[Wisconsin Central Transportation Corporation logo]
THE WRITE TRACK
News for Wisconsin Central Customers
Oct.-Nov. 2000, No. 66
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WHAT'S NEW?
* RESTRUCTURING--Wisconsin Central has restructured its North American rail
operations--trimming 44 management jobs and realigning transportation
personnel to focus on local issues and customer service. Changes include
four cuts or retirements in marketing and customer service and adding a
market development manager at Green Bay, Wis. Terminals at Fond du Lac,
Green Bay, Neenah and Stevens Point now function on a stand-alone basis,
each headed by a director of terminal operations. Division managers are now
directors of road operations. Elimination of a number of engineering
positions reflects WC's return next year to a normal roadway capital
program. (See REORGANIZATION, page 3).
* WCTC PROXY BID, POSSIBLE SALE--On November 3, Wisconsin Central
Transportation Corporation announced retaining Goldman, Sachs & Co. to act
as a financial advisor in evaluating--among other alternatives--putting the
company up for sale and disposing of its international holdings in an
effort to boost shareholder value. WCTC's action follows a proxy filing
October 20 by a shareholder committee headed by Ed Burkhardt, former
president and ceo, seeking to replace the company's current board of
directors and sell the company to one of the large Class I railroads or
another qualified purchaser.
This information was furnished on behalf of Wisconsin Central
Transportation Corporation, its Board of Directors and Management.
Information regarding the participants in Wisconsin Central's consent
revocation solicitation and their interest in such solicitation may be
obtained by reviewing Wisconsin Central's preliminary consent revocation
materials as first filed with the Securities and Exchange Commission
("SEC") on October 26, 2000. Wisconsin Central will shortly be sending its
stockholders definitive consent revocation materials, which should be read
as they contain important information. A copy of Wisconsin Central's
preliminary consent revocation materials and, when filed, its definitive
consent revocation materials, may be obtained free of charge at the SEC's
web site at http://www.sec.gov.
* STB PROPOSAL COULD MAKE WC A CLASS I CARRIER--The Surface Transportation
Board has initiated a rulemaking proceeding, Ex Parte 634, which would
require railroad holding companies such as Wisconsin Central Transportation
Corporation to report on a consolidated basis. STB's proposed rule would
make WC a Class I carrier, based on the current annual revenue threshold of
$259 million. WC will likely ask for an increase in the minimum revenue
requirement.
* FUEL SURCHARGE RAISED TO 3%--Effective October 9, Wisconsin Central added a
1% surcharge to freight charges to offset the increased expense of diesel
fuel, after the price of West Texas Intermediate Crude Oil exceeded $32 per
barrel. This brings the surcharge to 3%. The surcharges will be removed as
soon as the monthly cost of West Texas Crude falls below $26 per barrel.
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KEEPING TRACK
Since our last visit, Wisconsin Central has made a cost control effort,
reducing a number of management jobs and seasonal positions, but in ways that
would not affect customer service. The transportation department did the most
radical reorganization and their specific goals were to increase customer
service and customer contact.
Our third quarter earnings were announced October 25 with very positive
results for the North American properties--despite significant fuel cost
increases. As always, we owe thanks to our customers for our ninth consecutive
quarter of record revenues. We are enclosing with this issue a summary of our
third quarter financial results.
Our friends at the Surface Transportation Board are at it again. Under Ex
Parte 634, railroad holding companies would be required to file on a
consolidated basis making WC a Class I carrier, based on our total operating
revenues. We have always strived to be a first-class carrier, but have spent 13
years trying to avoid all the regulatory burdens and costs that go with Class I
designation. We do not believe that WC-- consolidated or otherwise--should be
put in the same category as the multi-billion dollar mega-systems.
On October 20, a shareholder committee filed a proxy statement with the SEC
seeking to take control of the WC. Once begun, the vote must completed within 60
days, so this will not be a long drawn-out distraction. Our current board of
directors is dealing with the response, while the rest of us stay focused on
running our railroad and serving our customers. We'll certainly apprise you of
the outcome.
