neutral
62% Grain Increase
Trailing Twelve Months Rate
per Cargo Ton-Mile
$12
$11
$10
$9
$8
$7
43% Bulk Increase
Grain
•
•
•
•
Q3 '06
Q2 '06
Q1 '06
Q4 '05
Q3 '05
Q2' 05
Q1' 05
Q4' 04
Q3' 04
Q2' 04
Q1' 04
Q4' 03
Q3' 03
Q2' 03
Q1' 03
Q4' 02
Q3' 02
Q2' 02
Q1' 02
Q4' 01
Q3' 01
Q2' 01
Q1' 01
Q4' 00
$6
Bulk/Nonbulk
Rapidly improving supply / demand fundamentals in dry cargo business
Dry cargo accounts for 80% of ACL tonnage transported
All dry cargo commodities are experiencing double digit price increases net of fuel
$165 million of ACL’s contract renewals to reprice in 2006
9
Jeffboat is the Second Largest Manufacturer
of Barges in the United States
Early stages of a projected $2 billion dry cargo barge replacement cycle
•
Barge manufacturing industry effectively a
duopoly based on number of barges
manufactured
•
Jeffboat market share of 41%
•
Replacement cycle benefiting barge pricing /
margins expected to run for 5+ years
•
Industry manufacturing capacity sold out into
2008 (Jeffboat external backlog ~ $450 million)
Other
1%
Jeffboat
41%
Trinity
58%
Source: Informa Economics, Inc. and Company estimates; five year market share for years 2000 - 2004.
10
The Jeffboat Opportunity
Potential for robust top-line growth and improved profitability
•
Significant visibility into industry supply / demand
fundamentals given industry fleet ages, shipyard
capacity and Jeffboat backlog
•
Current manufacturing cost structure:
(as a percentage of revenues)
– 50-55% materials
– 40-45% labor and overhead
•
Lean manufacturing initiatives driving significant labor
and overhead cost reductions; labor hour reductions of
15% during the last 12 months
•
Replacement demand, product mix, pricing
improvements and cost reductions expected to result in
a meaningful enhancement to revenue and EBITDA by
2007
11
ACL Market Position
Dry Cargo
Liquid Cargo
Units
% of Total
Ingram
3,716
20.9%
ACL
2,803
15.8%
AEP / MEMCO (Captive)
2,318
13.0%
American River (Captive)
2,076
11.7%
Cargo Carriers (Captive)
909
5.1%
11,822
66.5%
Total Top 5 Dry Cargo Carriers
Units
% of Total
Kirby
897
32.3%
ACL
371
13.3%
Marathon Ashland (Captive)
170
6.1%
Canal
169
6.1%
Ingram
165
5.9%
1,772
63.7%
Total Top 5 Liquid Cargo Carriers
3 of top 5 dry cargo carriers (30% share) are captives vs. independents
Source: Informa Economics, Inc. as of 12/31/05.
12
ACL Revenues and Commodity Mix
2005 Revenues
2005 Domestic Transportation Revenues
1% Other
$10 mm
3.0%
Int’l Barging
$22 mm
16%
Manufacturing
$121 mm
29%
Bulk &
Other
80%
Transportation
$588 mm
8%
Steel
11%
Coal
27%
Grain
25%
Liquids
$ 588 million
$ 741 million
13
Revenue per Barge
90% increase in revenue per barge (44% increase fuel-neutral) since 2002
through increased pricing and improved barge utilization
$250,000
$231,343
Revenue per Barge
$200,000
$183,368
$146,949
$150,000
$125,165
$100,000
$175,232
$122,030
$50,000
$119,385
$133,549
$147,292
$0
2002
2003
2004
Fuel-Neutral
2005
TTM Sept '06
Actual
14
Note: Domestic barges only.
Stock Performance
ACL Closing Prices from BK Emergence to November 13, 2006
$80
$70
$60
$50
$40
$30
$20
$10
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Market Capitalization
ACL Market Capitalization from BK Emergence to November 14, 2006
$2,400
$1,600
$1,200
$800
$400
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$ in millions
$2,000
16
Container-on-Barge (COB) Service
17
McAlpine Locks and Dam
18