Genesee & Wyoming's Q1 earnings drop to US$39.6M from US$82.7M a year ago as severe weather in North America resulted in significant disruptions in several operating regions; total operating revenues increased 0.4% to US$376.3M

DARIEN, Connecticut , May 1, 2014 (press release) –

Genesee & Wyoming Inc. (G&W) (GWR)

First Quarter Highlights

  • Severe winter weather in North America resulted in significant disruptions to several G&W operating regions, reducing diluted earnings per share (EPS) in the first quarter of 2014 by an estimated $0.23 to $0.26 from a combination of lower revenues and higher operating costs.
    • Estimated revenue reduction due to weather was approximately $15 million to $20 million, primarily driven by temporary line closures, congestion in the North American rail network which impeded interchange with connecting carriers, and reduced supply of available freight cars. Lost profit margin from the lower revenues reduced diluted EPS by approximately $0.10 to $0.13.
    • Estimated higher operating costs due to weather were approximately $12 million, primarily due to increased overtime, higher diesel fuel consumption, higher car hire and extensive snow removal. The increased winter expenses reduced diluted EPS by approximately $0.13.
  • Including the negative impact of the winter weather noted above, G&W’s financial results for the first quarter of 2014, as reported and as adjusted for certain significant items described under Financial Results, were as follows:
    • Adjusted diluted EPS were $0.70, a 12.5% decrease in adjusted diluted EPS; Reported diluted EPS were $0.70. (1)
    • Total operating revenues increased 0.4% to $376.3 million.
    • Adjusted income from operations decreased 13.8% to $75.2 million; Reported income from operations decreased 1.7% to $74.9 million. (1)
    • Adjusted operating ratio increased 3.3 percentage points to 80.0%; Reported operating ratio increased 0.4 percentage points to 80.1% (81.4% North American & European Operations; 74.9% Australian Operations). (1)

Jack Hellmann, President and CEO of G&W, commented, “G&W’s financial results for the first quarter of 2014 were significantly impacted by extreme winter weather that disrupted several of our North American operations. Four G&W operating regions, Canada, Midwest, Northeast and Ohio Valley, suffered the most serious weather-related conditions, first from the direct impact of a series of winter storms on the 45 railroads in those geographies and then from congestion at connecting railroads. As a result, rail shipments were reduced and traffic was also diverted to truck. But through all of this, our employees worked tirelessly and safely under extremely harsh winter conditions. The Board of Directors and I are grateful for the efforts of these dedicated men and women over the past several months.”

“With the arrival of spring, we have seen sharp increases in our traffic levels starting in late March. In addition, we expect the Rapid City, Pierre & Eastern Railroad (RCP&E) to commence operations late in the second quarter and remain optimistic about the outlook for this business. However, we do not expect to recover the significant financial shortfall from the first quarter and congestion continues to impact the overall North American rail network. Including the impact of weather and the RCP&E, our revised outlook for growth in pre-tax income in 2014 is now approximately 15%, with expected growth in pre-tax income of more than 20% over the next nine months.”

“Meanwhile, with our integration planning well advanced on the RCP&E, we are actively evaluating new acquisition and investment opportunities worldwide.”

Financial Results

G&W reported net income in the first quarter of 2014 of $39.6 million, compared with net income of $82.7 million in the first quarter of 2013. Excluding the net impact of certain significant items discussed below, G&W’s adjusted net income in the first quarter of 2014 was $39.8 million, compared with adjusted net income of $44.9 million in the first quarter of 2013. (1)

G&W’s reported diluted EPS and adjusted diluted EPS in the first quarter of 2014 were $0.70 with 56.9 million weighted average shares outstanding, compared with diluted EPS of $1.46 and adjusted diluted EPS of $0.80 in the first quarter of 2013 with 56.5 million weighted average shares outstanding. (1) The net depreciation of foreign currencies relative to the U.S. dollar reduced first quarter 2014 diluted EPS by approximately $0.05, compared with the first quarter of 2013.

G&W’s effective income tax rate was 36.6% in the first quarter of 2014. The higher income tax rate in the first quarter of 2014, compared with the first quarter of 2013, was driven primarily by the expiration of the United States short line tax credit on December 31, 2013.

In the first quarter of 2014 and 2013, G&W’s results included certain significant items that are set forth in the following table (in millions, except per share amounts).

