Volume 3, Issue 1
January 11, 2002

Inside this issue:
Achieving quality takes dedication & work
Watco Switching: Past, present and future
Anniversaries
Fields new VP Railroads; Buccolo VP Rules & Safety
Ostrander: Future of Watco "Possibilities are endless"
Stillwater Central Railroad makes Snyder line addition

Achieving quality takes dedication & work By John Brown COO Transportation

Early in my career I faced several choices that I felt would impact what path I would take for many years to come. The same choices that all of us have faced at one time or another. When I asked my father for his guidance and thoughts, he said simply that I could accomplish whatever I choose as long as I lived by the commitment that I would always strive to be the best at my chosen field and work everyday to improve.

That simple advice is just as important today for our company as it was for me nearly 30 years ago. The sheer genius in that piece of advice is to continually improve and work towards becoming the best at what we have chosen to do.

In business, to become the best means that we must adopt a total quality management (TQM) philosophy, we must believe, we can and will continually improve upon our present activities. TQM will allow us to improve quality, increase productivity and add value to all activities while we simultaneously increase Customer satisfaction and improve our profitability long term.

Whenever a commitment to quality drives strategic operational decisions, a lasting cultural change is created and sustained. Really the term management is applicable to all employees at all levels because we all volunteer daily to manage how well we accomplish any given task. All of us are empowered to continually improve and each of us is responsible for the many different dependent events that complete our individual performance.

Quality is never an accident; it takes hard work and there are no short cuts. A total quality system must involve our whole company and must address the performance of every individual.

Knowing we can't improve everything at once is why we as a company have chosen to focus on a few key measurements within each of our business lines that provide the largest impact for improvement. By first sharing these results we can then use them to improve the performance of all Watco employees.

Quality is no accident means we have to prevent defects of all types! Why do we have the time and money to do things over, such as derailments, but don't have the time to get them right thru prevention or training. We must demand 100 per cent performance in taking care of our Customers and thus taking care of our company. But striving for 10o per cent doesn't mean that we will never have a problem.

However, by setting the performance bar high, becoming intolerant of defects and searching relentlessly for the root causes of each problem we will insure that continuous improvement becomes the norm.

Quality is no accident means we must accept responsibility for quality and hold ourselves responsible to achieve it. We must learn to stop, think, ask questions, suggest improvements and tell our co-workers about how to continually improve. We must all teach each other, we are at all levels empowered to train and be trained, we must seek out the cure, anything less is just an excuse.

As our company grows, we will continue to face various challenges, but by putting the proper systems in place we will continuously improve the reputation and results of our company. This will require that we have the right people in the right positions doing the right things, because we must continually improve as our business evolves. The key is to match capability, desire, and performance with the necessary activities. Sometimes what worked yesterday will need to be changed to work equally well tomorrow.

Our commitment to quality will be tested more than once, we must be ready to walk the continuous improvement talk every day, and when that inevitable struggle between short term ease and long term gain rears its head, remember we must always put quality first.

2001 has been a solid year for our switching division, primarily due to the commitment and dedication of our employees who consistently provide quality customer service.

The Watco Companies began with Watco Switching Services 18 years ago, and we currently provide switching services for 18 customers. Nine of the companies that we switch today have been satisfied customers for 10 years or more.

I am particularly proud of our 2nd half reduction in the occurrence of manfailure accidents. 2001 got off to a rocky start, but our team recovered well to end out the year with an impressive safety record. Out of 17 locations, we have 4 locations that have maintained accident free status for 2001: Fernandina (34); Kansas City (12), Kansas City (13), & Texas City (30). In addition, we have 3 locations that have accident costs totaling less that $1,000 for 2001; Indy (28), Springfield (21) & Clear Lake (33). We congratulate the employees of these locations for a job well done and encourage our employees at all locations to strive for the goal of an accident free year for 2002.

One of the changes this year in our switching group has been the introduction of operational measurements. I am very excited going into 2002 with the initial results noted so far in 2001. Typically, change is not readily accepted. However, I want to congratulate our team for their ability to adapt to this new process and learn from the wealth of information at their fingertips.

