Genesee & Wyoming Reports Results for the Fourth Quarter of 2013

Business Wire

DARIEN, Conn.--(BUSINESS WIRE)--

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

Fourth Quarter Highlights

  • Reported diluted earnings per common share (EPS) of $1.03; adjusted diluted EPS of $1.07, a 35.4% increase in adjusted diluted EPS and a 19.0% increase in adjusted diluted EPS normalizing for the impact of the 2013 short line tax credit. (1)
  • Total operating revenues increased 72.3% to $391.7 million.
  • Combined Company adjusted operating revenues, excluding the net impact from foreign currency depreciation and fuel sales to third parties, increased 8.2%. (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 controlled by G&W during 2012. In doing so, G&W has reclassified RailAmerica's 2012 information to conform with G&W's presentation.
  • Adjusted income from operations increased 65.6% to $95.7 million; Reported income from operations increased 181.7% to $94.8 million. (3)
  • Adjusted operating ratio increased 100 basis points to 75.6% (excluding RailAmerica integration and acquisition-related costs, business development and financing costs and net gain on sale of assets); Reported operating ratio of 75.8% (77.2% North American & European Operations; 70.4% Australian Operations). (3)

Jack Hellmann, President and CEO of G&W, commented, “The overall trajectory of our business continues to be positive, with adjusted diluted EPS increasing 19% in the fourth quarter of 2013. However, G&W’s fourth quarter financial results were weaker than we expected. While carload levels were consistent with our expectations, with the exception of delayed movements in Australian grain, our operating income was lower than projected for three main reasons. First, the strengthening of the U.S. dollar reduced our income translation from Australia and Canada. Second, we experienced two costly derailments in the quarter, one in Alabama in November and another in the Northern Territory of Australia in December. Third, our diesel fuel consumption was unusually high due to extremely cold temperatures in the United States and Canada.” (1)

“For the year, our 2013 results were uniformly strong. Our safety results led the rail industry for the 5th consecutive year, we successfully integrated the $2 billion acquisition of RailAmerica, we generated record free cash flow, and our adjusted diluted earnings per share increased 50%.” (1)(4)

“We expect our positive momentum to continue in 2014, although the year is starting slowly due to extreme winter weather in North America. Our Australian business continues to perform well, we have completed necessary management changes following the RailAmerica acquisition and we have enhanced our North American commercial capabilities. With the expiration of the short line tax credit on December 31, 2013, the easiest way to visualize our business outlook for 2014 is growth in pre-tax income of approximately 20%, compared with our 2013 adjusted pre-tax income. Also, we expect additional earnings growth to be contributed by our recently announced acquisition of the western end of the Dakota Minnesota & Eastern railroad from Canadian Pacific, pending approval by the U.S. Surface Transportation Board.” (1)

Financial Results

G&W reported net income in the fourth quarter of 2013 of $58.1 million, compared with net income of $13.4 million in the fourth quarter of 2012. Excluding the net impact of certain significant items discussed below, G&W's adjusted net income in the fourth quarter of 2013 was $60.6 million, compared with adjusted net income of $44.2 million in the fourth quarter of 2012. (1)

G&W's reported diluted EPS in the fourth quarter of 2013 were $1.03 with 56.8 million weighted average shares outstanding, compared with diluted EPS in the fourth quarter of 2012 of $0.18 with 50.6 million weighted average shares outstanding. Excluding the net impact of significant items discussed below, G&W's adjusted diluted EPS in the fourth quarter of 2013 were $1.07 with 56.8 million weighted average shares outstanding, compared with adjusted diluted EPS in the fourth quarter of 2012 of $0.79 with 56.6 million weighted average shares outstanding. (1)

G&W's effective income tax rate was 29.0% in the fourth quarter of 2013, or an adjusted effective income tax rate of 26.8% after giving effect for the significant items discussed below. (1) The lower income tax rate in the fourth quarter of 2013, compared with the fourth quarter of 2012, was driven primarily by the extension of the United States Short Line Tax Credit on January 2, 2013, which had previously expired on December 31, 2011.

In the fourth 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/(Loss) After-Tax Net Earnings/(Loss)
Before Taxes Income/(Loss) Per Common
Impact Impact Share Impact

Three Months Ended December 31, 2013

RailAmerica integration/acquisition costs $ (1.0 ) $ (0.6 ) $ (0.01 )
Business development and financing costs $ (1.2 ) $ (0.7 ) $ (0.01 )
Net gain on sale of assets $ 1.3 $ 0.8 $ 0.01

Valuation allowance on FTC

$

-

$ (2.0 )

$

(0.03

)
 

Three Months Ended December 31, 2012

RailAmerica integration/acquisition costs $ (23.5 ) $ (17.4 ) $ (0.36 )
Business development and financing costs $ (16.7 ) $ (10.1 ) $ (0.20 )

Acquisition/integration costs incurred by RailAmerica

$

-

$ (3.5 )

$

(0.06

)
Gain on insurance recoveries $ 0.6 $ 0.4 $ 0.01
Net gain on sale of assets $ 0.8 $ 0.6 $ 0.01
Contract termination expense in Australia $ (1.1 ) $ (0.8 ) $ (0.01 )
 

Explanation of Significant Items

In the fourth quarter of 2013, G&W's results included RailAmerica integration and acquisition-related costs of $1.0 million, $1.2 million of business development and financing costs, primarily related to the recently announced pending acquisition of the western end of the Dakota Minnesota & Eastern railroad from Canadian Pacific (which we expect to be operated by our new railroad, Rapid City Pierre and Eastern (RCP&E)), net gain on sale of assets of $1.3 million and a valuation allowance on foreign tax credits (FTC) generated in prior years of $2.0 million (after-tax). In the fourth quarter of 2012, G&W incurred $23.5 million of RailAmerica integration and acquisition-related costs, primarily associated with closing costs and severance benefits for RailAmerica senior executives and $16.7 million of business development and financing costs, primarily associated with the financing of the RailAmerica acquisition. In the fourth quarter of 2012, G&W also recorded $1.4 million in net gains on the Edith River Bridge-related insurance recoveries and the sale of assets and incurred $1.1 million of expense associated with the termination of a contract with a track maintenance service provider in Australia. In addition, RailAmerica's reported equity earnings included $3.5 million (after-tax) of expense associated with the integration, primarily related to severance obligations.

