Volume 2, Issue 5
May 4, 2001

Inside this issue:
Watco Companies expands with K & O Railroad
Switching: continued quality rail transportation
Employee News
Opportunities for job growth with the K & O Railroad
Pittsburg business pleased with SK&O rail service

Watco Companies announced the signing of an agreement to purchase the Central Kansas Railway (CKR) on April 2, 2001. Operations are scheduled to begin June 1, 2001, as the Kansas & Oklahoma Railroad.

"We are extremely pleased that we were able to reach an agreement to purchase the CKR," said Watco Companies President and CEO Rick Webb. "This acquisition is a great fit with our operations in the mid-west and I believe it will strengthen our company."

The Kansas & Oklahoma railroad will operate from Wichita west to Towner, Col., just west of the Kansas-Colorado border. There are 920 miles of track in this current predominantly agricultural railroad.

"Currently there is a 60-40 agriculture/industrial split on the CKR," said Kirk Hawley, Watco Companies Vice President of Railroad Marketing. "Our goal will be to not only increase the agriculture shipments, but also increase the industrial traffic."

Current estimates suggest that the service area of the K&O produces about 150 million bushels annually. While some of this wheat is consumed in the K&O area much of the wheat will be exported or shipped to flour or feed mills. That is a great opportunity for Watco Companies’ customer service team.

"We want to provide ‘Knock-Out’ customer service on the K&O from the very first day," Webb said. "Our job will be to duplicate what we have done on all of our other profit centers and work to meet our customers expectations.

"We have a lot to learn from our customers, but we are going to work as hard as we can to learn and build the K&O into a great railroad."

• The agreement was signed on April 2, 2001, concluding more than eight months of negotiations.
• Operations are scheduled to begin June 1, 2001, with the closing May 31.
• The acquisition is pending Surface Transportation Board Approval.
• The K&O will operate as a subsidiary of Watco Transportation Services.
• The K&O will operate on about 900 miles of track. With the acquisition Watco Companies will own about 2/3rds of all shortline track in Kansas.
• The State of Kansas has been a significant partner in this acquisition. At the time of this publication, the state is considering nearly a $10 million capital improvement plan for the K&O. In return the K&O will agree to provide a 20-year service plan. More will be reported on this and other government affairs issues in our June issue of The Dispatch.
• Watco Companies did not purchase a portion of the CKR from Wichita to Garden Plain. That portion of the line was already proposed for abandonment in an agreement with the State of Kansas and the City of Wichita.
• The acquisition did include specific leased property from Class I Railroads.
• Watco Companies will issue an 18-month rail abandonment moratorium on all rail lines owned by the K&O railroad, beginning on June 2, 2001. That moratorium will include all rail lines on the K&O except the Coats to Protection, Hanston to Jetmore, and Lyons to Dartmouth sub divisions. Those rail line abandonments are subject to customer and state infrastructure commitments.
• Applications for employment on the K&O are currently being handled through the Watco Companies Human Resources Office in Pittsburg.
• A K&O information desk has been set up in the Pittsburg office to direct all inquiries to the appropriate parties. That phone number is (620) 231-2230 ext. 223.

Watco Switching Services continues with its goal of providing safe, efficient, quality rail transportation services for our customers. We are responsible daily for our customer’s switching needs ranging anywhere from 30 cars up to 1,100 cars at each of our customers locations. Our working relationship with those customers must go beyond what is required, we must go the extra mile. Our competition is fierce and each of our location teams has built a solid relationship that enables us to continue working toward our goal.

Recently, one of the Midwest regional operations lead by Eric Hill, with members of Jason Williams, Kenny Davenport, Patrick Fugate, Aaron Spoon, and Mike White received from the customer a Quality Recognition award letter along with shirts as appreciation for a job well done. This location recently began providing additional rail services in addition to the normal railcar switching we had been doing. The transition with the additional services we are proving made production improvements for the customer and at the same time, provided Watco Companies with additional revenues.

Jim Herman, Director of Safety and Compliance, has been on the road visiting locations and providing our employees additional safety training to ensure our goal is met. Watco Companies emphasis on safety will make and keep us at the top of the rail switching service providers.

Keith LaCaze, Director of Oper-ations, is in the final stages of a new operation startup in the southeast region. The crews have been hired, the equipment is in place, and now this location joins the Watco Co.’s in providing our customer with safe, efficient, quality rail transportation services.

Welcome Julie Madl to the Watco Companies, Inc. family. Julie started as the new receptionist/office assistant for the corporate office on March 22, 2001. Julie comes to us from the broadcasting field, where she spent 4 years working for local radio and television stations. Julie is engaged to Justin Fortman and they are planning a March 2002 wedding. Not only will Julie be the voice on the other end of the phone when you call over to corporate, she will also be the voice of the "Dispatch". Julie will be taking over the Newsletter Coordinator position as of next month. This is your company newsletter and your contributions are important to our success.

Managers son builds new home in Kansas town.

Benny Easley, son of John Easley, Manager of the Owasso branch of the SKO, recently celebrated the completion of a new house that he and 6 other Neodesha youths built in Neodesha Kansas. The students built one of three homes that were constructed in a cooperative effort with See-Kan Cooperative.