                             
       

Income/(Loss)
Before Taxes
Impact

       

After-Tax Net
Income/(Loss)
Impact

       

Diluted
Earnings/(Loss)
Per Common
Share Impact

Three Months Ended March 31, 2014

                                 
Business development and related costs       $ (1.2 )         $ (0.7 )         $ (0.01 )
Net gain on sale of assets       $ 0.8           $ 0.5           $ 0.01  
                                   

Three Months Ended March 31, 2013

                                 
Retroactive 2012 short line tax credit       $           $ 41.0           $ 0.72  
2013 short line tax credit       $           $ 4.0           $ 0.07  
RailAmerica integration costs       $ (12.8 )         $ (8.0 )         $ (0.14 )
Refinancing and debt prepayment related expenses       $ (0.6 )         $ (0.4 )         $ (0.01 )
Net gain on sale of assets       $ 1.7           $ 1.3           $ 0.02  
                                         

Explanation of Significant Items

In the first quarter of 2014, G&W’s results included business development and related costs of $1.2 million, including RCP&E related integration costs, and net gain on sale of assets of $0.8 million.

On January 2, 2013, the United States short line tax credit (which had previously expired on December 31, 2011) was extended for fiscal years 2012 and 2013. In the first quarter of 2013, G&W recorded a tax benefit of $45.0 million associated with the short line tax credit. The total tax credit impact during the first quarter of 2013 included $41.0 million for the retroactive fiscal year 2012 tax benefit and $4.0 million associated with the first quarter of 2013.

Also in the first quarter of 2013, G&W incurred $12.8 million of RailAmerica integration costs and $0.6 million of debt refinancing and prepayment-related expenses. In the first quarter of 2013, net gain on sale of assets was $1.7 million.

Quarterly Results

In the first quarter of 2014, although lower than expected due to the impact of extreme winter weather, G&W’s total operating revenues increased $1.3 million, or 0.4%, to $376.3 million, compared with $375.0 million in the first quarter of 2013. Excluding a $13.0 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar, G&W’s operating revenues increased $14.3 million, or 3.8%.

G&W’s freight revenues in the first quarter of 2014 were $287.7 million, compared with $281.1 million in the first quarter of 2013. Excluding a $10.1 million decrease from the impact of foreign currency depreciation, G&W’s freight revenues increased by $16.8 million, or 6.0%.

G&W’s non-freight revenues in the first quarter of 2014 were $88.5 million, compared with $93.8 million in the first quarter of 2013. Excluding a $2.9 million decrease from the net impact of foreign currency depreciation, G&W’s non-freight revenues decreased by $2.4 million, or 2.6%.

G&W’s traffic in the first quarter of 2014 increased 17,075 carloads, or 3.8%, to 467,379 carloads. The traffic increase was principally due to increases of 10,743 carloads of coal and coke traffic (primarily in the Midwest and Ohio Valley regions), 4,062 carloads of metallic ores traffic (primarily in the Australia Region) and 1,939 carloads of traffic from G&W’s Other commodity group (primarily due to overhead Class I shipments). All remaining traffic increased by a net 331 carloads.

G&W’s income from operations in the first quarter of 2014 was $74.9 million, which was lower than expected due to the impact of extreme winter weather, compared with $76.2 million in the first quarter of 2013. G&W’s operating ratio in the first quarter of 2014 was 80.1%, compared with an operating ratio of 79.7% in the first quarter of 2013. Income from operations in the first quarter of 2014 included business development and related costs of $1.2 million, partially offset by net gain on sale of assets of $0.8 million. Income from operations in the first quarter of 2013 included $12.8 million of RailAmerica integration costs, partially offset by net gain on sale of assets of $1.7 million. Excluding these items, G&W’s adjusted income from operations decreased $12.0 million, or 13.8%, to $75.2 million. G&W’s adjusted operating ratio increased 3.3 basis points to 80.0% in the first quarter of 2014, compared with 76.7% in the first quarter of 2013. (1)

Free Cash Flow (1)

G&W’s free cash flow for the three months ended March 31, 2014 and 2013 was as follows (in millions):

     
    Three Months Ended
    March 31,
    2014         2013
Net cash provided by operating activities   $ 71.7           $ 64.8  
Net cash used in investing activities, excluding new business investments   (39.0 )         (21.1 )
Net cash used for acquisitions             5.5  
Free cash flow before new business investments   32.6           49.3  
New business investments   (17.9 )         (12.0 )
Free cash flow (1)   $ 14.7           $ 37.3  
                       

The 2014 period included $27.4 million of net cash payments for 2013 capital projects. The 2013 period included $9.7 million of net cash payments for 2012 capital projects.