Quarterly Results

In the fourth quarter of 2013, G&W's total operating revenues increased $164.4 million, or 72.3%, to $391.7 million, compared with $227.3 million in the fourth quarter of 2012. The increase included $152.9 million in revenues from new operations, partially offset by a $9.4 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 $20.9 million, or 9.2%.

G&W's same railroad freight revenues in the fourth quarter of 2013 were $178.5 million, compared with $165.4 million in the fourth quarter of 2012. Excluding a $7.7 million decrease from the impact of foreign currency depreciation, G&W's same railroad freight revenues increased by $20.7 million, or 12.5%.

G&W's same railroad non-freight revenues in the fourth quarter of 2013 were $60.3 million, compared with $61.9 million in the fourth quarter of 2012. Excluding a $1.8 million decrease from the net impact of foreign currency depreciation, G&W's same railroad non-freight revenues increased by $0.2 million.

In the fourth quarter of 2013, Combined Company operating revenues increased $18.5 million, or 5.0%, to $391.7 million. Excluding a $10.3 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar and a $0.9 million decrease in third-party fuel sales, Combined Company adjusted operating revenues increased by $29.8 million, or 8.2%. Combined Company adjusted freight revenues increased by $29.6 million, or 11.0%, to $297.5 million in the fourth quarter of 2013, excluding $8.2 million from the impact of foreign currency depreciation. Combined Company adjusted non-freight revenues increased by $0.2 million, or 0.2%, to $94.2 million in the fourth quarter of 2013, excluding a $2.1 million decrease from the net impact of foreign currency depreciation and a $0.9 million decrease in third-party fuel sales. (2)

G&W's traffic in the fourth quarter of 2013 was 471,906 carloads. On a Combined Company basis, traffic increased 32,988 carloads, or 7.5%, compared with traffic in the fourth quarter of 2012. The traffic increase was principally due to increases of 9,358 carloads of coal and coke traffic (primarily in the Central, Midwest and Ohio regions), 6,566 carloads of metallic ores traffic (primarily in the Australian Region), 4,515 carloads of agricultural products traffic (primarily in the Australian Region), 4,479 carloads of metals traffic (primarily in the Northeast and Mountain West regions) and 3,898 carloads of petroleum products traffic (primarily in the Pacific Region). All remaining traffic increased by a net 4,172 carloads.

G&W's income from operations in the fourth quarter of 2013 was $94.8 million, compared with $33.7 million in the fourth quarter of 2012. G&W's operating ratio in the fourth quarter of 2013 was 75.8%, compared with an operating ratio of 85.2% in the fourth quarter of 2012. Income from operations in the fourth quarter of 2013 included $1.0 million of RailAmerica integration and acquisition-related costs, $1.2 million of business development and financing costs and net gain on sale of assets of $1.3 million. Income from operations in the fourth quarter of 2012 included $23.5 million of RailAmerica integration and acquisition-related costs, primarily associated with closing costs and severance benefits, a $1.1 million contract termination payment in Australia associated with outsourced maintenance of way activities and business development and financing costs of $1.0 million, partially offset by $1.4 million of gains on insurance recoveries and sale of assets. Excluding these items, G&W's adjusted income from operations increased $37.9 million, or 65.6%, to $95.7 million. G&W's adjusted operating ratio increased 100 basis points to 75.6% in the fourth quarter of 2013, compared with 74.6% in the fourth quarter of 2012. (3)

Consolidated Annual Results

G&W reported net income for the year ended December 31, 2013 of $272.1 million ($318.4 million pre-tax), compared with net income of $52.4 million ($83.3 million pre-tax) for the year ended December 31, 2012. Excluding the impact of certain significant items listed below that primarily related to the RailAmerica acquisition, G&W's adjusted net income for the year ended December 31, 2013 was $242.0 million ($332.9 million adjusted pre-tax), compared with adjusted net income of $129.7 million ($170.0 million adjusted pre-tax) for the year ended December 31, 2012. (1)

G&W's diluted EPS for the year ended December 31, 2013 were $4.79 with 56.7 million weighted average shares outstanding, compared with diluted EPS of $1.02 with 51.3 million weighted average shares outstanding for the year ended December 31, 2012. Excluding the significant items listed below, G&W's adjusted diluted EPS for the year ended December 31, 2013 were $4.26 with 56.7 million weighted average shares outstanding, compared with adjusted diluted EPS of $2.53 with 51.3 million weighted average shares outstanding for the year ended December 31, 2012. (1)

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

 
                 

Diluted

Income/(Loss)

After-Tax Net

Earnings/(Loss)

Before Taxes

Income/(Loss)

Per Common

Impact

Impact

Share Impact

Twelve Months Ended December 31, 2013

RailAmerica integration/acquisition costs $ (17.0 ) $ (10.7 ) $ (0.19 )
Business development and financing costs $ (2.2 ) $ (1.4 ) $ (0.03 )
Net gain on sale of assets $ 4.7 $ 3.2 $ 0.06
Retroactive Short Line Tax Credit for 2012 $

-

$ 41.0 $ 0.72
Valuation allowance on FTC $

-

$ (2.0 ) $ (0.03 )

 

Twelve Months Ended December 31, 2012

RailAmerica integration/acquisition costs $ (29.5 ) $ (21.0 ) $ (0.41 )
Business development and financing costs $ (18.1 ) $ (11.0 ) $ (0.21 )
Acquisition/integration costs incurred by RailAmerica $

-

$ (3.5 ) $ (0.07 )
Gain on insurance recoveries $ 0.8 $ 0.5 $ 0.01
Net gain on sale of assets $ 11.2 $ 8.6 $ 0.17
Contract termination expense in Australia $ (1.1 ) $ (0.8 ) $ (0.02 )
Contingent forward sale contract mark-to-market expense $ (50.1 ) $ (50.1 ) $ (0.98 )
 

