Genesee & Wyoming Reports Results for the Second Quarter of 2013

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Genesee & Wyoming Reports Results for the Second Quarter of 2013

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

Second Quarter Highlights

  • Reported diluted earnings per share (EPS) of $1.14 as well as adjusted EPS of $1.14, a 35.7% increase in reported EPS, a 70.1% increase in adjusted EPS, and a 50.7% increase in adjusted EPS normalizing for the impact of the 2013 short line tax credit. (1)
  • Total operating revenues increased 84.3% to $400.7 million.
  • Combined Company same railroad adjusted operating revenues increased 10.0%. (2)
    • To provide comparative context for 2013 consolidated revenues and traffic volumes, G&W is providing "Combined Company" comparisons as though the RailAmerica railroads were owned by G&W during 2012. In doing so, G&W has reclassified RailAmerica's 2012 information to conform with G&W's presentation.
    • Same railroad operating revenues and traffic exclude the revenues and traffic of railroads that were not owned or operated by either G&W or RailAmerica for the full comparable periods.
  • Adjusted income from operations increased 103.2% to $107.6 million; Reported operating income of $107.4 million. (3)
  • Adjusted operating ratio improved 250 basis points to 73.2% (adjusted primarily to exclude RailAmerica integration costs and net gain on the sale of assets); Reported operating ratio of 73.2% (74.1% North American & European Operations; 69.7% Australian Operations). (3)

Jack Hellmann, President and CEO of G&W commented, "The second quarter of 2013 was the second reporting period in which G&W's consolidated results included the former RailAmerica railroads. We are pleased to report continued strength in our financial results, with adjusted earnings per share up more than 50%. Our Combined Company same railroad adjusted revenues increased 10% in the second quarter of 2013, led by iron ore in Australia, petroleum products in North America and improving steam coal shipments in the United States. In addition, each of our eleven operating regions effectively managed its costs. As a result, in North America, our adjusted operating ratio improved 2.1 percentage points to 74% and in Australia our adjusted operating ratio improved 4.8 percentage points to 70%." (3)

"As we enter the second half of 2013, we are focused on commercial development across our broad national footprint, further reducing our costs as well as ensuring the successful start-up of new iron ore projects in both Australia and Canada. With our integrated operations performing well, our balance sheet deleveraging and $400 million of revolver capacity, we also continue to evaluate multiple investment opportunities."

Financial Results

G&W reported net income in the second quarter of 2013 of $65.1 million, compared with net income of $36.4 million in the second quarter of 2012. Excluding the net impact of certain significant items discussed below, G&W's adjusted net income in the second quarter of 2013 was $65.1 million, compared with adjusted net income of $28.7 million in the second quarter of 2012. (1)

G&W's reported diluted EPS in the second quarter of 2013 were $1.14 with 56.7 million weighted average common shares outstanding, compared with diluted EPS of $0.84 with 43.2 million weighted average common shares outstanding in the second quarter of 2012. Excluding the net impact of significant items discussed below, G&W's adjusted diluted EPS in the second quarter of 2013 were $1.14 with 56.7 million weighted average common shares outstanding, compared with adjusted diluted EPS of $0.67 with 43.2 million weighted average shares outstanding in the second quarter of 2012. (1)

G&W's effective tax rate was 27.9% in the second quarter of 2013, as compared with 33.6% in the second quarter of 2012. The lower tax rate in the second quarter of 2013 was driven primarily by the extension of the Short Line Tax Credit on January 2, 2013, which had previously expired on December 31, 2011.

In the second 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).

               

Income/

(Loss)

Before Taxes


Impact

After-Tax

Net Income/

(Loss) Impact

Diluted

Earnings/

(Loss) Per


Common

Share Impact

Q2 2013

RailAmerica acquisition/integration costs$(1.2)$(0.7)$(0.01)
Net gain on sale of assets$1.0$0.7$0.01

 

Q2 2012

Net gain on sale of assets$6.2$5.2$0.12
Gain on insurance recoveries$5.2$3.6$0.08
Business/Corporate development expenses$(1.9)$(1.2)$(0.03)
 

Explanation of Significant Items

In the second quarter of 2013, G&W incurred RailAmerica acquisition/integration costs of $1.2 million, primarily associated with employee severance arrangements. In the second quarter of 2013, net gain on the sale of assets was $1.0 million, compared with $6.2 million in the second quarter of 2012. Also in the second quarter of 2012, G&W benefited from insurance recoveries of $5.2 million, primarily related to a business interruption claim associated with lost profits incurred in the first quarter of 2012 as a result of the Edith River Bridge derailment.

Results from Continuing Operations

In the second quarter of 2013, G&W's total operating revenues increased $183.3 million, or 84.3%, to $400.7 million, compared with $217.4 million in the second quarter of 2012. The increase included $167.4 million in revenues from new operations, partially offset by a $1.5 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 $17.4 million, or 8.0%.

G&W's same railroad freight revenues in the second quarter of 2013 were $173.3 million, compared with $154.2 million in the second quarter of 2012. Excluding $1.2 million from the impact of foreign currency depreciation, G&W's same railroad freight revenues increased by $20.3 million, or 13.2%.

G&W's same railroad non-freight revenues in the second quarter of 2013 were $60.1 million, compared with $63.2 million in the second 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 $2.8 million, or 4.5%, primarily due to a $4.2 million decrease in third-party fuel sales, partially offset by increased switching revenues in Australia. G&W sold its third-party fuel operation in South Australia in the third quarter of 2012.