This program has allowed us to realize improved efficiencies in many locations and at the same time recognize locations with proficient systems that were beneficial to other locations. The key to the success of the operational measurements is the involvement of all employees at each location in that they can now better understand the impact and consequences of their performance on their location as a whole. We have learned to be proactive instead of reactive in many cases. Operational measurements will continue to be utilized as a valuable management tool to gage our daily performance for a more efficient and prosperous future.

With all the change that has occurred in the Watco Companies over the years, it remains clear that some things always remain constant. In November, Watco Switching acquired a new switching operation at Westvaco Chemical in DeRidder, Louisiana. This was possible due in part from going back to the basic concept that made this a great company, utilizing all available assets to exceed our customers' expectations. In doing so two facets of our company benefited in the process, Watco Switching and the Timber Rock Railroad. The Timber Rock Railroad allowed Watco Switching to offer an exclusive railcar storage arrangement that virtually eliminated our competition. The Timber Rock Railroad has since reaped reward in the form of a track maintenance agreement for Westvaco trackage and opened the door for additional rail traffic from this facility beginning in 2002.

On December 17th we started a new switching operation in Pampa, Texas, for the Celanese Chemical Corporation. We have a tentative start-up date of February 1, 2002, for another Celanese switching operation located in Bay City, Texas. Celanese is a long term customer of the Watco Companies Switching Division, with over 9 years of consistent quality customer service at the Clear Lake, Texas, location alone.

The hard work and dedication of our employees opened the door for Watco to be awarded the new Westvaco and two new Celanese switching contracts. Their commitment to providing customer service second to none was a key factor in making this new growth a reality.

We are scheduled to begin tank car maintenance and repair at the Westvaco DeRidder operation in January 2002. Again, this is another example of the different services within the Watco Companies family working together for a common goal. Tony Bybee, the AAR quality assurance manager for Watco Companies, has lent his assistance in registering this operation through the AAR. I would like to take this opportunity to thank Tony for his assistance in this new venture.

We are off to a great start for 2002. The future has never been brighter for Watco Switching and the Watco Companies. Here's to a safe and prosperous new year for our employees, the Watco Companies, and this great nation.

Congratulations to the following dedicated employees who celebrate anniversaries with Watco Companies, Inc., in the month of January.

• 1 year: Ken Parkin, MindyBooth, Tommie Reeves, Steve Harvey and Charles Anton;
• 2 years: Michael Hayden, David Morrison II, and Bart Gray;.
• 3 years: Fred Cornish and Les Hancock;
• 4 years: Dennis Steggal, Sandra Carston, Joseph Hunt, and Mark Walker;
• 5 years: Lonnie Kaminer, Artis Smith, Robert Clay Jr., Dan Salmon, and Roger Kelley;
• 6 years: Charlie Sigley;
• 7 years: James Broadfoot, Shannon Knisley, Gary Thompson, Rob Thrall, Charles Blackwood, David Wiggins, and Harold Stephens;
• 8 years: David Young Jr, Tamera Hanson, Jean Sigley and Wayne Sigley;
• 9 years: Santiago Montoya;
• 11 years: Kirk Hawley;
• 16 years: Jeff Mayberry;
• 18 years: Rick Webb;
• 19 years: Dick Webb;
• 25 years: Tex Inman;
• 33 years: David Carter

Watco Transportation is pleased to announce two appointments which will allow our company to continually improve.

Larry Fields, Pittsburg, KS, has been appointed Vice President of Railroad Operations. Larry brings to Watco 26 years of railroad experience from the Kansas City Southern Railroad, having held positions in the Maintenance of Way departments, up to Vice President of Operations. Along with Larry’s other accomplishments, he was President CEO and Director of the Texas Mexican Railway Company from 1994-1999.

With the lifetime of railroad experience Larry bring, we will not only benefit from a fresh perspective, but his appointment will allow Dave Buccolo to accept the position of Vice President of Rules and Safety for our railroads. Both Larry’s and Dave’s complete focus in their respective areas will provide the vehicle for a successful future.

Larry and Dave will be headquartered in Pittsburg, KS, but will be responsible for all of our railroads activities within their respective areas.

Please join me in welcoming Larry and congratulating Dave on their appointments within Watco Companies.

For those of you who don't know John Ostrander, Vice President of Transportation/Northwest Track, Twin Falls, ID, he is a self-proclaimed laid back, easy going, low--stress individual.