We are going forward with plans for a time-definite service for non
unit-train shipments. The technology is now available to do this and so is the
incentive--since nearly three quarters of our traffic is single car business, as
opposed to significantly smaller proportions on the Class I's. We'll be
contacting customers and representative groups for input and feedback as we move
ahead on this new program.
Bill Schauer
Vice President-Marketing
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<PAGE>
ON-TIME RAIL FREIGHT SERVICE COMING
To meet customer demand for truly reliable scheduling of rail freight
shipments and to gain a greater share of the transportation market, Wisconsin
Central System is working on a computer-driven program to move single carload
shipments--on time--from origin to destination.
"We plan to give customers time-definite service, eliminating missed
connections," says WCS President and CEO Reilly McCarren. "To achieve this
result, we must avoid overloading parts of the network. This is not as simple as
it seems, since capacity constraints can occur at origin, destination, on the
road, or at intermediate rail yards, where cars may be left behind or trains
delayed. In short, how do we better manage capacity?"
A major hurdle, McCarren explains, is the random nature of the railroad
business. "Motor carriers and airlines take requests until they are `maxed out.'
Meanwhile, railroads keep accepting shipments. This works only if a railroad
consistently staffs and equips for peaks--and then only until investors pull the
plug, because of high operating costs and abysmally low return on assets."
McCarren notes a number of railroads have redesigned intermodal and unit
train products. "We must redefine the carload model in order to make this
important part of our business attractive in today's fast-changing markets."
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THE WRITE TRACK
WISCONSIN CENTRAL SYSTEM
Wisconsin Central Ltd.
Algoma Central Railway Inc.
Fox Valley & Western Ltd.
Sault Ste. Marie Bridge Co.
Wisconsin Chicago Link Ltd.
P. O. Box 5062 * Rosemont, IL 60017-5062
J. Reilly McCarren, President & CEO
William R. Schauer, Vice President-Marketing
Customer Service Center 1-800-822-6440
Marketing/Rate Desk 1-800-852-8335
Web site: www.wclx.com
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HOW'S BUSINESS?
Total Revenue Units
(Excludes units moved
under contract for
Canadian National)
Tabular Representation of Omitted Graph
2000 1999
------ ------
January 43,907 43,083
February 38,058 44,262
March 43,053 47,744
April 46,340 49,906
May 48,220 49,894
June 48,855 48,220
July 45,928 49,352
August 48,970 49,502
September 44,965 41,723
October 48,191 45,725
November 49,274
December 44,515
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WC SYSTEM POSTS RECORD THIRD QUARTER
Thanks to a 4.6% rise in operating revenues to $96.3 million, Wisconsin
Central Transportation Corporation's North American operations reported
operating income of $27.8 million, up 9.5% from the same quarter last year,
excluding special items in both years.
Most Wisconsin Central System revenue groups were higher in the
July-September 2000 period--particularly paper, which was up 12%. However,
metallic ore shipments were down this year due to customer adjustments of
inventory levels and the absence of short-term movements that ended in November
1999.
Volume in the third quarter 2000 decreased 0.5% to 139,900 revenue units,
or about 700 less than a year ago.
Increases in fuel, labor and depreciation pushed up operating expenses $1.8
million, or 2.8% above last year.
Special items included a favorable $2.4 million Wisconsin retroactive
property tax settlement that was partially offset by a $900,000 restructuring
charge in the quarter.
WCTC President and CEO Tom Power Jr. says, "The North American team
performed very effectively in growing revenues, while holding the line on costs.
The operating ratio (71.2% before special items)--one of the best in the
industry under any circumstances--is especially noteworthy in this high fuel
cost environment."
WCTC's net income in the third quarter declined $1.4 million, or 9.0%, to
$14.5 million. This was attributed to a $5.3 million, or 94.2%, decrease in
overseas earnings--primarily from the English Welsh & Scottish Railway and Tranz
Rail affiliates, including special items totaling $1.2 million.