RCP&E Financing

G&W expects to amend and expand the size of its senior secured syndicated credit facility from approximately US$2.0 billion to US$2.4 billion in conjunction with financing the $210 million RCP&E cash purchase price for the western end of Canadian Pacific’s Dakota, Minnesota and Eastern rail line. G&W anticipates that the amended credit facility will be comprised of a US$1,520 million dollar term loan, an A$220 million term loan and a US$625 million revolving credit facility, of which approximately US$600 million would be undrawn at closing. In addition, G&W plans to extend the maturity of the amended credit facility from October 1, 2017 to May 31, 2019. As of March 31, 2014, pro forma for the debt financing associated with the $210 million cash purchase price for the expected RCP&E transaction, G&W’s total debt to capitalization would be approximately 45%.

Conference Call and Webcast Details

As previously announced, G&W’s conference call to discuss financial results for the first quarter of 2014 will be held on Thursday, May 1, 2014, at 11:00 am EDT. The dial-in number for the teleconference in the U.S. is (800) 553-5260; outside the U.S. is (612) 288-0340, or the call may be accessed live over the Internet (listen only) at www.gwrr.com/investors, by selecting “First Quarter Earnings Conference Call Webcast.” Management will be referring to a slide presentation that will also be available at gwrr.com/investors. The webcast will be archived at www.gwrr.com/investors, until the following quarter’s earnings press release. Telephone replay is available for 30 days beginning at 1:00 p.m. EDT on May 1, 2014 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 309988.

About G&W

G&W owns and operates short line and regional freight railroads in the United States, Australia, Canada, the Netherlands and Belgium. In addition, G&W operates the 1,400-mile Tarcoola to Darwin rail line, which links the Port of Darwin with the Australian interstate rail network in South Australia. Operations currently include 111 railroads organized in 11 regions, with nearly 15,000 miles of owned and leased track, 4,600 employees and over 2,000 customers. We provide rail service at 37 ports in North America, Australia and Europe and perform contract coal loading and railcar switching for industrial customers.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains forward-looking statements regarding future events and the future performance of Genesee & Wyoming Inc. that are based on current expectations, estimates and projections about our industry, management’s beliefs, and assumptions made by management. Words such as “anticipates,” “intends,” “plans,” “believes,” “could,” “should,” “seeks,” “expects,” “estimates,” “trends,” “outlook,” variations of these words and similar expressions are intended to identify these forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast, including the following: risks related to the operation of our railroads; severe weather conditions and other natural occurrences, which could result in shutdowns, derailments or other substantial disruption of operations; consummation and integration of acquisitions; economic, political and industry conditions (including employee strikes or work stoppages); customer demand and changes in our operations, retention and contract continuation; legislative and regulatory developments, including changes in environmental and other laws and regulations to which we are subject; increased competition in relevant markets; funding needs and financing sources, including our ability to obtain government funding for capital projects; international complexities of operations, currency fluctuations, finance, tax and decentralized management; challenges of managing rapid growth including retention and development of senior leadership; unpredictability of fuel costs; susceptibility to various legal claims and lawsuits; increase in, or volatility associated with, expenses related to estimated claims, self-insured retention amounts, and insurance coverage limits; consummation of new business opportunities; exposure to the credit risk of customers and counterparties; decrease in revenues and/or increase in costs and expenses; susceptibility to the risks of doing business in foreign countries; our ability to realize the expected synergies associated with acquisitions; and others including, but not limited to, those noted in our 2013 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q under “Risk Factors.” Therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Forward-looking statements speak only as of the date of this press release or as of the date they were made. G&W does not undertake, and expressly disclaims, any duty to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

1.

 

Adjusted net income, adjusted diluted earnings per common share, adjusted income from operations, adjusted operating ratio and free cash flow are non-GAAP financial measures and are not intended to replace financial measures calculated in accordance with GAAP. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to their most directly comparable financial measures calculated in accordance with GAAP, is included in the tables attached to this press release.

