Genesee & Wyoming Reports Results for the First Quarter of 2013

Genesee & Wyoming Reports Results for the First Quarter of 2013

GREENWICH, Conn.--(BUSINESS WIRE)-- Genesee & Wyoming Inc. (G&W) (NYS: GWR)

First Quarter Highlights

  • Adjusted diluted earnings per common share (EPS) of $0.87, adjusted primarily to exclude the retroactive benefit of the 2012 short line tax credit ($0.72 per share) and RailAmerica integration costs ($0.14 per share); Reported diluted EPS of $1.46. (1)
  • Total operating revenues increased 80.9% to $375.2 million.
  • Combined Company same railroad operating revenues increased 7.6%. (2)
  • Adjusted income from operations increased 93.5% to $87.3 million; Reported operating income of $76.2 million. (3)
  • Adjusted operating ratio of 76.7% (adjusted primarily to exclude RailAmerica integration costs); Reported operating ratio of 79.7%. (3)

Jack Hellmann, President and CEO of G&W, commented, "The first quarter of 2013 was the first full reporting period in which G&W's consolidated results included the former RailAmerica railroads. We moved quickly to integrate the new operations and are pleased to report financial results in-line with our acquisition plan. Despite revenue weakness from Canadian winter wheat exports and certain North American steel shipments, we managed our operating costs well and reported an adjusted operating ratio of 76.7%, 230 basis points better than last year. Normalizing for several items such as the benefit of the U.S. short line tax credit, RailAmerica integration costs, as well as the impact of last year's Edith River Bridge washout in Australia, G&W's adjusted earnings per share increased nearly 40% in the first quarter of 2013."(1)

"In Australia, shipments of iron ore from a new mine continued to grow, a trend that we expect to be further supported by the expansion of our existing narrow gauge iron ore service starting in the second quarter of 2013. In the United States, we experienced higher lumber and forest products shipments due to a stronger U.S. housing market as well as significant growth in crude-by-rail shipments on both the West Coast and the Gulf Coast. With the integration of RailAmerica operations now largely complete, we are focused on new commercial development, further reducing the expenses of the combined company, as well as carefully evaluating several new investment opportunities."

Financial Results

G&W reported net income in the first quarter of 2013 of $82.7 million, compared with net income of $22.2 million in the first quarter of 2012. Excluding the impact of certain significant items discussed below, G&W's adjusted net income in the first quarter of 2013 was $48.9 million, compared with adjusted net income of $25.0 million in the first quarter of 2012. (1)

G&W's reported diluted EPS in the first quarter of 2013 were $1.46 with 56.5 million weighted average common shares outstanding, compared with diluted EPS of $0.52 with 43.1 million weighted average common shares outstanding in the first quarter of 2012. Excluding the significant items discussed below, G&W's adjusted diluted EPS in the first quarter of 2013 were $0.87 with 56.5 million weighted average common shares outstanding, compared with adjusted diluted EPS of $0.58 with 43.1 million weighted average shares outstanding in the first quarter of 2012. (1)

In the first quarter of 2013 and 2012, G&W's results included certain significant items that are set forth in the following table ($ in millions, except per share amounts).

                  Diluted    
Income/

After-Tax Net

Earnings/
(Loss)

Income/

(Loss) Per
Before Taxes

(Loss)

Common

Impact

Impact

Share Impact

Q1 2013

Retroactive Short Line Tax Credit for 2012 $ - $ 41.0 $ 0.72
RailAmerica integration costs (a) $ (12.8 ) $ (8.0 ) $ (0.14 )
Net gain on sale of assets $ 1.7 $ 1.3 $ 0.02
Refinancing and debt prepayment related expense $ (0.6 ) $ (0.4 ) $ (0.01 )
 

Q1 2012

Impact of Edith River Bridge outage $ (5.0 ) $ (3.5 ) $ (0.08 )
Net gain on sale of assets $ 1.2 $ 0.8 $ 0.02
 

 

(a) Of the $12.8 million, approximately $4.3 million represents non-cash charges and $8.5 million represents cash charges.

Explanation of Significant Items

On January 2, 2013, the U.S. 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 extension of 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. The full-year 2013 tax benefit is estimated to total approximately $25 million, of which $4.0 million was recognized in the first quarter.

Also in the first quarter of 2013, G&W incurred RailAmerica integration costs of $12.8 million, primarily associated with employee severance arrangements, and debt refinancing and prepayment-related expense of $0.6 million, primarily related to the amendment and refinancing of its $2.3 billion Senior Secured Syndicated Facility Agreement, and the associated repayment of its Canadian term loan.