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<TABLE>
<CAPTION>
WISCONSIN CENTRAL TRANSPORTATION CORPORATION (Nasdaq)
<S> <C> <C> <C>
Quarter ending Sept. 30 (unaudited): 2000 1999 Change
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Revenue units 139,900 140,600 (0.5)%
Operating revenues $96,334,000 $92,065,000 4.6%
Operating expenses (excluding special items) $68,568,000 $66,717,000 2.8%
Operating ratio (including special items) 69.7% 76.7% 7.0 pts
Net income $14,544,000 $15,982,000 (9.0)%
</TABLE>
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<PAGE>
WC REORGANIZES, TRIMS MANAGEMENT STAFF
Faced with rising costs in a very competitive transportation market,
Wisconsin Central System has simplified its organizational structure--cutting 44
management posts by year-end, which is expected to add $3 million annually to
the company's cash flow. The engineering department will also be trimmed as WC
winds down a multi-year program to expand track capacity.
WCS President and CEO Reilly McCarren notes, "The restructuring is the
first initiative coming out of a strategic review that began some months ago to
help us hold the line on costs in a period of slower growth."
The most significant changes occur in the transportation department where
responsibilities for road and yard operations have been separated. In addition
to the Michigan, Sault Ste. Marie North, South and West operating territories,
each major terminal is now headed by a director--all reporting to Ed Terbell,
WCS vice president and general manager. "We've flattened out and downsized every
field territory so we can focus on all our customer issues--externally and
internally," says Terbell. "We're counting on these changes to improve both our
customer service and our safety performance."
In other changes, Dave Kruschwitz has been appointed director operations
network with responsibility for the operations center and train dispatching.
Chris Hellem becomes manager market development at Green Bay, Wis. (920)
436-5901.
Trainmaster positions have been retitled manager operations and yardmasters
are titled supervisor operations.
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TRANSPORTATION DEPARTMENT
Gary Bright Director Road Operations West
Mike Duffert Director Neenah
Bill Grimstad Asst. VP Network Services
Dan Hall Director Green Bay
Rich Miller Director Road Operations South
Tim Rice Director Fond du Lac
Jamie Rogers Director Michigan Operations
Larry Rouse Director Stevens Point
Mike Schmitt Director Training
Bob Toguchi General Mgr. Sault Ste. Marie North
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E-COMMERCE UPDATE
Wisconsin Central's E-Commerce group continues to make progress on four key
objectives identified by customers during a round of focus group meetings in May
2000.
ONLINE PRICING--Talking to third parties, other railroads, and Transentric
(formerly UP Technologies) on applications that will permit user-friendly
inquiries. WC's current pricing applications do not store data in a way that can
be easily accessible via the Web.
WEB BILL OF LADING--Launched Web-based application and working to make it
even easier to use. (See adjacent story.)
DATA FOR CURRENT ETA'S--Now providing a substantial amount of information
on current car movements and working with connections to exchange carload
shipment schedules.
CAR INSTRUCTIONS, ORDERING, STATUS--Seeking a cost-effective solution.
Alternate options are being explored.
Internet Waybilling Available
Customers may now submit shipping instructions using the WCS E-commerce Web
site: www.wclx.com/apps.shtml. Advantages include:
* Access 24 hours/7days a week
* Positive acknowledgements
* Faxes are eliminated
* Orders to move cargo are accurate, timely and instantly available o
Rework of paper documents and telephone instructions are eliminated
* Bills of lading are on-line for five days and retrievable via the Web
for three-years.
Jack Schlag, export traffic manager at Packerland Packing, Green Bay, Wis.
likes submitting bills of lading on line. "It's a lot easier to use. We get
acceptance of our bills of lading now. Before, generally we had to wait a day to
get confirmation to make sure the bill showed up correctly." He also uses the
Web to trace cars. "The Web is more up to date, more accurate."
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CUSTOMERS RESPOND TO WC MINI-SURVEY
In August, Wisconsin Central's Customer Services Center telephoned 48
customers asking them about:
1) Satisfaction with rail industry service;
2) Satisfaction with WC's service in particular;
3) Diversions to other transport modes;
4) Satisfaction with the service provided by Customer Services.