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013
(in thousands, except per share amounts)
(unaudited)
                       
        Three Months Ended
        March 31,
        2014         2013
OPERATING REVENUES       $ 376,279           $ 374,950  
OPERATING EXPENSES       301,404           298,750  
INCOME FROM OPERATIONS       74,875           76,200  
INTEREST INCOME       1,034           1,043  
INTEREST EXPENSE       (13,641 )         (20,120 )
OTHER INCOME, NET       266           673  
INCOME BEFORE INCOME TAXES       62,534           57,796  
(PROVISION FOR)/BENEFIT FROM INCOME TAXES       (22,900 )         24,932  
NET INCOME       39,634           82,728  
LESS:NET (LOSS)/INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST       (370 )         165  
LESS:SERIES A-1 PREFERRED STOCK DIVIDEND                 2,139  
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS       $ 40,004           $ 80,424  
BASIC EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS       $ 0.73           $ 1.57  
WEIGHTED AVERAGE SHARES - BASIC       54,841           51,332  
DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS       $ 0.70           $ 1.46  
WEIGHTED AVERAGE SHARES - DILUTED       56,905           56,496  
                       
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2014 AND DECEMBER 31, 2013
(in thousands)
(unaudited)
                     
        March 31,         December 31,
        2014         2013
ASSETS                    
CURRENT ASSETS:                    
Cash and cash equivalents       $ 32,187           $ 62,876
Accounts receivable, net       326,160           325,453
Materials and supplies       31,788           31,295
Prepaid expenses and other       48,896           52,584
Deferred income tax assets, net       75,610           76,122
Total current assets       514,641           548,330
PROPERTY AND EQUIPMENT, net       3,462,074           3,440,744
GOODWILL       629,545           630,462
INTANGIBLE ASSETS, net       606,615           613,933
DEFERRED INCOME TAX ASSETS, net       3,117           2,405
OTHER ASSETS, net       70,620           83,947
Total assets       $ 5,286,612           $ 5,319,821
LIABILITIES AND EQUITY                    
CURRENT LIABILITIES:                    
Current portion of long-term debt       $ 94,837           $ 84,366
Accounts payable       205,603           242,010
Accrued expenses       125,502           130,132
Total current liabilities       425,942           456,508
LONG-TERM DEBT, less current portion       1,484,722           1,540,346
DEFERRED INCOME TAX LIABILITIES, net       872,706           863,051
DEFERRED ITEMS - grants from outside parties       266,590           267,098
OTHER LONG-TERM LIABILITIES       42,921           43,748
TOTAL EQUITY       2,193,731           2,149,070
Total liabilities and equity       $ 5,286,612           $ 5,319,821
                         
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013
(in thousands)
(unaudited)
        Three Months Ended
        March 31,
        2014         2013
CASH FLOWS FROM OPERATING ACTIVITIES:                      
Net income       $ 39,634           $ 82,728  
Adjustments to reconcile net income to net cash provided by operating activities:                      
Depreciation and amortization       37,641           34,223  
Compensation cost related to equity awards       3,314           7,525  
Excess tax benefits from share-based compensation       (3,580 )         (4,314 )
Deferred income taxes       16,118           (33,866 )
Net gain on sale of assets       (838 )         (1,707 )
Insurance proceeds received                 9,315  
Changes in assets and liabilities which (used) provided cash, net of effect of acquisitions:                      
Accounts receivable, net       (8,559 )         (8,766 )
Materials and supplies       131           (3,404 )
Prepaid expenses and other       2,181           (2,215 )
Accounts payable and accrued expenses       (15,582 )         (15,328 )
Other assets and liabilities, net       1,200           628  
Net cash provided by operating activities       71,660           64,819  
CASH FLOWS FROM INVESTING ACTIVITIES:                      
Purchase of property and equipment       (71,618 )         (37,908 )
Grant proceeds from outside parties       12,800           2,848  
Insurance proceeds for the replacement of assets       300            
Proceeds from disposition of property and equipment       1,555           2,011  
Net cash used in investing activities       (56,963 )         (33,049 )
CASH FLOWS FROM FINANCING ACTIVITIES:                      
Principal payments on long-term borrowings, including capital leases       (96,287 )         (139,475 )
Proceeds from issuance of long-term debt       46,546           73,362  
Debt amendment costs                 (1,543 )
Dividends paid on Series A-1 Preferred Stock                 (2,139 )
Proceeds from employee stock purchases       4,647           5,903  
Excess tax benefits from share-based compensation       3,580           4,314  
Treasury stock acquisitions       (3,374 )         (7,237 )
Net cash used in financing activities       (44,888 )         (66,815 )
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS       (498 )         (391 )
DECREASE IN CASH AND CASH EQUIVALENTS       (30,689 )         (35,436 )
CASH AND CASH EQUIVALENTS, beginning of period       62,876           64,772  
CASH AND CASH EQUIVALENTS, end of period       $ 32,187           $ 29,336  
                           