In the first quarter of 2013, net gain on the sale of assets was $1.7 million, compared with $1.2 million in the first quarter of 2012. In the first quarter of 2012, G&W's income from operations was reduced by approximately $5.0 million as a result of the Edith River Bridge outage.

Results from Continuing Operations

In the first quarter of 2013, G&W's total operating revenues increased $167.8 million, or 80.9%, to $375.2 million, compared with $207.4 million in the first quarter of 2012. The increase included $154.4 million in revenues from new operations, partially offset by a $1.2 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar. Excluding the net impact from foreign currency depreciation, G&W's same railroad operating revenues, which exclude former RailAmerica railroads, increased $14.5 million, or 7.0%. Excluding a $1.3 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar, the combined Company same railroad operating revenues increased $26.2 million, or 7.6%, to $368.4 million in the first quarter of 2013. (2)

G&W's same railroad freight revenues in the first quarter of 2013 were $161.9 million, compared with $144.6 million in the first quarter of 2012. Excluding $0.9 million from the impact of foreign currency depreciation, G&W's same railroad freight revenues increased by $18.2 million, or 12.6%. Excluding $0.9 million from the impact of foreign currency depreciation, the combined Company same railroad freight revenues increased by $27.5 million, or 11%, to $276.9 million in the first quarter of 2013. (2)

G&W's traffic in the first quarter of 2013 was 450,304 carloads, an increase of 19,387 carloads, or 4.5%, compared with the combined G&W and RailAmerica ("Combined Company") traffic in the first quarter of 2012. Excluding 8,836 total carloads from the Wellsboro & Corning Railroad, LLC, which RailAmerica acquired on April 9, 2012, Marquette Rail LLC, which RailAmerica acquired on May 1, 2012, and the Columbus & Chattahoochee Railroad, Inc., which G&W commenced operations on July 1, 2012, combined Company same-railroad traffic increased 10,551 carloads, or 2.4%, compared with the first quarter of 2012. The traffic increase was principally due to increases of 7,765 carloads of petroleum products traffic (primarily crude oil and liquid propane gases in G&W's Pacific, Canada, Mountain West and Southern regions), 4,950 carloads of metallic ores traffic (primarily iron ore in G&W's Australia Region) and 4,445 carloads of lumber & forest products traffic (primarily G&W's Pacific region), partially offset by a decrease of 5,093 carloads of metals traffic (primarily steel and scrap in G&W's Canada and Southern regions) and a decrease of 1,196 carloads of agricultural products traffic (primarily due to lower Canadian winter wheat traffic). All remaining traffic decreased by a net 320 carloads.

G&W's same railroad non-freight revenues in the first quarter of 2013 were $58.8 million, compared with $62.9 million in the first quarter of 2012. Excluding a $0.3 million decrease from the net impact of foreign currency depreciation, G&W's same railroad non-freight revenues decreased by $3.7 million, or 5.9%, primarily due to a $5.0 million decrease in third-party fuel sales resulting from G&W's sale, partially offset by increased switching revenues in the United States. G&W sold its third-party fuel operation in South Australia in the third quarter of 2012. Excluding a $0.3 million decrease from the net impact of foreign currency depreciation and a $3.5 million decrease from the sale of our third-party fuel operations, combined Company same railroad non-freight revenues decreased by $1.3 million, or 1.4%, to $91.5 million in the first quarter of 2013. (2)

G&W's income from operations in the first quarter of 2013 was $76.2 million, compared with $41.3 million in the first quarter of 2012. G&W's operating ratio in the first quarter of 2013 was 79.7%, compared with an operating ratio of 80.1% in the first quarter of 2012. Income from operations in the first quarter of 2013 included $12.8 million of RailAmerica integration costs, partially offset by a $1.7 million net gain on the sale of assets. In the first quarter of 2012, income from operations was negatively impacted by approximately $5.0 million due to the Edith River Bridge outage, partially offset by a $1.2 million gain on the sale of assets. Excluding these items, G&W's adjusted income from operations increased $42.2 million to $87.3 million. G&W's adjusted operating ratio improved 230 basis points to 76.7% in the first quarter of 2013, compared with 79.0% in the first quarter of 2012. (3)

Free Cash Flow from Continuing Operations (4)

      Three Months Ended    
(in millions) March 31,
2013       2012
Net cash provided by operating activities $

63.4

$ 27.7
Net cash used in investing activities, excluding

new business investments

(19.6 ) (16.5 )

Net cash used for acquisitions (a)

  5.5     0.8  
Free cash flow before new business investments

49.4

12.0
New business investments   (12.0 )   (24.5 )
Free cash flow (4) $

37.4

  $ (12.5 )

(a) The 2013 period included $5.5 million in cash paid for incremental expenses related to the integration of RailAmerica.

