THE RAILCAR POOLING EXPERTS www ttx com POOLING

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

Welcome Today’s Agenda » TTX Overview » Economic Conditions & Outlook » Intermodal »

TTX Overview TTX functions as the industry’s railcar cooperative, operating under pooling authority granted

Spending Flexes, Based on Customer Needs, with nearly $5 Billion Spent Since 2000 TTX

Economic Conditions TTX Company. Copyright 2012. Confidential. 6

Context for the 2013 Plan Discussion » Weak and uncertain economy » Strong, domestic-driven

Very strong industry-wide velocity improvements Weighted Average Industry Measures YTD vs. 2011 Train Speed

Late 2012 Economic Climate: High Uncertainty » Europe in recession » China growth slowing

Risk of recession still elevated Source: Moody’s Analytics TTX Company. Copyright 2012. Confidential. 10

Features of the fiscal cliff » Taxes § Expiration of the Bush tax cuts

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

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

Some Recent Positives » Housing showing signs of life » Low natural gas prices

U. S. auto sales well ahead of 2011 Annual Forecasts 2012 – 14. 2

Economic Outlook TTX Company. Copyright 2012. Confidential. 16

Given current uncertainty, TTX chose a modest growth scenario for 2013 Sources: Moody’s Analytics,

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

Consumer spending growth will be muted until 2014 Sources: Bureau of Economic Analysis, Moody’s

Housing will slowly recover with multifamily taking a larger share of starts Sources: Bureau

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

Mexico GDP growth will rebound Sources: INEGI, Moody’s Economy. com TTX Company. Copyright 2012.

Summary of economic assumptions Indicator 2012 2013 2014 2015 2016 GDP (annualized % change)

Intermodal Outlook TTX Company. Copyright 2012. Confidential. 24

International intermodal drivers » Imports (GDP and consumer spending) » Fuel prices and competition

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

Transpacific traffic will continue to dominate imports Sources: PIERS, TTX Company. Copyright 2012. Confidential.

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

Estimated percentage of containerized imports moving inland by rail Canada West Coast ~ 77%

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

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

Tight trucking supply reflects investment in replacement capacity rather than growth Sources: FTR Associates

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

Trucking inputs are outpacing inflation… U. S. trucker costs, fuel and productivity held constant

Intermodal market share has room to grow Sources: IHS Global Insight/TTX Company. Copyright 2012.

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 Sources: TTX

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

Trailer volume forecast U. S. and Canada Sources: IANA, AAR, TTX Company. Copyright 2012.

Intermodal volume forecast U. S. and Canada Sources: IANA, AAR, TTX Company. Copyright 2012.

Automotive Outlook TTX Company. Copyright 2012. Confidential. 42

Key Factors Driving Network Changes » NA light vehicle production expected to increase 20%

Auto production will outpace auto sales Sources: Monthly Autocast TTX Company. Copyright 2012. Confidential.

Boxcar Outlook TTX Company. Copyright 2012. Confidential. 45

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

Industry-wide boxcar fleet continues to decline Source: AAR TTX Company. Copyright 2012. Confidential. 47

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

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

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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 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 TTX Company. Copyright 2012. Confidential. 4

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 TTX Company. Copyright 2012. Confidential. 7

Very strong industry-wide velocity improvements Weighted Average Industry Measures YTD vs. 2011 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 TTX Company. Copyright 2012. Confidential. 8

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 TTX Company. Copyright 2012. Confidential. 9

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 TTX Company. Copyright 2012. Confidential. 11

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 TTX Company. Copyright 2012. Confidential. 14

U. S. auto sales well ahead of 2011 Annual Forecasts 2012 – 14. 2 Million 2013 – 15. 0 Million 2014 – 16. 0 Million Source: Auto. Data, The Monthly Autocast TTX Company. Copyright 2012. Confidential. 15

Housing will slowly recover with multifamily taking a larger share of starts Sources: Bureau of Census; Moody's Economy. com TTX Company. Copyright 2012. Confidential. Other 2013 Total Housing Starts Forecasts Global Insight: 930, 000 WSJ Consensus: 890, 000 RISI: 920, 000 20

Summary of economic assumptions Indicator 2012 2013 2014 2015 2016 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) 720 800 1, 120 1, 370 1, 580 Auto Sales (Millions) 14. 2 15. 0 15. 9 16. 2 16. 4 TTX Company. Copyright 2012. Confidential. 23

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 TTX Company. Copyright 2012. Confidential. 25

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% Canada East Coast ~ 48% 712 k Import TEU’s; 340 k Intermodal TEU’s • Montreal ~ 40% • Halifax ~ 80% 9. 1 mm Import TEU’s; 6. 1 mm Intermodal TEU’s • LA/LB% ~ 37% IPI & 30% transload U. S. East Coast ~ 17% • Oakland ~ 30% IPI & 20% transload 5. 1 mm Import TEU’s; 885 k Intermodal TEU’s • PNW ~ 50% IPI & 24% transload • NYC ~ 13% • Norfolk ~ 30% Mexico West Coast ~ 33% • Charleston / Savannah ~ 18% 1. 2 mm Import TEU’s; 395 k Intermodal TEU’s • Gulf ports – minimal • Manzanillo ~ 20% IPI • Lazaro Cardenas ~ 57% IPI TTX Company. Copyright 2012. Confidential. • Percentage moving inland by rail is TTX’s current estimate • TEU volume numbers use 2011 full year data 29

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 TTX Company. Copyright 2012. Confidential. 32

Trucking inputs are outpacing inflation… U. S. trucker costs, fuel and productivity held constant 3. 4% 4. 6% 5. 8% Sources: FTR Associates, Freight Rate Index, The. Truckers. Report. com, various annual reports TTX Company. Copyright 2012. Confidential. 35

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 Company. Copyright 2012. Confidential. 43