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# LB Foster Co. Message Board

• redbirdview redbirdview Feb 8, 2006 9:36 PM Flag

Ran across an interesting piece earlier this week that raised some more questions about DME's ability to service that \$2.5 billion loan which when added to the \$233 million they borrowed a year ago adds up to \$2.7 billion long term debt. The thrust of the piece centers on the annual revenues of the big railroads and the ratio of those revenues to their long term debt. Here are the numbers�

DME and ICE�I believe I read \$180 million revenue for the two in a newspaper article about their merger a few years ago(\$60 million for DME and \$120 million for ICE).

BNSF�2005 revenues of \$12.987 billion. Outstanding long term debt of \$6.516 billion.

UP�2005 revenues of \$13.578 billion. Outstanding long term debt of \$6.816 billion.

Norfolk Southern�2005 revenues of \$8.527 billion. Outstanding long term debt of \$6.930 billion.

CSX�2005 revenues of \$8.618 billion. Outstanding long term debt of \$6.037 billion.

The piece next detailed a "what if" scenerio for DME if it got the \$2.5 billion loan, what it would take to service the \$2.7 billion each year. It started witht he assumption that DME could get 20 mills per mile for every ton of coal. The scenerio used a 1,000 mile haul as a basis for the formula:
1,000 miles X 20 mills or \$20 to deliver one ton of coal. Then you have to take that \$20 X 15,000 tons per train to come up with the \$300,000 from one train for the 1000 miles. The number of trains needed to generate \$2.7 billion in revenue you divide the \$2.7 billion by \$300,000 per train which gives you 9,000 trains a year. Then divide those 9,000 trains by 365 to get the number of trains per day, which would be 25 loaded trainsbut a total of 50 on the track because 25 would supposedly be returning on the same tracks which might cause some logistical problems. Run the numbers again, 9,000 trains a year X 15,000 tons each, and you come up with 135 million tons per year which would generate \$2.7 billion in annual revenue. Of course, as you noticed early on the big railroads revenue is 1 to 2 times
their long term debt figure. The optimistic DME scenerio outlined above only equals their long term debt. So, bilboba is probably right in saying DME is most likely looking for a quick sale.

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• By your calculation, if you run 9000 trains in one year is equal to the 2.7 billion. The 2.7 billion is amortized over 30 years, not one year.

If they need 500 million in gross revenue per year to service debt, then by your mill caculation they need only aprox 1670 od trains per year. That boils down to 32 per week.