G&W's free cash flow from continuing operations for the three months ended March 31, 2013 was $37.4 million. G&W's free cash outflow from continuing operations for the three months ended March 31, 2012 was $12.5 million (3). The net use of cash flow from operations due to the repairs and other incremental costs associated with the Edith River derailment in Australia was approximately $3 million in the three months ended March 31, 2012.

Conference Call and Webcast Details

As previously announced, G&W's conference call to discuss financial results for the first quarter will be held on Wednesday, May 1, 2013, at 11:00 am EDT. The dial-in number for the teleconference in the U.S. is (877) 209-9922; outside the U.S. is (612) 332-1210, 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 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 277534.

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 35 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 applicable to all of our operations: risks related to the acquisition and integration of railroads; economic and competitive uncertainties and contingencies and third party approvals; 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 associated with estimated claims, self-insured retention amounts, and insurance coverage limits; consummation of new business opportunities; exposure to the credit risk of customers and counterparties; severe weather conditions and other natural occurrences, which could result in shutdowns, derailments or other substantial disruption of operations; susceptibility to the risks of doing business in foreign countries; our success integrating RailAmerica railroads into our operations and our ability to realize the expected synergies associated with the acquisition of RailAmerica; and others including but not limited to, those noted in our 2012 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 and adjusted diluted earnings per common share that exclude items described above are non-GAAP financial measures and are not intended to replace the net income and diluted earnings per common share calculated on a basis consistent 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 net income and diluted earnings per common share calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

2. Combined Company revenues include both RailAmerica and G&W operating revenues for the first quarter 2012. Combined Company same railroad revenues exclude operating revenues from the Wellsboro & Corning Railroad, LLC and TransRail North America, which RailAmerica acquired on April 9, 2012, Marquette Rail LLC, which RailAmerica acquired on May 1, 2012, and the Columbus & Chattahoochee Railroad, Inc., which G&W commenced operations on July 1, 2012, as well as the revenues from our third party fuel sales business in South Australia that was sold in September 2012, and the net impact from foreign currency depreciation. The adjusted combined Company same railroad revenues that exclude the items described above is a non-GAAP financial measure and is not intended to replace same railroad operating revenues, its most directly comparable GAAP measure. 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 operating revenues calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

3. Adjusted income from operations and adjusted operating ratios that exclude the items described above are non-GAAP financial measures and are not intended to replace income from operations and operating ratios calculated using total operating expenses and total revenues, calculated on a basis consistent 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 income from operations and operating ratios calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

4. Free cash flow is a non-GAAP financial measure and is not intended to replace net cash provided by operating activities, its most directly comparable GAAP measure. 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 net cash provided by operating activities, 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, 2013 AND 2012
(in thousands, except per share amounts)
(unaudited)
               
Three Months Ended
March 31,
2013 2012
 
OPERATING REVENUES $ 375,208 $ 207,436
 
OPERATING EXPENSES   299,008     166,122  
INCOME FROM OPERATIONS 76,200 41,314
 
INTEREST INCOME 1,043 867
INTEREST EXPENSE (20,120 ) (8,616 )
OTHER INCOME, NET   682     984  
 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 57,805 34,549
 
BENEFIT FROM/(PROVISION FOR) INCOME TAXES   24,932     (12,305 )
 
INCOME FROM CONTINUING OPERATIONS 82,737 22,244
 
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX   (9 )   (3 )
 
NET INCOME 82,728 22,241
LESS:NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST 165 -
SERIES A-1 PREFERRED STOCK DIVIDEND   2,139     -  
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 80,424   $ 22,241  
 
BASIC EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC.
COMMON STOCKHOLDERS:
BASIC EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 1.57 $ 0.55
BASIC LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -  
BASIC EARNINGS PER COMMON SHARE $ 1.57   $ 0.55  
 
WEIGHTED AVERAGE SHARES - BASIC   51,332     40,360  
 
DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC.
COMMON STOCKHOLDERS:
DILUTED EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 1.46 $ 0.52
DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -  
DILUTED EARNINGS PER COMMON SHARE $ 1.46   $ 0.52  
 
WEIGHTED AVERAGE SHARES - DILUTED   56,496     43,081  
 

               
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2013 AND DECEMBER 31, 2012
(in thousands)
(unaudited)
 
March 31, December 31,
ASSETS 2013 2012
 
CURRENT ASSETS:
Cash and cash equivalents $

29,336

$ 64,772

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