In the second quarter of 2013, Combined Company same railroad operating revenues increased $32.1 million, or 8.8%, to $398.4 million, excluding a $1.7 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar. Excluding $1.3 million from the impact of foreign currency depreciation, the Combined Company same railroad freight revenues increased by $33.3 million, or 12.6%, to $297.7 million in the second quarter of 2013. Excluding a $0.4 million decrease from the net impact of foreign currency depreciation and a $4.2 million decrease in third-party fuel sales primarily due to the sale of our third-party fuel operation, Combined Company same railroad adjusted non-freight revenues increased by $3.0 million, or 2.9%, to $100.7 million in the second quarter of 2013. (2)

G&W's traffic in the second quarter of 2013 was 480,979 carloads. On a Combined Company basis, traffic increased 34,296 carloads, or 7.7%, compared with traffic in the second quarter of 2012. Excluding 5,291 total carloads from 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 29,005 carloads, or 6.5%, compared with the second quarter of 2012. The traffic increase was principally due to increases of 10,455 carloads of petroleum products traffic (primarily crude oil and liquid petroleum gases in the Pacific, Southern, Mountain West and Canada regions), 7,832 carloads of coal & coke traffic (primarily in the Midwest, Central and Northeast regions, offset by lower shipments in the Ohio Valley Region) and 3,801 carloads of metallic ores traffic (primarily the Australia Region). All remaining traffic increased by a net 6,917 carloads.

G&W's income from operations in the second quarter of 2013 was $107.4 million, compared with $62.5 million in the second quarter of 2012. G&W's operating ratio in the second quarter of 2013 was 73.2%, compared with an operating ratio of 71.3% in the second quarter of 2012. Income from operations in the second quarter of 2013 included $1.2 million of RailAmerica acquisition and integration costs, offset by a $1.0 million net gain on the sale of assets. In the second quarter of 2012, income from operations included a $6.2 million gain on the sale of assets and $5.2 million from insurance recoveries, primarily related to the Edith River Bridge derailment, partially offset by $1.9 million of business/corporate development expenses. Excluding these items, G&W's adjusted income from operations increased $54.7 million, or 103.2%, to $107.6 million. G&W's adjusted operating ratio improved 250 basis points to 73.2% in the second quarter of 2013, compared with 75.7% in the second quarter of 2012. (3)

Free Cash Flow from Continuing Operations (4)

(in millions)      Six Months Ended

June 30,

  2013      2012 
Net cash provided by operating activities$152.7$90.9
Net cash used in investing activities, excluding
new business investments(78.0)(26.4)
Net cash used for acquisitions (a) 9.6  0.8 
Free cash flow before new business investments84.365.3
New business investments (25.1) (54.5)
Free cash flow (4)$59.2 $10.7 

a) The 2013 period included $9.6 million in cash paid for expenses related to the integration of RailAmerica.

G&W's free cash flow from continuing operations for the six months ended June 30, 2013 and 2012 was $59.2 million and $10.7 million, respectively. (4)

Conference Call and Webcast Details

As previously announced, G&W's conference call to discuss financial results for the second quarter will be held on Thursday, August 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 "Second 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 August 1 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 277583.

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 36 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; 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; 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 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. To provide comparative context for 2013 consolidated revenues and traffic volumes, G&W is providing "Combined Company" comparisons for those items as though the RailAmerica railroads were owned by G&W during 2012. In doing so, G&W has amended RailAmerica's 2012 information to conform with G&W's reporting methodology. Combined Company revenues include both RailAmerica and G&W operating revenues for the second quarter of 2012. Combined Company same railroad revenues exclude operating revenues from Marquette Rail LLC, which RailAmerica acquired on May 1, 2012, and Columbus & Chattahoochee Railroad, Inc., which G&W commenced operations on July 1, 2012. Combined Company same railroad adjusted revenues exclude revenues from fuel sales to third parties and the net impact from foreign currency depreciation. The Combined Company same railroad adjusted 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 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 AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(in thousands, except per share amounts)
(unaudited)
                    
Three Months EndedSix Months Ended
June 30,June 30,
 2013  2012  2013  2012 
 
OPERATING REVENUES$400,741$217,419$775,949$424,855
 
OPERATING EXPENSES 293,324  154,946  592,332  321,068 
INCOME FROM OPERATIONS107,41762,473183,617103,787
 
INTEREST INCOME9509641,9931,831
INTEREST EXPENSE(17,203)(8,622)(37,323)(17,238)
OTHER(LOSS)/INCOME, NET (879) 15  (197) 999 
 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES90,28554,830148,09089,379
 
PROVISION FOR INCOME TAXES (25,226) (18,443) (294) (30,748)
 
INCOME FROM CONTINUING OPERATIONS65,05936,387147,79658,631
 
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX (9) (24) (18) (27)
 
NET INCOME65,05036,363147,77858,604
LESS:NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST280-446-
LESS:SERIES A-1 PREFERRED STOCK DIVIDEND -  -  2,139  - 
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$64,770 $36,363 $145,193 $58,604 
 

BASIC EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING

INC. COMMON STOCKHOLDERS:

 

BASIC EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS$1.19$0.90$2.75$1.45
BASIC LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS -  -  -  - 
BASIC EARNINGS PER COMMON SHARE$1.19 $0.90  Read Full Story

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