Free Cash Flow (4)

G&W's free cash flow for the twelve months ended December 31, 2013 and 2012 was as follows ($ in millions):

 

Twelve Months Ended

2013

       

2012

Net cash provided by operating activities

$

411.9 $ 170.7
Net cash used in investing activities, excluding new business investments

(174.5

)

(1,999.8

)

Net cash used for acquisitions   12.9     1,964.2  
Free cash flow before new business investments 250.2 135.0
New business investments   (34.2 )   (101.9 )

Free cash flow (4)

$

216.1

 

$

33.2

 
 

Conference Call and Webcast Details

As previously announced, G&W's conference call to discuss financial results for the fourth quarter will be held on Tuesday, February 11, 2014, at 8:30 am EST. The dial-in number for the teleconference in the U.S. is (800) 553-5260; outside the U.S. is (612) 234-9959, or the call may be accessed live over the Internet (listen only) at www.gwrr.com/investors, by selecting "Fourth Quarter Earnings Conference Call Webcast." Management will be referring to a slide presentation that will also be available at gwrr.com/ investors at approximately 8:00 am EST on February 11, 2014. 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 10:30 a.m. EST on February 11 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 309987.

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 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; decrease in revenues and/or increase in costs and expenses; 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, adjusted diluted earnings per common share, adjusted income before income taxes and income from equity investment (adjusted pre-tax income) and adjusted effective income tax rate are non-GAAP financial measures and are not intended to replace the net income, diluted earnings per common share, income before income taxes and income from equity investment and effective income tax rate 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 (Item 10(e)) and (Regulation G) under the Securities Exchange Act of 1934 (Regulation G), including a reconciliation to net income, diluted earnings per common share and income before income taxes and income from equity investment 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 operating 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 operating revenues include both RailAmerica and G&W operating revenues for the fourth quarter of 2012. Combined Company adjusted operating revenues exclude revenues from fuel sales to third parties and the net impact from foreign currency depreciation. The Combined Company adjusted operating revenues described above is a non-GAAP financial measure and is not intended to replace operating revenues, its most directly comparable GAAP measure. The information required by Item 10(e) and Regulation G, 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) and Regulation G, 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) and Regulation G, 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 TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012
(in thousands, except per share amounts)
(unaudited)
         

Three Months Ended

Twelve Months Ended

 

December 31,

December 31,

2013

       

2012

2013

       

2012

OPERATING REVENUES $ 391,674 $ 227,316 $ 1,569,011 $ 874,916
OPERATING EXPENSES   296,844     193,656     1,188,823     684,594  
INCOME FROM OPERATIONS 94,830 33,660 380,188 190,322
INTEREST INCOME 986 966 3,971 3,725
INTEREST EXPENSE (14,542 ) (36,793 ) (67,894 ) (62,845 )
CONTINGENT FORWARD SALE CONTRACT MARK- TO-MARKET EXPENSE

-

-

-

(50,106 )
OTHER INCOME, NET   592     357     2,122     2,182  

INCOME/(LOSS) BEFORE INCOME TAXES AND INCOME FROM EQUITY INVESTMENT

81,866 (1,810 ) 318,387 83,278
PROVISION FOR INCOME TAXES (23,778 ) (351 ) (46,296 ) (46,402 )
INCOME FROM EQUITY INVESTMENT, NET

-

    15,557  

-

    15,557  
NET INCOME 58,088 13,396 272,091 52,433

LESS: NET (LOSS)/INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST

(189 )

-

795

-

LESS: SERIES A-1 PREFERRED STOCK DIVIDEND

-

    4,375     2,139     4,375  

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS

$ 58,277   $ 9,021   $ 269,157   $ 48,058  
BASIC EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS $ 1.07   $ 0.19   $ 5.00   $ 1.13  
WEIGHTED AVERAGE SHARES - BASIC   54,727     48,116     53,788     42,693  
DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS $ 1.03   $ 0.18   $ 4.79   $ 1.02  
WEIGHTED AVERAGE SHARES - DILUTED   56,808     50,590     56,679     51,316  
 
 

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2013 AND DECEMBER 31, 2012

(in thousands)
(unaudited)
         

December 31,

December 31,

2013 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 62,876 $ 64,772
Accounts receivable, net 325,453 262,949
Materials and supplies 31,295 32,389
Prepaid expenses and other 52,584 33,586
Deferred income tax assets, net   76,122   71,556
Total current assets   548,330   465,252
PROPERTY AND EQUIPMENT, net 3,440,744 3,396,295
GOODWILL 630,462 634,953
INTANGIBLE ASSETS, net 613,933 670,206
DEFERRED INCOME TAX ASSETS, net 2,405 2,396
OTHER ASSETS, net   83,947   57,013
Total assets $ 5,319,821 $ 5,226,115

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt $ 84,366 $ 87,569
Accounts payable 242,010 232,121
Accrued expenses 130,132 93,971
Deferred income tax liabilities, net  

-

  3,083
Total current liabilities   456,508   416,744
LONG-TERM DEBT, less current portion 1,540,346 1,770,566
DEFERRED INCOME TAX LIABILITIES, net 863,051 862,734
DEFERRED ITEMS - grants from outside parties 267,098 228,579
OTHER LONG-TERM LIABILITIES 43,748 47,506
SERIES A-1 PREFERRED STOCK

-

399,524
TOTAL EQUITY   2,149,070   1,500,462
Total liabilities and equity $ 5,319,821 $ 5,226,115
 
 

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2013 AND 2012
(in thousands)
(unaudited)
  Twelve Months Ended
December 31,
2013         2012
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

272,091

$

52,433

Adjustments to reconcile net income to net cash provided by operating activities:
Income from equity investment in RailAmerica, net

-

(15,557 )
Depreciation and amortization 141,644 73,405
Compensation cost related to equity awards 16,951 12,151
Excess tax benefits from share-based compensation (8,453 ) (5,335 )
Deferred income taxes 10,683 29,926
Net gain on sale of assets (4,677 ) (11,225 )
Gain on insurance recoveries (1,465 ) (5,760 )
Insurance proceeds received 11,053 21,479
Contingent forward sale contract mark-to-market expense