Please send any employee information to Julie Madl at jmadl@watcocompanies.com.

Throughout our history we have been known for growth and we plan to continue. Our growth is more than locomotives, track and equipment; it is people. Each person is a vital part of this growth. We will be hiring many people to staff our newest acquisition, the Kansas and Oklahoma Railroad.

While many of the employees will come from the former railroad company, we want to make certain qualified and desiring candidates from within our existing company have the opportunity for advancement or a change in employment location. Our bottom line is that we want to fill every position with the best people from both internal and external candidates who want to serve our new customers. Throughout our history, we have looked first to the talents and commitment of the family of Watco employees to step into new challenges. Growth has also required us to look outside of our organization to fill vacancies.

Choosing the most qualified candidate is not easy. Comparing internal candidates (present employees of Watco) with external candidates is comparing apples and oranges. The ability to do the essential functions of the job is only one small part. We must also consider how the whole organization is affected.

Advantages of Internal Candidates

• Prior knowledge of the organization, the people and culture
• Proven quality of work and ability to learn
• Company loyalty leading to greater probability of long-term employment

Advantages of External Candidates

• Catalyst to change corporate culture
• Possession of training, education, experience and contacts not available internally

No matter where we find the most available candidate, that person will have to undergo training and orientation. The on-site employees, who are content with doing their present job well, comprise the vital backbone of our organization and have the responsibility of teaching a new person what they need to know and making them feel welcome.

Many Watco employees have accepted new challenges in their careers. They can tell you how important it is that we have good people at the location who take time to help them become adjusted to their new jobs. Here are a few examples of our employees who have accepted the challenge of a new position.

Mark McClellan started in the mechanical shop in Coffeyville, KS and is now Switching Operational Assistant working out of Kansas City, MO. Carl McKeown started in switching in DeRidder, LA and is now in mechanical in Rupert, ID after stops in El Paso, TX and Wallula, WA. Linn Herman began switching in DeRidder, LA and is now Trainmaster in Winfield, KS. Robert McKinney began switching in East Helena, MT and is now an Engineer on the PCC in the state of Washington. Pat LaCaze began switching in Baytown, TX and is now General Manager of Timber Rock Railroad. And there are many more examples such as Jim Herman, Jeff Mayberry, Jack Lisle, Tony Clark, Paul Fries, Maurice McGinnis, and Dan Salmon, to mention a few.

This short list provides an illustration of those who have stepped up to the plate when we needed them. However, none of them could have made it if it was not for the help of many people who taught them the ropes along the way. This is the essence of teamwork. None of us can do it alone.

Someday we may be asking you to accept a new challenge, or you may want a change yourself. Opportunities abound with Watco. If your desire is to move to the sunny beaches of Florida or the outdoorsman paradise of the mountains of Washington we may have an opportunity for you. If you want a chance to expand yourself by changing to a new job, Watco has railroads, mechanical shops, locomotive shops, warehousing facilities, trucking, and switching profit centers. And we are always looking to grow to new areas and take advantage of new opportunities.

Check out our website at www.watcocompanies.com and see what we are showing the entire world about our company. And who knows, you may find your dream job posted in the Watco job opportunities section.

Pittsburg Train Crew, SKO General Manager with Bill Coleman (Vinylplex) l-r: Tim Herman, Gary Brown, Mick Kinsley, Randy Letner (Mngr), Jeff Mayberry (Gen Mngr), BIll Coleman and Garin Shaw

The SKO was recently recognized by a local customer for their superior service.

Vinylplex, Inc., a rail served industry located in Pittsburg Kansas, manufactures and distributes PVC plastic pipe. They produce an average of 75 million pounds of PVC pipe annually, which is shipped to distributors and contractors throughout Texas, North and South Dakota and as well as in Kansas, Missouri and Oklahoma. The major use of the PVC pipe is for area Rural Water Departments.

In order to supply this product to the community, Vinylplex receives the inbound raw materials via the SKO. PVC resin cars are spotted to the industry where Vinylplex itself moves the cars in and out of their facility as needed. President of Vinylplex, Mr. Bill Coleman, has been dealing with the rail industry for 25 years in various industries, and never thought that he could be happy with rail service. That was until he started with Vinlyplex three years ago.

"Typical rail services operate when and where they want, without regard to the needs of the customer", stated Mr. Coleman. "The SKO is not a typical rail service, many times the Pittsburg train crew for the SKO has given up their weekends and holidays to ensure that our industry is served." Coleman also commented that without the continuous and prompt service from the SKO, his business would not be able to run properly.

Mr. Coleman is a strong proponent of the rail industry in our community. "With out the rail industry many hundreds of jobs would not in existence", said Coleman. "Not only does the SKO benefit our community by supplying jobs for other industries, they also supply the community with entertainment with the annual Little Balkins Days Train Rides as well as other events throughout the year."

With continued community support from industries like Vinylplex, Inc., the employees of Watco Transportation Services believe that they can and will encourage future customer growth as well as community involvement.

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                               Watco Companies, Inc. * 315 W. 3rd Street * Pittsburg, KS 66762 * Phone: 620-231-2230 * Fax: 620-231-0812