"In most cases working with me is relaxing itself," claims Ostrander. Maybe it's his line of work.

"I've been a mechanic all my life. I started washing parts on weekends in a shop when I was 8 years old. That way I could spend time with my Dad," said Ostrander.

Little did Ostrander know years later he would become the VP for a successful company with locations nationwide.

"I grew up overhauling the neighbor's cars and lawn mowers, whatever they had that needed worked on," Ostrander said. "I never thought I'd be where I am today. That's what is so great about Watco Companies. There are opportunities for anyone with desire to succeed, whatever the goal."

Goals as VP of NW Track for Ostrander now means overseeing spending, coordinating dollars spent and maintaining quality control in the track department, to add profitability to the Railroads (for the long term of course). Although he began doing manual labor, he doesn’t do much of that now.

November of 1993 Ostrander heard there were locomotive jobs in Rupert, ID, so he gave it a shot.

"Knowing what I do now, I'm grateful they returned my call. I assisted in bringing back to life locomotives that were in rough shape," Ostrander said. "The experience I had growing up not only got me that job at that time, but lead to this job, which I had never dreamed of doing."

Ostrander says he never imagined he would be in this position, but once the opportunity came about, he jumped in with both feet.

"The mechanical experience I've gained in the past has proven useful to me, although this job is a lot more mental that I thought it would be," Ostrander said.

"My job may be stressful at times, but I enjoy the challenges. When I tell my friends about my job, I tell them Watco is a professional, yet family-oriented atmosphere with a company that tries to totally satisfy customers within its means. It's family owned and that makes it exciting. I've never worked for a company where the founders continuously remind me that I, along with every other valued employee, am part owner and have a profound affect on the destiny of this company," Ostrander said.

As for the future of Watco Companies and John Ostrander, he has only one answer.

"I can't dream that far today…the possibilities are endless. The last eight years have proven to me that you can't predict the total extent of your abilities because I never saw this coming."

John and his wife of 14 years, Flo, enjoy flyfishing in Montana and Canada.

The Stillwater Central Railroad (SLWC) has added 120 miles of track between Oklahoma City and Snyder in southwest Oklahoma. The purchase of the line is from the Burlington Northern Santa Fe Railway (BNSF) and operations began December 29, 2001.

"The acquisition of the Snyder line between Oklahoma City and Long has been a goal of ours for several years," said Stillwater Central President and CEO Rick Webb.

"This is a tremendous opportunity for the Stillwater Central to better serve our customers and to grow the rail business.

"This is really an exciting addition which will expand our already strong presence in Oklahoma and the Midwest."

The SLWC was created in 1998 and currently operates track between Sapulpa and Oklahoma City and from Stillwater to the Pawnee Junction where it connects with the BNSF. The SLWC is owned by Watco Transportation Services (Watco), a Pittsburg, KS, based company, which owns six shortline railroads and operates in 17 states.

"The guiding principles of this company are three fold: improved customer satisfaction; improved profitability; and do both for the long-term. That is the message that we will take to every new customer, and it is a message we want to emphasize with everyone of our partners," Webb said.

"Our entire management team will be focusing on this line for the first couple weeks in January to ensure that we are taking care of our customers, and that this transition is as seamless as possible."

Watco Companies currently has five locomotives either enroute to the Snyder branch or in a staging area in Oklahoma City to operate on the new line. A general manager will be named and an initial office location announced early January which will be featured in the February issue of "The Dispatch."

John T. Brown, Chief Operating Officer for Watco Companies Transportation emphasized the startup period for the railroad will be a learning opportunity, and will also be one of growth.

"Our goal, quite simply, is to exceed our customers expectations. We will be entering this acquisition with a primary focus on providing quality service, also figuring out ways to do it better. We want to work with our community partners to understand their economic development needs and be a good community partner to help southwest Oklahoma grow," Brown said.

                             © 2002-2008 Watco, Inc. All rights reserved.
Problems with website? Contact webmaster@watcocompanies.com
                               Watco Companies, Inc. * 315 W. 3rd Street * Pittsburg, KS 66762 * Phone: 620-231-2230 * Fax: 620-231-0812