-

50,106
Changes in assets and liabilities which (used) provided cash, net of effect of acquisitions:
Accounts receivable, net (44,454 ) (262 )
Materials and supplies (1,839 ) (567 )
Prepaid expenses and other (22 ) (5,384 )
Accounts payable and accrued expenses 15,929 (30,051 )
Other assets and liabilities, net   4,471   5,320  
Net cash provided by operating activities   411,912     170,679  
CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(249,318

)

(231,694

)

Grant proceeds from outside parties 33,913 39,632
Cash paid for acquisitions, net of cash acquired

-

(1,925,296 )
Insurance proceeds for the replacement of assets

-

370
Proceeds from disposition of property and equipment   6,687     15,298  
Net cash used in investing activities   (208,718 )   (2,101,690 )
 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

Principal payments on long-term borrowings, including capital leases

(471,957

)

(1,013,166

)

Proceeds from issuance of long-term debt 262,651 2,192,916
Debt amendment costs (2,773 ) (38,839 )
Net proceeds from Class A common stock issuance

-

234,340
Net proceeds from TEU issuance

-

222,856
Net proceeds from Series A-1 Preferred Stock issuance

-

349,418
Dividends paid on Series A-1 Preferred Stock (2,139 ) (4,375 )
Proceeds from employee stock purchases 12,510 19,320
Excess tax benefits from share-based compensation 8,453 5,335
Treasury stock acquisitions   (11,095 )   (4,314 )
Net cash (used in)/provided by financing activities   (204,350 )   1,963,491  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   (740 )   5,023  
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (1,896 ) 37,503
CASH AND CASH EQUIVALENTS, beginning of period   64,772     27,269  
CASH AND CASH EQUIVALENTS, end of period $ 62,876   $ 64,772  
 
 

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)

(unaudited)

             

Three Months Ended December 31,

2013

2012

Amount

% of Revenue

Amount

% of Revenue

Revenues:

Freight

$

297,500

76.0

%

$

165,410

72.8

%

Non-freight

 

94,174

 

24.0

%

 

61,906

 

27.2

%

Total revenues

$

391,674

 

100.0

%

$

227,316

 

100.0

%

 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 111,622 28.5 % $ 66,543 29.3 %
Equipment rents 19,667 5.0 % 9,252 4.1 %
Purchased services 29,110 7.4 % 22,241 9.8 %
Depreciation and amortization 35,926 9.2 % 18,458 8.1 %
Diesel fuel used in operations 37,633 9.6 % 23,756 10.5 %
Diesel fuel sold to third parties 6

-

%

862 0.4 %
Casualties and insurance 12,348 3.2 % 7,131 3.1 %
Materials 16,315 4.2 % 6,116 2.7 %
Trackage rights 13,854 3.5 % 6,443 2.8 %
Net gain on sale of assets (1,258 ) (0.3 )% (778 ) (0.3 )%
Gain on insurance recoveries

-

-

%

(574 ) (0.3 )%
Other expenses 20,609 5.3 % 10,256 4.5 %
RailAmerica acquisition-related costs 77

-

%

12,591 5.5 %
RailAmerica integration costs   935   0.2 %   11,359   5.0 %
Total operating expenses $ 296,844   75.8 % $ 193,656   85.2 %
 

Functional Classification

Transportation $ 117,510 30.0 % $ 72,945 32.1 %
Maintenance of ways and structures 41,114 10.5 % 21,655 9.5 %
Maintenance of equipment 40,762 10.4 % 23,920 10.5 %
Diesel fuel sold to third parties 6

-

%

862 0.4 %
General and administrative 54,100 13.8 % 33,218 14.7 %
Construction costs 7,672 2.0 %

-

-

%

RailAmerica acquisition-related costs 77

-

%

12,591 5.5 %
RailAmerica integration costs 935 0.2 % 11,359 5.0 %
Net gain on sale of assets (1,258 ) (0.3 )% (778 ) (0.3 )%
Gain on insurance recoveries

-

-

%

(574 ) (0.3 )%
Depreciation and amortization   35,926   9.2 %   18,458   8.1 %
Total operating expenses $ 296,844   75.8 % $ 193,656   85.2 %
 
 

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

 

                                         

 

North American &

Three Months Ended December 31, 2013

European Operations

Australian Operations

Total Operations

% of

% of

% of

 

Amount

Revenue

Amount

Revenue

Amount

Revenue

Revenues:

Freight $ 230,844 74.8 % $ 66,656 80.1 % $ 297,500 76.0 %
Non-freight 77,613 25.2 % 16,555 19.9 % 94,168 24.0 %
Fuel sales to third parties

-

 

-

%

6  

-

%

6  

-

%

Total revenues   308,457   100.0 %   83,217   100.0 %   391,674   100.0 %

Operating expenses

Labor and benefits 95,840 31.1 % 15,782 18.9 % 111,622 28.5 %
Equipment rents 17,123 5.6 % 2,544 3.1 % 19,667 5.0 %
Purchased services 15,813 5.1 % 13,297 16.0 % 29,110 7.4 %
Depreciation and amortization 29,039 9.4 % 6,887 8.3 % 35,926 9.2 %
Diesel fuel used in operations 29,923 9.7 % 7,710 9.3 % 37,633 9.6 %
Diesel fuel sold to third parties

-

-

%

6

-

%

6

 

-

%

Casualties and insurance 8,691 2.8 % 3,657 4.4 % 12,348 3.2 %
Materials 15,541 5.0 % 774 0.9 % 16,315 4.2 %
Trackage rights 8,216 2.7 % 5,638 6.8 % 13,854 3.5 %
Net gain on sale of assets (1,462 ) (0.5 )% 204 0.2 % (1,258 ) (0.3 )%
Gain on insurance recoveries

-

-

%

-

-

%

-

-

%

Other expenses 18,539 6.0 % 2,070 2.5 % 20,609 5.3 %
RailAmerica acquisition-related costs 77

-

%

-

-

%

77

-

%

RailAmerica integration costs   935   0.3 %

-

 

