Mark Green: What brought you into this work? Did you have a specific interest in Corman or railroads or did it just occur by happenstance?
Ed Quinn: I got lucky. I was born in Fort Benning, Georgia. My father was an Army Ranger in Vietnam and was medically retired when we lived there. There was a family that lived above us, Rich and Margo Timmons. Rich ended up staying in the army and was a three-star general when he retired. Later he ran the American Shortline Railroad Association. I went to the U.S. Merchant Marine Academy and I was in the shipping industry for a while. I ran back into Timmons and talked to him and he introduced me to R.J. Corman—Rick—and the folks here. That’s how I got to be at Corman and how I ended up being lucky enough to move to Central Kentucky.
MG: R.J. Corman Railroad has grown, as a story goes, from a truck and a backhoe into a 23-state operation with multiple short-line railroads. Can you share any revenue numbers and trends, categories that are performing well?
EQ: We are privately held and we don’t share revenue numbers. What I can tell you is that we’ve got a great team here. We’re focused on operating all our businesses safely, efficiently, growing all of them with long-term sustainable growth—the theme that our founder had.
MG: Can you discuss your different business service categories and which are the strongest or generate the most revenue without giving us the numbers?
EQ: On our website you’ll see there’s a wheel graphic of the company. How we describe it is, we are a vertically integrated portfolio railroad company. We now have 17 short-line railroads. Where we came from was the contract services world—construction, doing maintenance work. We grew a construction company. We have an emergency response business for derailments and storms. We now have a signaling business. Anything that a railroad would need, from engineering and the mechanical side, we should be able to help; we “self-medicate” for ourselves and then we also help other folks. Then we have this logistics business, which is a sister and a driver for some of the business on the railroad side as well. That’s our switching businesses, our distribution centers, our transload facilities, and to some extent our material handling business. I like it presented in a circle because one drives another drives another. We end up doing a lot of cross utilization of talent and equipment and people, and ultimately cross selling across the different divisions.
MG: What are the broader economic trends in the rail industry? Is it up, down, steady? And what are the main trends that affect the rail business?
EQ: I’ve got a quote for you that Warren Buffett used after Berkshire Hathaway bought the BNSF railroad. He said if you were stuck on a desert island and allowed one number to know what the economy was doing, he would pick railcar traffic. When you talk about broader economic trends, it’s pretty telling. For the first half of ’21, intermodal traffic hit record highs. Rail shipments of bulk commodities like ores, metal; those are also up. Coal is a multiyear down trend, flat trend. To me the world certainly seems to be smaller and smaller every day with global logistics. We live in Lexington in Kentucky and maybe we don’t think of ourselves as part of this big giant global logistics world, but we certainly are right in the middle of it. When you look around and see ports in Los Angeles being overrun and ships “on the hook” there, congestion in Chicago, all of this plays together. But the railroads in general have all been able to take advantage of the needs and move quite a bit over the last several years.
MG: The rail sector moves up and down at the same speed with the overall economy?
EQ: It does. Sometimes it’s a leading indicator or lagging indicator as you go in or out of troughs or peaks, but that’s how we tend to look at it.
MG: Corman has approximately 1,500 employees in 23 states. How many of those are in Kentucky, and is your ability to find the people you need in Kentucky any different than it is in other states?
EQ: We have a little over 600 team members in Kentucky, spread out through various businesses that we have. Our headquarters are here in Nicholasville and we have what you think of traditionally: finance, accounting, IT, etc. We have a bunch of repair shops, fabrication shops. We have a distribution center in Bowling Green. We have our dinner train in Bardstown, three short lines in Kentucky; one is here in Lexington. Our wiring shop, emergency response divisions, our construction crews roll out of here.
As far as challenges in finding employees, we’re not that unique in the state of Kentucky. We’ve had challenges across our entire footprint, and we’re pretty representative of what the rest of the rail industry, the services industry, has had based on conversations I have had with other leaders in the industry.
MG: Railroads are such an archetypal sector, but most people think of rail operations in terms of imagery from old movies or from their childhood 40 or 50 years ago. Can you describe some of the modern technology today’s rail systems use that might be different from people’s perceptions?
EQ: One of the biggest technological advances would be something called positive train control, or PTC. The investment in round numbers is about $15 billion. It was a government mandate back in 2008. The focus is on safety, like railroad crossings. All the investment was made with private money. All the Class 1 railroads and all the rest of the railroads that were part of it, we had to invest in this technology. Basically, what you have is digital wireless communication systems: think satellite, radio signals, cellular, tying the locomotive with a home network operations center— what they call a NOC—integrating GPS so you can track rail cars as they are moving through the networks.