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                                               
        Three Months Ended March 31,
        2014         2013
        Amount         % of Revenue         Amount         % of Revenue

Revenues:

                                             
Freight       $ 287,734           76.5 %         $ 281,104           75.0 %
Non-freight       88,545           23.5 %         93,846           25.0 %
Total revenues       $ 376,279           100.0 %         $ 374,950           100.0 %
                                               

Operating Expense Comparison:

                                             

Natural Classification

                                             
Labor and benefits       $ 116,751           30.9 %         $ 109,306           29.2 %
Equipment rents       19,060           5.1 %         18,708           5.0 %
Purchased services       27,907           7.4 %         28,996           7.7 %
Depreciation and amortization       37,641           10.0 %         34,223           9.1 %
Diesel fuel used in operations       41,935           11.1 %         39,185           10.5 %
Casualties and insurance       9,633           2.6 %         7,951           2.1 %
Materials       16,119           4.3 %         19,329           5.2 %
Trackage rights       12,266           3.3 %         10,857           2.9 %
Net gain on sale of assets       (838 )         (0.2 )%         (1,707 )         (0.5 )%
Other expenses       20,930           5.6 %         19,135           5.1 %
RailAmerica integration costs                 %         12,767           3.4 %
Total operating expenses       $ 301,404           80.1 %         $ 298,750           79.7 %
                                               

Functional Classification

                                             
Transportation       $ 119,035           31.6 %         $ 110,326           29.4 %
Maintenance of ways and structures       41,408           11.0 %         38,316           10.2 %
Maintenance of equipment       43,422           11.5 %         40,263           10.8 %
General and administrative       56,468           15.1 %         56,760           15.2 %
Construction costs       4,268           1.1 %         7,802           2.1 %
RailAmerica integration costs                 %         12,767           3.4 %
Net gain on sale of assets       (838 )         (0.2 )%         (1,707 )         (0.5 )%
Depreciation and amortization       37,641           10.0 %         34,223           9.1 %
Total operating expenses       $ 301,404           80.1 %         $ 298,750           79.7 %
                                                   
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                                                                       
Three Months Ended March 31, 2014      

North American & European
Operations

        Australian Operations         Total Operations
        Amount         % of Revenue         Amount         % of Revenue         Amount         % of Revenue

Revenues:

                                                                     
Freight       $ 228,987           76.3 %         $ 58,747           77.0 %         $ 287,734           76.5 %
Non-freight       71,000           23.7 %         17,545           23.0 %         88,545           23.5 %
Total revenues       299,987           100.0 %         76,292           100.0 %         376,279           100.0 %

Operating expenses:

                                                                     
Labor and benefits       100,542           33.5 %         16,209           21.3 %         116,751           30.9 %
Equipment rents       16,772           5.6 %         2,288           3.0 %         19,060           5.1 %
Purchased services       15,725           5.1 %         12,182           16.0 %         27,907           7.4 %
Depreciation and amortization       30,579           10.2 %         7,062           9.3 %         37,641           10.0 %
Diesel fuel used in operations       34,734           11.6 %         7,201           9.4 %         41,935           11.1 %
Casualties and insurance       7,132           2.4 %         2,501           3.3 %         9,633           2.6 %
Materials       15,511           5.1 %         608           0.8 %         16,119           4.3 %
Trackage rights       6,757           2.3 %         5,509           7.2 %         12,266           3.3 %
Net gain on sale of assets       (720 )         (0.2 )%         (118 )         (0.2 )%         (838 )         (0.2 )%
Other expenses       17,265           5.8 %         3,665           4.8 %         20,930           5.6 %
RailAmerica integration costs                 %                   %                  

%

Total operating expenses       244,297           81.4 %         57,107           74.9 %         301,404           80.1 %
Income from operations       $ 55,690                       $ 19,185                       $ 74,875              
Carloads       409,537                       57,842                       467,379              
Net expenditures for additions to property & equipment       $ 53,985                       $ 4,833                       $ 58,818              
                                                                             
                                                                             
                                                                             
Three Months Ended March 31, 2013      

North American & European
Operations

        Australian Operations         Total Operations
        Amount         % of Revenue         Amount         % of Revenue         Amount         % of Revenue