-

%

  935     0.2 %
Total operating expenses   238,275   77.2 %   58,569   70.4 %   296,844     75.8 %
Income from operations $ 70,182   $ 24,648   $ 94,830  
Carloads 415,067 56,839 471,906
Net expenditures for additions to property & equipment $ 58,342 $ 10,506 $ 68,848
 
 

 

North American &

Three Months Ended December 31, 2012

European Operations

Australian Operations

Total Operations

 

% of

% of

% of

 

Amount

Revenue

Amount

Revenue

Amount

Revenue

Revenues:

Freight $ 101,228 69.1 % $ 64,182 79.4 % $ 165,410 72.8 %
Non-freight 45,214 30.9 % 15,787 19.5 % 61,001 26.8 %
Fuel sales to third parties

-

 

-

%

  905   1.1 %   905   0.4 %
Total revenues   146,442   100.0 %   80,874   100.0 %   227,316   100.0 %
Operating expenses
Labor and benefits 50,226 34.3 % 16,317 20.2 % 66,543 29.3 %
Equipment rents 6,557 4.5 % 2,695 3.3 % 9,252 4.1 %
Purchased services 6,841 4.7 % 15,400 19.1 % 22,241 9.8 %
Depreciation and amortization 12,802 8.7 % 5,656 7.0 % 18,458 8.1 %
Diesel fuel used in operations 14,440 9.9 % 9,316 11.5 % 23,756 10.5 %
Diesel fuel sold to third parties

-

-

%

862 1.1 % 862 0.4 %
Casualties and insurance 4,587 3.1 % 2,544 3.1 % 7,131 3.1 %
Materials 5,718 3.9 % 398 0.5 % 6,116 2.7 %
Trackage rights 3,840 2.6 % 2,603 3.2 % 6,443 2.8 %
Net gain on sale of assets (802 ) (0.5 )% 24

-

%

(778 ) (0.3 )%
Gain on insurance recoveries

-

-

%

(574 ) (0.7 )% (574 ) (0.3 )%
Other expenses 7,678 5.2 % 2,578 3.2 % 10,256 4.5 %

RailAmerica acquisition-related costs

12,591 8.6 %

-

-

%

12,591 5.5 %
RailAmerica integration costs   11,359   7.8 %

-

 

-

%

  11,359   5.0 %
Total operating expenses   135,837   92.8 %   57,819   71.5 %   193,656   85.2 %
Income from operations $ 10,605   $ 23,055   $ 33,660  
Carloads 180,427 49,391 229,818
Net expenditures for additions to property & equipment $ 18,875 $ 27,587 $ 46,462
 
 
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 December 31, 2013

North American & European Operations

Australian Operations

Total Operations

 
Average Average Average

Freight

Revenues Freight Revenues Freight Revenues

Commodity Group

Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
Agricultural Products $ 24,075 48,361 $ 498 $ 8,652 13,466 $ 643 $ 32,727 61,827 $ 529
Metallic Ores 4,669 5,333 875 29,817 15,430 1,932 34,486 20,763 1,661
Chemicals & Plastics 30,668 39,088 785

-

-

-

30,668 39,088 785
Metals 31,517 42,636 739

-

-

-

31,517 42,636 739
Pulp & Paper 29,066 42,928 677

-

-

-

29,066 42,928 677
Coal & Coke 28,880 82,960 348

-

-

-

28,880 82,960 348
Minerals & Stone 21,122 39,463 535 1,819 10,624 171 22,941 50,087 458
Intermodal 218 2,404 91 25,980 17,243 1,507 26,198 19,647 1,333
Lumber & Forest Products 19,200 32,375 593

-

-

-

19,200 32,375 593
Petroleum Products 16,069 27,677 581 388 76 5,105 16,457 27,753 593
Food or Kindred Products 8,607 14,916 577

-

-

-

8,607 14,916 577
Waste 5,546 10,999 504

-

-

-

5,546 10,999 504
Autos & Auto Parts 6,748 9,512 709

-

-

-

6,748 9,512 709
Other   4,459 16,415 272  

-

-

-

  4,459 16,415 272

Totals

$

230,844

415,067

$

556

$

66,656

56,839

$

1,173

$

297,500

471,906

$

630

 

                                                                 

Three Months Ended December 31, 2012

North American & European Operations

Australian Operations

Total Operations

 
Average Average Average

Freight

Revenues

Freight Revenues Freight Revenues

Commodity Group

Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
Agricultural Products $ 4,434 11,420 $ 388 $ 6,863 7,246 $ 947 $ 11,297 18,666 $ 605
Metallic Ores 2,473 2,653 932 26,292 9,323 2,820 28,765 11,976 2,402
Chemicals & Plastics 13,360 16,929 789

-

-

-

13,360 16,929 789
Metals 15,411 22,017 700

-

-

-

15,411 22,017 700
Pulp & Paper 16,642 25,978 641

-

-

-

16,642 25,978 641
Coal & Coke 16,694 41,541 402

-

-

-

16,694 41,541 402
Minerals & Stone 8,027 16,792 478 3,134 15,197 206 11,161 31,989 349
Intermodal 121 1,244 97 27,319 17,542 1,557 27,440 18,786 1,461
Lumber & Forest Products 9,142 18,774 487

-

-

-

9,142 18,774 487
Petroleum Products 6,210 7,566 821 574 83 6,916 6,784 7,649 887
Food or Kindred Products 1,428 3,027 472

-

-

-

1,428 3,027 472
Waste 3,829 5,979 640

-

-

-

3,829 5,979 640
Autos & Auto Parts 2,007 2,622 765

-

-

-

2,007 2,622 765
Other   1,450 3,885 373  

-

-

-

  1,450 3,885 373

Totals

$

101,228

180,427

$

561

$

64,182

49,391

$

1,299

$

165,410

229,818

$

720

 

                         

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(dollars in thousands)
(unaudited)
 

Twelve Months Ended December 31,

2013

2012

Amount

% of Revenue

Amount

% of Revenue

Revenues:

Freight

$

   1,177,364

75.0

%

$

...624,809

71.4

%

Non-freight

 