Each railroad has different rules. There are different road crossings; you have to make sure that the gates are down before you go through town so to speak or you can create a very unpleasant situation if that doesn’t occur. Having this technology set up, you can operate the railroad more efficiently. Again, safety is the main focus. Preventing train-to-train collisions and derailments and unauthorized train movements is critical for a safe infrastructure. There’s a lot of data that comes out of that. One of the things that will happen over time using that data set for good is being able to take advantage of the rail network, run full trains, keep trucks off the road. Think about infrastructure. For folks traveling down the highway, having fewer trucks on the road, particularly in heavily populated areas, that’s a big one.
You have wayside detectors, rail flaw detectors, and lidar technology for 3D renderings and inspections. You can run these on trains, get a picture of the industry infrastructure. The railroad has an entire world growing around it— trees, whatever—and you can make sure everything is safe for rail operations. Those are some things the industry in general has taken advantage of.
MG: How long did it take to put in PTC?
EQ: It’s over 10 years. We had some serious slippage on it. It’s a federal mandate with the individual railroads needing to do this. There’s a guideline for it and then the railroads have to write the rules, so those things can get complicated quickly—how everybody ties themselves together. There was no back office way to integrate it. It’s a brand new thing. It was a struggle. And again, in conservative numbers it was $15 billion; that’s a lot of money to go into technology that’s mandated.
MG: Corman’s rail services businesses use around 350 pieces of construction equipment, and there’s been a lot of technological change in that area. Has Corman adopted the use of any robotic or autonomous equipment at this point?
EQ: We have not. Especially on the construction side, we do see some of that technology being developed over in Europe. When you think about the construction world, that’s a lot of on-track equipment. We are not autonomous, but we do a lot of rail track testing, infrastructure testing. In Europe the rights of way are really tight when you think about the densely populated areas. Some of the technology from there will migrate this direction at some point, but as of right now no autonomous or robotic equipment.
MG: Corman owns about 125 locomotives and services them as well as rail cars. Does managing a fleet of locomotives pose special issues? What is the life of a locomotive?
EQ: The exact number is 157 (locomotives). There are a little less than 550 rail cars. The total inventory is about 3,100 pieces of equipment, some heavy equipment and some lighter stuff. We’re spread out in these 70-plus locations, and our folks locally to do a dynamite job taking care of everything and maintaining it. We have shops based here Nicholasville, and from the Lexington yard as well, that do major overhauls on locomotives. We have locomotives that are decades old, 30 to 40 years old, and we go through and rebuild them on a fairly regular basis. A lot of our power is what I call smaller power. You look at some of the trains that go through Lexington with CSX or Norfolk Southern, they’re pulling 100-plus car unit trains; they use multiple locomotives. A lot of our work is done in local service, in the lower speed, so we don’t have that kind of power.
MG: It is a locomotive akin to anything else somebody might be familiar with? Larger trucks or other large construction equipment?
EQ: I am not sure I can draw a correlation to a locomotive, but I can give you a good example on a railcar: (For) a gondola open-top type railcar for a commodity—use coal as an example—you require four semi dump trucks to fill up one of those rail cars.
MG: How much does a locomotive cost? Is there such a thing as a typical locomotive?
EQ: There’s different horsepower, what it’s used for etc. I’d say on the low end you’re in the $400,000 to $500,000 range. Some of the newer ones, the larger ones will be in the $2.5 million range. If you get into some newer technology, you can get into twice that easily.
Some of our equipment is aged, and we have 26 switching locations in addition to the (short-line) railroads. Imagine a single industry or a couple of locomotives captive with a single industry: Those are our work horses. You’re in the confines of a 50- or 100-acre industrial facility moving rail cars around the facility one or two cars at a time. That’s a lot different than grabbing a 125-car unit train out of the Powder River and hauling coal halfway across the country. It’s just like how all pickup trucks aren’t the same. There is a lot of technology in the newer ones. It’s pretty impressive.
MG: Tell us about Corman’s geographic footprint. You operate in 23 states. Are those contiguous states or are they spread around the country?
EQ: We’re spread around. We’re denser east of the Mississippi; a lot of those states are continuous as we roll through. We go as far west as Tucson, Arizona, in the South, and to Scott’s Bluff, to Fargo, North Dakota, up in the North. We are spread out. When you move west outside of some of the more densely populated areas, you lose a little bit of the contiguous piece. But I’d say we’re covering all the East.
When we say we’re in 23 states with 73 or 75 locations, that’s where we have some sort of a division, a home base, if you will. We don’t have a home base in Maine as an example, but we go to Maine and do work. We don’t have a base in Massachusetts but we go to Massachusetts and will do some work primarily with the construction side or the emergency response side. Out west we hardly ever touch Idaho; we won’t get in Washington state or California typically. We will get into Colorado a little bit with our service businesses. You know, have truck will travel. We do quite a bit of that.
