Volume 2, Issue 12
December 14, 2001

Inside this issue:
Continued growth leads to positive changes
Watco Companies Management Reorganization
Rising healthcare costs affect bottom line profits
Variety keeps Lewis happy at work and play
Employee News
Anniversaries
Maintaining healthy diet is a balancing act

Continued growth leads to positive changes By Rick Webb CEO

Our success over the past 18 years has been achieved by having a committed group of individuals working towards a common goal of continuous improvement. I want you to know how personally fortunate I feel to be able to be part of a company with such talented and dedicated people. I am confident that our success over the past 18 years will only be surpassed by our success over the next 18 years.

As we have grown we have had various management structures and have chosen different ways to tell the Watco story of success. As a company we have to evolve or die, there is no standing still.

During 2002 every person in the Watco family must be solidly united to achieving continuous improvement. While how we describe them, and how we implement them have changed, our guiding principles have remained the same:

1. Improved Customer satisfaction
2. Improved Profitability
3. Do both consistently over the long term

These three principles describe everything we work for, whether it is top line revenue growth or cost containment. We want to make our Customers as satisfied as possible, have Watco Companies be as profitable as possible, and do it with a long-term vision.

That long-term vision is probably more important to underscore today than ever before in the history of our company. The rail industry is continuing to consolidate and mergers and acquisitions will continue to be weekly news items. While this is the trend for our industry, it will only be a trend for Watco Companies in one area: growth.

We will continue to demonstrate to the rail industry that you can grow by doing better, and we will demonstrate it every day.

Our current management structure has worked well to improve Watco Companies to where we are today, but in order to achieve maximum Customer Satisfaction and Profitability over the long term, Watco Companies has to continue improving its Management structure.

John Brown will remain the Chief Operating Officer (COO) - Transportation with no changes to his responsibilities.

Wayne Sigley has accepted the new position of COO of Equipment Services and will be primarily responsible for the improvement of our locomotive and rail car fleet and also concentrate on locomotive and railcar mobile services.

Dick Webb has accepted the new position of COO - Contract Services. The COO of Contract Services will be responsible for our contract car repair shops and our contract switching operations, including our warehousing services that are currently part of our switching services.

Gary Lundy has accepted the new position of Executive Vice President (EVP) - Strategic Investments. This new position will allow Gary to maintain his focus on our investment into Information Technology and expand his role on other Strategic Investments including our Real Estate investments and our non-Railroad related equity investments.

Randall Readinger will continue his role as Chief Financial Officer and Walter Keener will continue his role as Director of Human Resources but both positions will now answer directly to me.

Mark Blazer will retain his position as EVP - Business Development with no changes.

Without doubt the talent outlined above has the capabilities to lead Watco Companies to a new level of improvement and with everyone's help we will get there in a very determined way.

The goal of the Watco Companies' Management team will be to insure that Watco Companies' guiding principles of improved Customer Satisfaction and improved Profitability, both over the long term, will remain at the forefront of every thing we do.

Thank you for being a part of the Watco Family and for believing in our success.

Our employees are the BEST! This is proven every day in the way we take care of our customers. This same dedication to our customer’s needs is also reflected in the way each employee manages their selection of health care. According to BusinessWeek, the average cost for healthcare was $4,985 per employee in 2000 and Watco employees kept that figure down to $4,430 per employee.

Since our company is self-insured for health care, every doctor, hospital, or pharmaceutical bill comes right off the profit of this company, and profit is how we get our paychecks and grow our business. It is very important that we do all we can to reduce health care costs.

In keeping down the costs of health care, each one of us has done a wonderful job this past year. Even though we are self-insured, we have hired Blue Cross to administer our plan. Everyone’s efforts to choose Blue Cross preferred medical care providers are to be applauded. These providers offer quality care and pass a savings on to us as a result of their payment agreements with the Blue. To help with this, our employees have chosen doctors and hospitals enrolled in Blue Choice and also kept costs down by using generic drugs where available.

Projections for the year 2002 show that health care costs should increase by around 40%. If the company passed that cost to each of us, our individual contributions would increase by around $23 (single) and $69 (family) per paycheck. We must each do our part to watch health care costs to keep that increase as low as possible. However, we must also increase the profitability of our company to provide enough funds to pay for this increase. Because we believe in each and every one of our employees, management has decided that the company and not the employee will pay the increase.

Health care costs will not be decreasing. We can expect the quality care we desire to cost more in the future. However, we will continue to make decisions on the corporate level to keep our costs as low as possible, which follows the examples set by our employees. Together as a team, we will continue to improve.

Variety seems to be the driving force for the Eastern Idaho Railroad’s Office Administrator/Administrative Assistant, Susan Lewis.

"The variety…not knowing what challenge to expect from one day to the next, is one of the things that keeps my job interesting," Lewis said.

Beginning as a part-time receptionist 6 years ago, Lewis soon moved up to a full-time office administrator/administrative assistant.

"I supervise dispatchers, work with accounts payable, oversee the office operations, and assist the general manager (Jack Lisle) also. I strive to keep things running smoothly by establishing or revising procedures and being proactive to any situation that arises, on a daily basis, and I love the challenge of it all." Lewis said.

Before coming to Watco, Lewis worked in accounting and also for the Chamber of Commerce in leadership and tourism, so her experiences are wide and differed.