391,647

25.0

%

 

250,107

 

28.6

%

Total revenues

$

   1,569,011

 

100.0

%

$

874,916

 

100.0

%

 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 441,318 28.1 % $ 257,618 29.5 %
Equipment rents 77,825 5.0 % 37,322 4.3 %
Purchased services 120,871 7.7 % 80,572 9.2 %
Depreciation and amortization 141,644 9.0 % 73,405 8.4 %
Diesel fuel used in operations 147,172 9.4 % 88,399 10.1 %
Diesel fuel sold to third parties 368

-

%

11,322 1.3 %
Casualties and insurance 40,781 2.6 % 24,858 2.8 %
Materials 78,243 5.0 % 25,240 2.9 %
Trackage rights 50,911 3.2 % 28,250 3.2 %
Net gain on sale of assets (4,677 ) (0.3 )% (11,225 ) (1.3 )%
Gain on insurance recoveries (1,465 ) (0.1 )% (5,760 ) (0.7 )%
Other expenses 78,797 5.1 % 44,549 5.1 %
RailAmerica acquisition-related costs 360

-

%

18,592 2.1 %
RailAmerica integration costs   16,675   1.1 %   11,452   1.3 %
Total operating expenses $ 1,188,823   75.8 % $ 684,594   78.2 %
 

Functional Classification

Transportation $ 449,018 28.6 % $ 276,316 31.6 %
Maintenance of ways and structures 164,641 10.5 % 87,751 10.0 %
Maintenance of equipment 164,349 10.5 % 92,531 10.6 %
Diesel fuel sold to third parties 368

-

%

11,322 1.3 %
General and administrative 218,891 14.0 % 130,210 14.9 %
Construction costs 39,019 2.5 %

-

-

%

RailAmerica acquisition-related costs 360

-

%

18,592 2.1 %
RailAmerica integration costs 16,675 1.1 % 11,452 1.3 %
Net gain on sale of assets (4,677 ) (0.3 )% (11,225 ) (1.3 )%
Gain on insurance recoveries (1,465 ) (0.1 )% (5,760 ) (0.7 )%
Depreciation and amortization   141,644   9.0 %   73,405   8.4 %
Total operating expenses $ 1,188,823   75.8 % $ 684,594   78.2 %
 
   
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
 
  North American &        
Twelve Months Ended December 31, 2013 European Operations Australian Operations Total Operations
    % of       % of % of
Amount Revenue Amount Revenue Amount Revenue

Revenues:

 

Freight $ 917,971 73.8 % $ 259,393 79.8 % $ 1,177,364 75.0 %
Non-freight 325,876 26.2 % 65,385 20.1 % 391,261 24.9 %
Fuel sales to third parties

-

 

-

%

  386   0.1 %   386 0.1 %
Total revenues   1,243,847  

100.0

%   325,164   100.0 %   1,569,011 100.0 %

Operating expenses

Labor and benefits 374,935 30.2 % 66,383 20.4 % 441,318 28.1 %
Equipment rents 67,297 5.4 % 10,528 3.2 % 77,825 5.0 %
Purchased services 68,632 5.5 % 52,239 16.1 % 120,871 7.7 %
Depreciation and amortization 114,542 9.2 % 27,102 8.4 % 141,644 9.0 %
Diesel fuel used in operations 116,204 9.4 % 30,968 9.5 % 147,172 9.4 %
Diesel fuel sold to third parties

-

-

%

368 0.1 % 368

-

%

Casualties and insurance 28,937 2.3 % 11,844 3.7 % 40,781 2.6 %
Materials 75,742 6.1 % 2,501 0.8 % 78,243 5.0 %
Trackage rights 29,595 2.4 % 21,316 6.6 % 50,911 3.2 %
Net gain on sale of assets (4,491 ) (0.4 )% (186 ) (0.1 )% (4,677 ) (0.3 )%
Gain on insurance recoveries

-

-

%

(1,465 ) (0.5 )% (1,465 ) (0.1 )%
Other expenses 71,297 5.8 % 7,500 2.3 % 78,797 5.1 %
RailAmerica acquisition-related costs 360

-

%

-

-

%

360

-

%

RailAmerica integration costs   16,675   1.3 %

-

 

-

%

  16,675   1.1 %
Total operating expenses   959,725   77.2 %   229,098   70.5 %   1,188,823   75.8 %
Income from operations $ 284,122   $ 96,066   $ 380,188  
Carloads 1,649,914 236,098 1,886,012
Net expenditures for additions to property & equipment $ 163,545 $ 51,860 $ 215,405
 

 

                                       

 

North American &

Twelve Months Ended December 31, 2012

European Operations

Australian Operations

Total Operations

 

% of

% of

% of

 

Amount

Revenue

Amount

Revenue

Amount

Revenue

Revenues:

Freight $ 412,839 70.5 % $ 211,970 73.3 % $ 624,809 71.4 %
Non-freight 173,054 29.5 % 65,185 22.6 % 238,239 27.2 %
Fuel sales to third parties

-

 

-

%

  11,868   4.1 %  

11,868

 

1.4

%

Total revenues   585,893   100.0 %   289,023   100.0 %   874,916   100.0 %

Operating expenses

Labor and benefits 197,407 33.7 % 60,211 20.8 % 257,618 29.5 %
Equipment rents 26,298 4.5 % 11,024 3.8 % 37,322 4.3 %
Purchased services 26,330 4.5 % 54,242 18.8 % 80,572 9.2 %
Depreciation and amortization 50,156 8.5 % 23,249 8.0 % 73,405 8.4 %
Diesel fuel used in operations 56,298 9.6 % 32,101 11.1 % 88,399 10.1 %
Diesel fuel sold to third parties

-

-

%

11,322 3.9 % 11,322 1.3 %
Casualties and insurance 16,244 2.8 % 8,614 3.0 % 24,858 2.8 %
Materials 23,569 4.0 % 1,671 0.6 % 25,240 2.9 %
Trackage rights 17,643 3.0 % 10,607 3.7 % 28,250 3.2 %
Net gain on sale of assets (9,178 ) (1.6 )% (2,047 ) (0.7 )% (11,225 ) (1.3 )%
Gain on insurance recoveries

