RailAmerica swings to Q1 net profit of US$4.1M compared with loss of US$2.5M a year ago, as revenue increases 9% year-over-year to US$124.9M; outlook for traffic favorable, CEO says

Andrew Rogers

JACKSONVILLE, Florida , May 2, 2011 (press release) –
First Quarter Highlights

* Revenue increased 9% and carloads declined 1% versus first quarter 2010.
* Income from continuing operations of $0.07 per share.
* Adjusted income from continuing operations(1) of $0.12 per share.
* Announced agreement to acquire three Alabama railroads.


RailAmerica, Inc. (NYSE: RA) today reported financial results for the quarter ended March 31, 2011. First quarter 2011 revenue increased 9% to $124.9 million from $114.9 million in the first quarter of 2010. Freight revenue increased 3% to $97.6 million with carloads down 1%. Non-freight revenue increased 36% to $27.3 million. Excluding the acquisition of Atlas Railroad Construction Company, non-freight revenue increased 22% versus first quarter 2010.

RailAmerica President and Chief Executive Officer John Giles, said, "Our operations performed well in the quarter in the face of challenging weather and a sharp run up in fuel prices. We remain encouraged as we look ahead. The outlook for traffic is favorable and we continue to make progress on our growth and productivity initiatives. We are also continuing our strong, disciplined push in the corporate development area and were pleased to announce earlier this month an agreement to acquire three railroads in Alabama."

RailAmerica reported first quarter 2011 income from continuing operations of $4.1 million, or $0.07 per diluted share. This compares to a loss from continuing operations of $2.5 million, or $0.05 per diluted share in the first quarter of 2010. Noteworthy items impacting the first quarters of 2011 and 2010 include:

* 45G tax credits: Because the latest extension of the credits (for 2010 and 2011) did not occur until December 2010, no benefits were recognized in the first quarter of 2010. A $4.2 million income statement benefit was recorded in the first quarter of 2011.
* Amortization of swap termination costs: Non-cash charges of $3.7 million and $6.1 million were recorded in interest expense during the first quarters of 2011 and 2010, respectively, due to the June 2009 termination of an interest rate swap agreement.
* Severance costs: First quarter 2011 labor and benefits costs include $1.6 million in severance expenses related to consolidating dispatching services and other organizational changes.
* Styrene resolution: The Company resolved outstanding legal issues from a 2005 styrene car incident resulting in a $1.2 million favorable adjustment to casualty and insurance costs during the first quarter of 2011.
* Taxes: Cash taxes paid in the first quarter of 2011 were $1.3 million compared to the financial statement provision for income tax expense of $2.1 million.

The Company reported operating income of $24.2 million in the first quarter of 2011 compared to $19.2 million in the first quarter of 2010. First quarter 2011 operating income and expenses were impacted by 45G tax credits, severance costs and the styrene matter discussed above. Other first quarter 2011 operating expenses were up due to higher fuel prices, weather and the inclusion of Atlas Railroad Construction Company. Operating income excluding the impact of the 45G tax credits and asset sales is shown below.

Industry Intelligence editor's note: In an omitted table RailAmerica reported a Q1 net income of US$4.1 million compared with a net loss of US$2.5M year-over-year.

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