Taking a job with Watco Companies was just another notch on her head post of experience.

"Railroading was a whole new world to me; I had never been around it."

Lewis is proud to be a part of a company that is growing so rapidly and expanding in all directions.

"One of the best things is the management and owners. I have never worked for a company in which the owners go out of their way to know everyone’s name at all the locations," she said. "All the people I have worked with are wonderful people."

Lewis takes her appetite for differing activities to her personal life also.

"I grew up in Nampa, Idaho, and spent the summers on a ranch at Cascade, Idaho, spending almost every day on a horse, herding and doctoring cattle, raising and training Paint horses. I currently enjoy spending time with my grandchildren, oil painting, fishing, gardening, cross country skiing and gold prospecting."

Gold prospecting? Yes, gold prospecting.

"I have always been interested in prospecting for gold, and one day I saw a magazine in a store that said there was a Prospecting club in my area. So a couple weekends a month I head out looking for gold. Mainly I go to places I can drive to and back from in a day; and also go on weekend outings monthly with the Prospectors group during the summer months," Lewis said.

"I didn’t realize prospecting (panning and searching for gold with a metal detector) would be as challenging as it is. You have to find a good geologic spot, or a location that has been previously mined or dredged. Gold sinks into the bottom of a stream, and stops at the bedrock, so you scoop us the gravel next to or in the cracks in bedrock into your pan and pan it out, but you have to be careful or you’ll shake the gold right out too. There’s definitely an art to it," Lewis said.

Susan Lewis has perhaps discovered the art to pleasing not only herself, but others also.

"The people of Watco Companies made me realize the importance of communication, teamwork, and serving customers in the best way possible. And I believe your co-workers are your customers too. We all have to work together."

Kevin Schoenhoffer, conductor for the South Kansas and Oklahoma Railroad in Cherryvale, and his wife Mitzi, welcomed a new baby girl to their family October 30th. Makayla Jordan, 7 lbs. 2 oz., joins a sister, Hayley.

Jennifer Barber, Mobile Repairs in Jacksonville, Florida, and her husband Lee, welcomed a baby girl October 13th. McKenzie Faith, 8 lbs. 10 oz. is their first child.

Jeffrey Wells joined the Kansas and Oklahoma Railroad in Wichita in October. Jeffrey will be working as a track man and is married with four children.

Warren Duncan joined the Kansas and Oklahoma Railroad in the Kingman area last month. Warren has seven and a half years railroad experience ranging from engineer to car clerk. He has worked for many railroads including the Santa Fe, Katy, South Kansas and Oklahoma.

• 1 year-Larry Brooks, Leonard Swink, Stephen Armstong, Bryan Rawlinson, Scott Cahill.
• 2 years-Charles Karamales.
• 3 years-Ricky Absher, Jerald Clark.
• 4 years-Hugo Medina, William Miskell, Samuel Greenfield.
• 7 years-Paul Fries, William Wiggins, Michael Carr.
• 11 years-Gary Spaw, James Horner.
• 13 years-Michael Barrington.

Are you eating a balanced diet? Unless you have been hiding in a cave for the last 15 years, you have heard some form of debate on, which is better…,a high protein high fat diet or a low fat high carbohydrate diet. Well, in reality you should be eating a balanced diet.

What is a balanced diet? Based on an average 2000 calories per day intake, a person should have 25% of the calories in the form of protein. Protein rebuilds muscles, supports the immune system and manufactures hormones, enzymes and red blood cells. Primary sources of protein are meat and dairy products and vegetable proteins found in beans, whole grains and cereals. Keep in mind that where there is animal protein you’ll also find fat and cholesterol, so eat lean beef, skinless poultry, fish and low fat dairy products. Thy vegetable proteins like beans, grains and cereals.

The next 25% of your calories should come from fat. For most of us this is where the trouble starts. Many of us don’t understand that there is good fat and bad fat and we eat way too much bad fat. Bad fat is saturated fat, soaps and candles are made from it, although we don’t eat soap or candles, we eat the saturated fat and hydrogenated vegetable oils. The bad fat also raises bad cholesterol (LDL) which contributes to the development of the fatty deposits that clog up your arteries and give you a heart attack. You should eat less saturated fat and obtain fat calories through good fat. Good fats are unsaturated fats: nuts, avocados, olives, and sea foods prepared by baking or broiling or in olive or canola oils. Good fats raise good cholesterol (HDL) and good cholesterol escorts bad cholesterol to your liver for disposal. Getting your fat calories from good fat lowers your risk for coronary artery disease and will not make you gain weight.

The remaining 50% of our calories should come from carbohydrates. Carbohydrates are important because they are quickly broken down into immediate forms of energy (sugar). It is important that we choose our carbs wisely. Some carbohydrates like energy bars, cookies, cakes and crackers cause the blood sugar to skyrocket and when we can’t burn the sugar it is stored. Our triglycerides (blood fats) raise and we may run the risk of heart disease and diabetes. Get your carb calories from vegetables and fruits such as apples, grapes, oranges, pears, tomatoes, broccoli, carrots, celery, lettuce, and green beans. These are good choices. They are complete carbs, meaning they are metabolized slower and contain dietary fiber.

Remember the more natural and unprocessed the food is, the less effect it will have on increased blood sugar and body fat.

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