MG: What are the main operational differences between the seven large regional Class 1 railroad providers that do the long-distance links and the short-line railroads that do last-mile delivery operations?
EQ: There are differences for sure. There are also a lot of similarities. The operational similarities in this industry and a lot of other heavy industries is a focus on safety and rules compliance. They are absolutely paramount. When you get into the operational differences, to me it’s more of a business model difference. The Class 1 railroads are really large organizations; they fit into the model of a business-to-business (B2B) business, and we like to take the mentality more of a B2C (business to consumer) type of business. We look at our customer base as folks we can work with on a regular basis to try to improve it on the rail side of things, to make sure there’s some amount of transparency on where their freight is. Or if there’s somebody with a problem, we’ve got a group of folks who’ve experienced that before and we can get creative and help solve some problems. That’s not to say that the Class 1s don’t try to solve some problems.
MG: For your last-mile delivery, do you take handoffs of freight from long-distance carriers and then make the delivery to the individual customer? Is that a short-line railroad’s main business?
EQ: For short lines, there will be an interchange point. The Class 1s in the state Kentucky, you’ll see a lot of CSX and Norfolk Southern type traffic. We will interchange with one of those Class 1s or they will interchange with us, and they’ll hand us we call it a “block” of cars or a “slug,” a handful of cars—it could be just a few, it could be 50 or 100. We’ll take those and move them on our railroad, sometimes to our railyard. We’ll break it up, then deliver it to our receivers or shippers for their use. When they are done—either empty or they’ll load it back up—we’ll build a train back and we’ll give it back to a Class 1 and off it goes to its new destination.
MG: How many times might a car change hands in its movement from its origin to its final destination?
EQ: It can get tricky. Think about some of the global issues. When you start thinking just bulk commodities and get into intermodal traffic, it’s even more complicated. You have a ship that hits that Los Angeles port, or it hits the East Coast somewhere in the North and they’re offloading containers—it wouldn’t be uncommon for three Class 1s, a couple of short-lines and an industry to touch that container before it gets to its final destination. It just depends on how the traffic gets routed.
A lot of times if it is an NP (Northern Pacific) or a BNSF train, it will go to a mixing yard of some sort; maybe they may bring it into Kansas City, for example, and then it gets taken by Canadian National for a period of time, then UP (Union Pacific) touches it, Norfolk Southern. We have quite a few folks on our side who work with the Class 1s to try to make sure it’s not confusing for the shipping customers, to try to make sure it’s easy for them. There are a lot of advantages to rail when you think about the economics of it. We try to make sure we’re helping as much as we can.
MG: What is the typical or most common customer for rail freight services? Is there any rule of thumb on size or industry sector as to who is a rail customer?
EQ: Intermodal traffic is the biggest right now. About 48% of freight traffic is intermodal traffic, and then bulk commodities, agriculture, energy products are about 52% of customer goods and merchandise. It flows that way.
MG: Do we know how many rail freight customers there are in Kentucky?
EQ: In Kentucky there are 13 railroads and 2,583 miles of track, and we estimate they moved about 48.9 million tons or about 700,000 railcars last year. If you think about the truck-to-rail conversion of four-to-one, that would be the equivalent of 2.8 million semitruck trailers off the road and moving by railroad versus moving by truck. We have about 70 industries across the state that are heavy utilizers of rail.
MG: What percentage of Corman’s business is in Kentucky, and what states generate the most work for you?
EQ: Kentucky is probably about 20%. Tennessee is about 11%, and then we end up with states like Texas, Ohio, Indiana, Illinois and Pennsylvania all in that 5% to 7.5% type range.
MG: Current federal government infrastructure discussions are talking about making some major changes, but how much do ongoing typical infrastructure upgrades generate business for you?
EQ: It’s important to qualify that we do a lot of work for the Class 1 railroads. We do that work through our railroad construction company, our material handling business and our signaling business. That’s to help maintain, help upgrade some infrastructure, etc. For the most part, those projects have no public money involved; these are properties that are privately owned, some of them by public companies certainly but they are owned, maintained and operated and upgraded with money that’s generated from the business. That’s the predominant piece of it. That’s a significant part of our company; when you think about the services side of our business, it’s significant.
MG: Have you done any assessment of the potential impact of projects under consideration as part of the federal infrastructure bill, such as adding passenger service from Chicago to Indianapolis and Cincinnati and Louisville? If this infrastructure bill comes to fruition, is it going to produce a major impact?
EQ: I don’t know the specifics on that exactly. If some of these projects get green lit and there’s some public money that goes into some of these projects, I can see us participating in, helping out, on the contracting side of the world. There are some carveouts for road-grade crossing eliminations and wiring to make sure we don’t have any dark crossings out there for all of us as we are rushing over the railroad tracks—because the railroad tracks were there before our roads were for the most part.