Revenues:

                                                                     
Freight       $ 220,846           73.8 %         $ 60,258           79.4 %         $ 281,104           75.0 %
Non-freight       78,249           26.2 %         15,597           20.6 %         93,846           25.0 %
Total revenues       299,095           100.0 %         75,855           100.0 %         374,950           100.0 %

Operating expenses:

                                                                     
Labor and benefits       92,697           30.9 %         16,609           21.9 %         109,306           29.2 %
Equipment rents       16,093           5.4 %         2,615           3.4 %         18,708           5.0 %
Purchased services       16,706           5.6 %         12,290           16.3 %         28,996           7.7 %
Depreciation and amortization       27,411           9.2 %         6,812           9.0 %         34,223           9.1 %
Diesel fuel used in operations       31,608           10.6 %         7,577           10.0 %         39,185           10.5 %
Casualties and insurance       5,801           1.9 %         2,150           2.8 %         7,951           2.1 %
Materials       18,769           6.3 %         560           0.7 %         19,329           5.2 %
Trackage rights       6,718           2.2 %         4,139           5.5 %         10,857           2.9 %
Net gain on sale of assets       (1,707 )         (0.6 )%                   %         (1,707 )         (0.5 )%
Other expenses       17,438           5.9 %         1,697           2.2 %         19,135           5.1 %
RailAmerica integration costs       12,767           4.3 %                   %         12,767           3.4 %
Total operating expenses       244,301           81.7 %         54,449           71.8 %         298,750           79.7 %
Income from operations       $ 54,794                       $ 21,406                       $ 76,200              
Carloads       394,971                       55,333                       450,304              
Net expenditures for additions to property & equipment       $ 16,218                       $ 18,842                       $ 35,060              
                                                                             
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
                                                                                                         
Three Months Ended March 31, 2014       North American & European Operations         Australian Operations         Total Operations
Commodity Group      

Freight
Revenues

        Carloads        

Average
Revenues Per
Carload

       

Freight
Revenues

        Carloads        

Average
Revenues Per
Carload

       

Freight
Revenues

        Carloads        

Average
Revenues Per
Carload

Agricultural Products       $ 25,902           48,055           $ 539           $ 9,765           16,979           $ 575           $ 35,667           65,034           $ 548
Chemicals & Plastics       32,749           40,272           813                                         32,749           40,272           813
Coal & Coke       31,250           86,303           362                                         31,250           86,303           362
Metallic Ores *       4,494           5,579           806           25,179           13,295           1,894           29,673           18,874           1,572
Metals       29,582           41,329           716                                         29,582           41,329           716
Pulp & Paper       27,662           42,211           655                                         27,662           42,211           655
Minerals & Stone       19,520           36,240           539           2,140           12,797           167           21,660           49,037          

442

Intermodal **       102           879           116           21,371           14,712           1,453           21,473           15,591           1,377
Lumber & Forest Products       19,179           32,547           589                                         19,179           32,547           589
Petroleum Products       16,294           27,776           587           292           59           4,949           16,586           27,835           596
Food or Kindred Products       8,061           13,847           582                                         8,061           13,847           582
Autos & Auto Parts       5,458           7,736           706                                         5,458           7,736           706
Waste       4,333           9,446           459                                         4,333           9,446           459
Other       4,401           17,317           254                                         4,401           17,317           254
Totals       $ 228,987           409,537           $ 559           $ 58,747           57,842           $ 1,016           $ 287,734           467,379           $ 616
                             
                             
                             
Three Months Ended March 31, 2013       North American & European Operations         Australian Operations         Total Operations
Commodity Group      

Freight
Revenues

        Carloads        

Average
Revenues Per
Carload

       

Freight
Revenues

        Carloads        

Average
Revenues Per
Carload

       