A similar survey was conducted in November 1999, after the Conrail merger.
Only 31% of the respondents were satisfied with rail service in general
last year, versus 56% this year. Most cited inconsistent service as the major
problem. "Transit times are slow in the East," says one major paper shipper,
"but it's better than it was six months ago." By comparison, 81% said they were
satisfied with WC's service--very close to the 84% reported by the 39 customers
surveyed a year ago. In 1999, 66% of the respondents diverted tonnage to a
different mode, compared with 29% this year. Most said it was done at a
customer's request and not due to WC's service.
WC's Customer Service Center got straight A's for satisfaction: 95% in 1999
and 94% in 2000.
"Overall, customers seem to be satisfied with WC's service," says CSC
Director Suzanne Van Huis. Several offered nice compliments, while six expressed
concerns about switching.
Participants were drawn from a list of WC's top 100 customers, including
some located off-line.
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WISCONSIN CENTRAL SYSTEM
Our Pledge:
"To offer superior transportation
consisting of more frequent,
dependable train service, at
competitive prices, with proper
equipment, accomplished by
customer-minded and safety-
conscious employees."
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<PAGE>
WHO'S CALLING?
Rich Miller has a new title. Prior to October 9, he was division manager of
the Eastern Division. Now he's director road operations south--a change that
came with Wisconsin Central's recent transportation department reorganization
(see page 3).
A third-generation railroader, both of Rich's grandfathers were railroaders
for the Baltimore & Ohio (now CSX Transportation) and his father was a B&O
conductor for 37 years.
Rich was born in North Vernon, Ind., a crew-change point on B&O's St.
Louis-Cincinnati main line. He joined CSXT in 1972 as a track laborer and
transferred to the transportation department in 1984. Following stints as
assistant trainmaster, trainmaster and terminal manager, he advanced to terminal
superintendent at Richmond, Va. in 1991--a post he held until joining Wisconsin
Central as division manager at Fond du Lac, Wis. in 1998.
Rich's territory extends from Fond du Lac south to Chicago, including the
West Bend subdivision. "I spend the bigger part of my week now in the Chicago
area, dealing with connecting railroads and trying to improve operations down
there."
Rich notes the division has become busier since joining WC. "My gut feeling
is we're handling about 30% more trains than when I first came here.
[Photo of Richard Miller]
RICHARD MILLER
Director Road Operations South
We've hired 50 people and track expansions have also helped--including the
double track up Byron Hill (just south of Fond du Lac) and siding extensions,
[Inset Quote]
"I think that it's good for
operating personnel to
develop a relationship with
the people who actually load
and receive the cars."
such as Duplainville." Rich is also looking forward to WC's upgrading and
dispatching of the CSXT (B&OCT) Altenheim Subdivision at Chicago. "Anything we
can do to add capacity will help."
Service through Chicago is more predictable, Rich notes, "but it's never
the way you want it. There's big room for improvement."
A recent change is WC's direct interchange with the Union Pacific at
Proviso yard (14 miles west of Chicago). "We're making excellent runs and it's
turned out to be one of our better interchanges," says Rich.
He enjoys working at WC. "I have the best of both worlds: it's Railroading
101, but I don't have to deal with a bureaucracy of 2,000 in a general office
building. I get to deal with Ed Terbell (VP and general manager) and that's it."
Interacting with customers is an important part of Rich's job. "They're
good to deal with. As a terminal superintendent on CSX, you let the sales and
marketing people handle it."
Rich adds, "I think it's good for operating personnel to develop a
relationship with the people who actually load and receive the cars. It's
enabled us to more accurately understand what each other does, and we can give
them better service that way."
Rich and his wife, Sue, have four children: twin girls, Sharon and Shanan,
23, a son Jake, 21, and daughter Megan, 15, who is a freshman in Fond du Lac.
Rich enjoys golfing and spending time with the family.
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THE WRITE TRACK
Wisconsin Central System
P. O. Box 5062
Rosemont, IL 60017-5062
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