Regarding Amtrak, I find that a bit disappointing because statistically speaking about 15% of riders are long-distance riders for Amtrak, but the long-distance service is about 80% of their financial losses. So, expanding a business model that doesn’t quite make sense right now doesn’t make sense to me. Amtrak owns about 625 miles of track; the other 20,000-plus miles of track they traverse are privately owned. That doesn’t mean there shouldn’t be the right to do that, but it is a heavily subsidized service and one that the American public doesn’t seem to be all that interested in.
There are definitely spots for commuter trains in large cities where you have congestion, but I don’t see a lot of long-distance use so it’s a little disappointing when I see infrastructure money go in that direction unless you don’t have cars; in the Northeast—Boston and New York—I totally get it. But for Lexington to Louisville to Cincinnati you’d spend more time leaving your house and going to a station and waiting for a train than you would to get there (by car) on your own schedule.
MG: Has the freight distribution between rail and truck changed significantly in recent years?
EQ: Twenty-eight percent of U.S. freight moves—according to ton miles—by rail. What I see is that rail has grown, but trucking has grown faster. Part of that is that trucking has grown faster on consumer goods. When you think about a just-in-time type of delivery system—you probably have Amazon boxes at your house and I do as well—the models changed a bit. I think there’s opportunity for rail to grow in more of a fundamental way. We’ve got some work to do working with shippers to make that happen.
MG: One of your key responsibilities in your previous position was “sustained rapid growth,” and Corman has added six short-line rail operations in the last two years, which has been a challenging environment. Is strong growth a current company mission?
EQ: Absolutely it is. We’re privately held, so our focus is long-term sustainable growth across all the different business platforms we have. We added six short-lines, and that’s a great example of us being aggressive from a growth platform piece, but we’ve also invested tens of millions of dollars in our other businesses—our construction company, our emergency response company. We’ve invested in some highly specialized equipment. We’ve grown what we call a wiring shop for our signal business; it’s what I think is a world-class wiring shop. We’ve added a distribution center. We’ve added transload facilities. Our switching business today is at 26 locations. That’s been a growth vehicle for us as well.
When you buy a short-line railroad, sometimes it’s a little bit loud. People notice it, but we’re definitely growing all the rest of it as well.
MG: Are you able to share the current overall strategy for the company or some special initiatives that you’re pursuing?
EQ: The general statement we have is that we are interested in growing the business. Each one of our business units has to be safe and we have to run it efficiently; those are the first two prerequisites. Then we have to add growth strategies for each one of those businesses. When you have a company like ours—which is a portfolio company with different businesses in it—it’s important to try to carve out growth strategies for each one of them.
We talked about the railroad quite a bit. We want to grow our carload volume. We’ll do 125,000-ish rail cars this year. We’re going to continue to grow that by adding railroads, by building out these transload facilities and working with industries that aren’t actually on our railroad but are “pull-ups,” so we can truck stuff over a half mile down the road. There are a number of projects that our construction teams have worked on that we are excited about. There’s a project down in Florida; it’s actually a passenger line. At one point the Virgin brand was attached to it. They are building a railroad from West Palm Beach up to Orlando. We just got a project for 20 miles of new rail, which is pretty amazing. We put hundreds of thousands of rail ties in at different locations.
We’ve really focused on some of those types of project business niches to grow. I want to be what I call opportunistic entrepreneurs; we set a direction and as opportunities come, we can build service models around them. That’s what we try to do.
MG: Are there numeric goals such as adding a certain number of short-line railroads this year or a certain number of employees?
EQ: I don’t look at the business that way. We have strategies to grow the top line, grow the revenue side of things, and we have strategies to become more efficient. Sometimes those operate in conflict with each other a little bit. But I think that’s good. People are trying to cost out and cross-utilize people and talents, and sometimes investing money. We try to play both sides of the fence as best we can.
MG: What would you like people to know about R.J. Corman Railroad Group that they probably don’t know right now?
EQ: Going into 2021 we won a business development award from the American Association of Railroads for our Carolina line, which is a really neat story. The railroad is basically an abandoned railroad that hadn’t run traffic on it for four years. We went in and bought it and built out some pretty fantastic things. At the same time, all 17 of our railroads won an association award for no injuries in 2020. Safety is a is a big deal for us. Our Central Kentucky line won the president’s award for safety from the American Short Line Railroad Association, and those are the things that I’m really proud of.
For me, I went to high school at Woodford County High School. I got to come back here. For me, being part of this R.J. Corman team is a huge honor. We’ve got a great, great group of individuals that work hard every day as part of a team and they do it safely. I’m excited to be here every single day.
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