Freight
Revenues

        Carloads        

Average
Revenues Per
Carload

Agricultural Products       $ 23,856           47,769           $ 499           $ 11,170           15,672           $ 713           $ 35,026           63,441           $ 552
Chemicals & Plastics       32,080           40,908           784                                         32,080           40,908           784
Coal & Coke       26,492           75,560           351                                         26,492           75,560           351
Metallic Ores *       4,038           5,074           796           23,241           9,738           2,387           27,279           14,812           1,842
Metals       29,246           41,623           703                                         29,246           41,623           703
Pulp & Paper       26,461           40,778           649                                         26,461           40,778           649
Minerals & Stone       19,228           34,739           553           3,091           15,486           200           22,319           50,225           444
Intermodal **       192           1,801           107           22,253           14,375           1,548           22,445           16,176           1,388
Lumber & Forest Products       19,746           33,625           587                                         19,746           33,625           587
Petroleum Products       16,661           27,151           614           503           62           8,113           17,164           27,213           631
Food or Kindred Products       7,825           13,594           576                                         7,825           13,594           576
Autos & Auto Parts       5,854           7,956           736                                         5,854           7,956           736
Waste       5,015           9,015           556                                         5,015           9,015           556
Other       4,152           15,378           270                                         4,152           15,378           270
Totals       $ 220,846           394,971           $ 559           $ 60,258           55,333           $ 1,089           $ 281,104           450,304           $ 624
                                                                                                                     
*   Includes carload and intermodal units
**   Represents intermodal units

Non-GAAP Financial Measures

This earnings release contains references to adjusted net income, adjusted diluted earnings per common share, adjusted income from operations, adjusted operating ratio and free cash flow, which are “non-GAAP financial measures” as this term is defined in Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934. In accordance with these rules, G&W has reconciled these non-GAAP financial measures to their most directly comparable U.S. GAAP measures.

Management views these non-GAAP financial measures as important measures of G&W’s operating performance or, in the case of free cash flow, an important financial measure of how well G&W is managing its assets and a useful indicator of cash flow that may be available for discretionary use by G&W. Key limitations of the free cash flow measure include the assumptions that G&W will be able to refinance its existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt.

These non-GAAP financial measures are not intended to represent, and should not be considered more meaningful than, or as an alternative to, their most directly comparable GAAP measures. These non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of each of these non-GAAP financial measures to their most directly comparable GAAP measure (in millions, except percentages and per share amounts).

Reconciliations of Non-GAAP Financial Measures

 
Adjusted Net Income and Adjusted Diluted Earnings Per Common Share                            
                             
Three Months Ended March 31, 2014       Net Income         Diluted Shares        

Diluted
Earnings/(Loss)
Per Common
Share Impact

As reported       $ 39.6           56.9           $ 0.70  
Add back certain items, net of tax:                                  
Business development and related costs       0.7                       0.01  
Net gain on sale of assets       (0.5 )                     (0.01 )
As adjusted       $ 39.8           56.9           $ 0.70  
Three Months Ended March 31, 2013       Net Income         Diluted Shares        

Diluted
Earnings/(Loss)
Per Common
Share Impact

As reported       $ 82.7           56.5           $ 1.46  
Add back certain items, net of tax:                                  
Retroactive 2012 short line tax credit       (41.0 )                     (0.72 )
2013 short line tax credit       (4.0 )                     (0.07 )
RailAmerica integration costs       8.0                       0.14  
Refinancing and debt prepayment related expenses       0.4                       0.01  
Net gain on sale of assets       (1.3 )                     (0.02 )
As adjusted       $ 44.9           56.5           $ 0.80  
                                       
         

Adjusted Income from Operations and Adjusted Operating Ratio

       
         
        Three Months Ended
        March 31,
        2014         2013
Operating revenues       $ 376.3           $ 375.0  
Operating expenses       301.4           298.8  
Income from operations (a)       $ 74.9           $ 76.2  
Operating ratio (b)       80.1 %         79.7 %
                       
Operating expenses       $ 301.4           $ 298.8  
Business development and related costs       (1.2 )          
RailAmerica integration costs                 (12.8 )
Net gain on sale of assets       0.8           1.7  
Adjusted operating expenses       $ 301.1           $ 287.7  
                       
Adjusted income from operations       $ 75.2           $ 87.3  
Adjusted operating ratio       80.0 %         76.7 %
                       
(a)   Income from operations is calculated as operating revenues less operating expenses.
(b)   Operating ratio is calculated as operating expenses divided by operating revenues.
         

Free Cash Flow

       
         
        Three Months Ended
        March 31,
        2014         2013
Net cash provided by operating activities       $ 71.7           $ 64.8  
Net cash used in investing activities       (57.0 )         (33.0 )
Net cash used for acquisitions (a)                 5.5  
Free cash flow       $ 14.7           $ 37.3  
                           
(a)   The 2013 period included $5.5 million in cash paid for incremental expenses related to the integration of RailAmerica.

 

Contact:
G&W Corporate Communications
Michael Williams, 1-203-202-8900
mwilliams@gwrr.com

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