-

-

%

(5,760 ) (2.0 )% (5,760 )

 

(0.7

)%

Other expenses 35,695 6.1 % 8,854 3.1 % 44,549 5.1 %
RailAmerica acquisition-related costs 18,592 3.2 %

-

-

%

18,592 2.1 %
RailAmerica integration costs   11,452   2.0 %

-

 

-

%

  11,452   1.3 %
Total operating expenses   470,506   80.3 %   214,088   74.1 %   684,594   78.2 %
Income from operations $ 115,387   $ 74,935   $ 190,322  
Carloads 723,448 203,646 927,094

Net expenditures for additions to property & equipment

$ 69,636 $ 122,426 $ 192,062
 
         
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)
 

Twelve Months Ended December 31, 2013

North American & European Operations

       

Australian Operations

 

Total Operations

Commodity Group                 Average                 Average         Average
Freight Revenues Freight Revenues

Freight

Revenues
Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
Agricultural Products $ 90,272 179,083 $ 504 $ 40,305 61,757 $ 653 $ 130,577 240,840 $ 542
Metallic Ores 16,602 20,231 821 109,326 52,135 2,097 125,928 72,366 1,740
Chemicals & Plastics 128,935 163,123 790

-

-

-

128,935 163,123 790
Metals 127,769 175,636 727

-

-

-

127,769 175,636 727
Pulp & Paper 112,663 169,708 664

-

-

-

112,663 169,708 664
Coal & Coke 110,836 323,500 343

-

-

-

110,836 323,500 343
Minerals & Stone 86,627 162,401 533 10,144 56,762 179 96,771 219,163 442
Intermodal 871 8,518 102 97,888 65,148 1,503 98,759 73,666 1,341
Lumber & Forest Products 79,035 133,649 591

-

-

-

79,035 133,649 591
Petroleum Products 63,493 108,605 585 1,730 296 5,845 65,223 108,901 599
Food or Kindred Products 31,982 55,084 581

-

-

-

31,982 55,084 581
Waste 22,750 43,166 527

-

-

-

22,750 43,166 527
Autos & Auto Parts 26,415 36,510 724

-

-

-

26,415 36,510 724
Other   19,721 70,700 279  

-

-

-

  19,721 70,700 279

Totals

$

917,971

1,649,914

$

556

$

259,393

236,098

$

1,099

$

1,177,364

1,886,012

$

624

 

 

                 

Twelve Months Ended December 31, 2012

North American & European Operations

Australian Operations

Total Operations

                Average                 Average                 Average
Freight Revenues Freight Revenues Freight Revenues
Commodity Group Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
Agricultural Products $ 20,845 46,062 $ 453 $ 38,533 50,672 $ 760 $ 59,378 96,734 $ 614
Metallic Ores 10,549 11,184 943 64,639 30,734 2,103 75,188 41,918 1,794
Chemicals & Plastics 55,146 68,999 799

-

-

-

55,146 68,999 799
Metals 62,129 94,621 657

-

-

-

62,129 94,621 657
Pulp & Paper 65,696 101,588 647

-

-

-

65,696 101,588 647
Coal & Coke 70,052 168,574 416

-

-

-

70,052 168,574 416
Minerals & Stone 36,005 70,830 508 12,018 59,772 201 48,023 130,602 368
Intermodal 503 4,644 108 94,232 62,062 1,518 94,735 66,706 1,420
Lumber & Forest Products 34,839 70,896 491

-

-

-

34,839 70,896 491
Petroleum Products 22,745 26,501 858 2,548 406 6,276 25,293 26,907 940
Food or Kindred Products 5,230 11,011 475

-

-

-

5,230 11,011 475
Waste 13,622 21,676 628

-

-

-

13,622 21,676 628
Autos & Auto Parts 8,313 10,148 819

-

-

-

8,313 10,148 819
Other   7,165 16,714 429  

-

-

-

  7,165 16,714 429

Totals

$

412,839

723,448

$

571

$

211,970

203,646

$

1,041

$

624,809

927,094

$

674

 

Reconciliation of non-GAAP Financial Measures

This earnings release contains references to adjusted income before income taxes and income from equity investment, adjusted pre-tax income, adjusted net income, adjusted effective income tax rate, adjusted diluted earnings per common share, Combined Company adjusted operating revenues, adjusted income from operations, adjusted operating ratios and free cash flow, which are "non-GAAP financial measures" as this term is defined in Regulation G. In accordance with Item 10(e) and Regulation G, G&W has reconciled these non-GAAP financial measures to their most directly comparable U.S. GAAP measures.

Adjusted Income Before Income Taxes and Income From Equity Investment, Adjusted Net Income, Adjusted Effective Income Tax Rate and Adjusted Diluted Earnings Per Common Share

Management views income before income taxes and income from equity investment, net income and diluted earnings per common share (EPS) as important measures of G&W's operating performance. Because management believes this information is useful for investors in assessing G&W's financial results, the income before income taxes and income from equity investment, net income and diluted EPS for the three months ended December 31, 2013 used to calculate adjusted income before income taxes and income from equity investment, adjusted net income, adjusted effective income tax rate and adjusted diluted EPS are presented excluding RailAmerica integration and acquisition-related costs, business development and financing costs, net gain on sale of assets and valuation allowance on foreign tax credits (FTC) generated in prior years and are further adjusted to exclude the fourth quarter of 2013 short line tax credit. The net income and diluted EPS for the three months ended December 31, 2012 used to calculate adjusted net income and adjusted diluted EPS are presented excluding the RailAmerica integration and acquisition-related costs, business development and financing costs, acquisition costs incurred by RailAmerica, gain on insurance recoveries, net gain on sale of assets and contract termination expense in Australia. The adjusted income before income taxes and income from equity investment, adjusted net income, adjusted effective income tax rate and adjusted diluted EPS excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, the net income, effective income tax rate and diluted EPS calculated using amounts in accordance with GAAP. Adjusted income before income taxes and income from equity investment, adjusted net income, adjusted effective income tax rate and adjusted diluted EPS amounts may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of income before income taxes and income from equity investment, net income and diluted EPS calculated using amounts determined in accordance with GAAP to the adjusted income before income taxes and income from equity investment, adjusted net income, adjusted effective income tax rate and adjusted diluted EPS described above (in millions, except per share amounts):

