A&M Chugging Along

J. Reilly McCarren is the majority shareholder and chairman of the board of the Springdale-headquartered Arkansas & Missouri Railroad Co. and its sister company, Allied Enterprises Inc.

Their combined efforts provide rail, trucking, warehousing, packaging, railcar leasing and other logistical services in Northwest Arkansas and southwest Missouri.

In addition to its rail transportation services, the A&M is a major tourist draw with its passenger excursion trains through the scenic Boston Mountains.

“It’s something we can do for the community that’s more visible than hauling rock or sand or grain,” McCarren said.

A modest railroad executive, McCarren knows his company has an important role in the Northwest Arkansas regional economy.

He’d just like it better if more people knew it.

“The biggest lament of a small company is it’s hard to get your name out there,” McCarren said recently while in Springdale for the annual shareholders meeting of the A&M. “To that point, a few years ago a major logistics magazine wrote an article on the Northwest Arkansas area and named the [Kansas City Southern Railway] as the only railroad.”

But another trade journal, the oldest and most circulated in the rail transport industry, knows A&M is pulling its weight, in Northwest Arkansas and beyond.

In its April issue, Railway Age, founded in 1856 and published monthly, named the A&M its Regional Railroad of the Year, recognizing the railroad’s commitment to customer service and industry innovation.

The honor has been given by the magazine annually since 1992, as a way to provide special recognition to one of the country’s more than 500 short-line railroads.

The award was formally presented April 25 in California during the annual meeting of the industry’s governing body, the American Short Line and Regional Railroad Association.

“Arkansas & Missouri Railroad may not be a Class I rail leviathan,” wrote Douglas John Bowen, managing editor of the magazine. “But when it comes to infrastructure, it’s a class act, ramping up for a bigger and brighter future.”

In the A&M’s in-house newsletter, McCarren said the recognition is due to savvy business decisions, an upswing in the economy and the railroad’s approximately 65 employees.

“We have an extraordinarily dedicated team, comprised of both management and hourly, as well as new players and those whose tenure began with our startup 27 years ago,” McCarren noted. “They all help maintain a steady course.”

 

Big, Heavy Stuff

The A&M, an independent carrier, was established Sept. 1, 1986, when its line was acquired from the Burlington Northern & Santa Fe Railway Co. It is headquartered in downtown Springdale on Emma Avenue and is a Class III railroad, meaning its annual operating revenue is less than $32 million. The A&M is one of three in Arkansas with that designation. The Fort Smith Railroad Co. and the Arkansas Southern Railroad headquartered in Russellville are the others.

The A&M operates freight service from Fort Smith to Monett, Mo., a stretch of 139.5 miles. It makes connections with three Class I railroads — the Union Pacific Railroad at Van Buren, the Kansas City Southern Railway Co. at Fort Smith and the Burlington Northern & Santa Fe Railway Co. at Monett, as well as at the Fort Smith Railroad.

The railroad hauls a wide range of commodities including aggregate, brick and cement, chemicals, coal, steel and scrap, metallic ores and minerals, paper and lumber and food and feed products.

Through its sister company Allied Enterprises (doing business as Ozark Transmodal Inc.), the A&M can also move inbound and outbound bulk freight from rail-to-truck and truck-to-rail. The same is true for barge-to-rail customers along the Arkansas River ports of Van Buren and Fort Smith.

“We move a lot of freight, and we move it economically,” McCarren said. “Railroads are a specialized form of transportation. We’re not going to be involved in hauling medical tissue samples or anything like that. We’re into big, heavy stuff and that is where our advantage lies: heavy, dense products.”

 

Quality Company

Like most people who have taken a business interest in this corner of the state, McCarren saw the potential of Northwest Arkansas when he decided to acquire the company.

The A&M is owned by a group of shareholders, the exact number McCarren did not say, only that “it’s in the tens, not the hundreds,” of people.

Through a series of planned stock purchases, McCarren slowly acquired control of the A&M from its majority owner, Tony Hannold, in 2002.

“I borrowed a lot more money than I could afford to lose,” McCarren joked. “But it was worth it. We put a deal together and [Hannold] was very gracious to realize I was not immediately in the position to write a large check. We did a transition over a period of time where I was able to acquire majority ownership of the company.”

McCarren said he’s spent his whole career working on the railroads. He began working for the now-defunct Boston & Maine Railroad in between college and graduate school.

After graduating from the Massachusetts Institute of Technology with a master’s degree, McCarren’s professional career began with Consolidated Rail Corp., commonly known as Conrail and the primary Class I railroad in the Northeast U.S. 

Before buying the A&M, McCarren was head of Wisconsin Central system from 1996 to 2001. Wisconsin Central was the nation’s largest short-line railroad before it was bought by Canadian National Railway Co. in 2001.

Prior to that, McCarren founded the Gateway Western Railway, together with New York and Chicago venture capital interests, as a leveraged buyout of the St.- Louis-to-Kansas-City route of the Chicago, Missouri and Western Railway. Gateway Western was sold to Kansas City Southern Industries in 1996.

He said being approached by his colleague, Hannold, in November 2001 was a serendipitous event.

“I knew Tony, knew [the A&M] was a quality company and operated in an up-and-coming area and had multiple connections with the larger railroads,” McCarren recalled. “Those are all factors in the potential success of a railroad.”

McCarren, who lives in the Chicago area, spends most of his time traveling to meet with legislators and trade association executives in Washington, D.C., attending various rail shippers’ meetings or meetings hosted by Class I railroads for their short line partners.

And since becoming owner of the A&M, McCarren has traveled to Northwest Arkansas a couple of times per month, though that schedule has fluctuated since September, when McCarren was diagnosed with liver cancer. He’s currently undergoing treatment.

G. Brent McCready, who has been with the A&M since its inception 27 years ago, is the company’s president and top local executive.

“We’ve got some real wisdom and experience in the ranks,” McCarren said. “And we’ve got some real promising young talent who I think are real leaders in the future for us.”

 

Capital Improvements

McCarren said, because new customers have come online in the last couple of years and existing customers have increased their business with the A&M, the increased traffic allowed the company to invest $23 million in improvements last year and into this year.

The most high-profile of those investments came in the form of three new EMD (Electro-Motive Diesel Inc.) locomotives.

The A&M picked up the new units Sept. 11 in Monett, and their addition to the fleet will allow the company to move more freight in less time. For example, the new EMD units’ horsepower is 4,300. The horsepower of the A&M’s existing fleet of ALCO (American Locomotive Co.) locomotives is 2,000.

Also in 2013, the A&M added 60,000 SF of warehouse space in Fort Smith. Just recently, the company was able to move its car repair operations indoors, into a 20,000-SF, $2.5 million facility built in 2012 as a locomotive repair facility.

The A&M fleet includes 26 locomotives.

McCarren said the company is also in the process of taking delivery of a third first-class car for the excursion segment of the business.

“We’re always trying to improve infrastructure,” McCarren said. “There’s a lot more stuff in investment besides bridges and track and signals and all the things that railroads do.”