                         

Income Before

Diluted

Income Taxes &

Earnings/

Income From

 

(Loss) Per

Equity Investment

 

Diluted

Common
Three Months Ended December 31, 2013

(Pre-Tax Income)

Net Income

Shares

Share Impact
As reported

$

81.9

$ 58.1 56.8 $ 1.03
Add back certain items, net of tax:
RailAmerica integration/acquisition costs 1.0 0.6 0.01
Business development and financing costs 1.2 0.7 0.01
Net gain on sale of assets (1.3 ) (0.8 ) (0.01 )
Valuation allowance on FTC       2.0       0.03  
As adjusted $ 82.8 $ 60.6 56.8 $ 1.07
Q4 impact of 2013 short line tax credit       (7.7 )     (0.13 )
As adjusted (excluding Q4 short line tax credit)

$

82.8

 

$

53.0

 

56.8

$

0.94

 
 

Calculation of adjusted effective income tax rate:

Adjusted income (pre-tax)

$ 82.8
Adjusted provision for income taxes $ 22.2
Adjusted effective income tax rate 26.8 %
 
                 
Diluted
Earnings/
(Loss) Per
Diluted Common
Three Months Ended December 31, 2012 Net Income Shares Share Impact
As reported

$

13.4

50.6 $ 0.18
Add back certain items, net of tax:
RailAmerica integration/acquisition costs 17.4 6.0 (a) 0.36
Business development and financing costs 10.1 0.20
Acquisition/integration costs incurred by RailAmerica 3.5 0.06
Gain on insurance recoveries (0.4 ) (0.01 )
Net gain on sale of assets (0.6 ) (0.01 )
Contract termination expense in Australia   0.8       0.01  
As adjusted $ 44.2   56.6 $ 0.79  
 

(a) There is no effect of Class B shares outstanding or unvested equity awards in the calculation of diluted earnings per common share. Amount represents effect of Class B shares outstanding and unvested equity awards in the calculation of diluted earnings per common share.

Combined Company Adjusted Operating Revenues

Management views operating revenues as an important financial measure of G&W's operating performance. Because management believes this information is useful for investors in assessing G&W's financial results, compared with the same period in the prior year, the Combined Company operating revenues are presented excluding revenues from fuel sales to third parties and the impact from the net depreciation of the Australia and Canadian dollars and the Euro relative to the United States dollar. The Combined Company adjusted operating revenues excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, operating revenues calculated using amounts in accordance with GAAP. Combined Company adjusted operating revenues may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth a reconciliation of operating revenues to the Combined Company adjusted operating revenues described above ($ in millions):

                         

Eliminations/

G&W As RailAmerica

Adjustments

Combined

Three Months Ended December 31, 2012

Reported As Reported (a) Company
Freight revenues

$

165.4

$ 113.1 $ (2.4 ) $ 276.1
Non-freight revenues   61.9   38.0   (2.9 )   97.0
Total operating revenues $ 227.3 $ 151.1 $ (5.2 ) $ 373.1
 

(a) Includes the elimination of non-freight revenues earned during the three months ended December 31, 2012 by a subsidiary of RailAmerica for work performed for subsidiaries of G&W and reclassifications of certain revenues of RailAmerica to align with G&W's accounting policies.

         
Three Months Ended
December 31, Change

2013

       

2012

$

       

%

Combined Company operating revenues $ 391.7 $ 373.1 $ 18.5 5.0 %
Fuel sales to third parties

-

(0.9 ) 0.9
Foreign exchange  

-

  (10.3 )   10.3
Combined Company adjusted operating revenues

$

391.7

$

361.9

 

$

29.8

8.2

%

 

The following table sets forth a reconciliation of operating revenues to the Combined Company adjusted operating freight revenues described above ($ in millions):

         
Three Months Ended
December 31, Change

2013

       

2012

$

       

%

Combined Company freight revenues

$

297.5

  $ 276.1

$

21.4

  7.7 %
Foreign exchange  

-

    (8.2 )   8.2  
Combined Company adjusted freight revenues

$

297.5

 

$

267.9

 

$

29.6

 

11.0

%

 

The following table sets forth a reconciliation of operating revenues to the Combined Company adjusted operating non-freight revenues described above ($ in millions):

  Three Months Ended        
December 31, Change

2013

       

2012

$

       

%

Combined Company non-freight revenues $ 94.2 $ 97.0 $ (2.8 ) (2.9 )%
Fuel sales to third parties

-

(0.9 ) 0.9
Foreign exchange  

-

  (2.1 )   2.1  

Combined Company adjusted non-freight revenues

$

94.2

$

94.0

 

$

0.2

 

0.2

%

 

Adjusted Income from Operations and Adjusted Operating Ratios

Management views income from operations, calculated as operating revenues less operating expenses, and operating ratios, calculated as operating expenses divided by operating revenues, as important measures of G&W's operating performance. Because management believes this information is useful for investors in assessing G&W's financial results compared with the same period in the prior year, the income from operations and operating ratios for the three months ended December 31, 2013, used to calculate adjusted income from operations and adjusted operating ratios, are presented excluding RailAmerica integration and acquisition-related costs, business development and financing costs and net gain on sale of assets. The income from operations and operating ratios for the three months ended December 31, 2012, used to calculate adjusted income from operations and adjusted operating ratios, are presented excluding RailAmerica integration and acquisition-related costs, business development and financing costs, gain on insurance recoveries, net gain on sale of assets and contract termination expense Australia. The adjusted income from operations and adjusted operating ratios presented excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, the income from operations and operating ratios calculated using amounts in accordance with GAAP. Adjusted income from operations and operating ratios may be different from similarly-titled non-GAAP financial measures used by other companies.

The following table sets forth a reconciliation of income from operations and operating ratios by segment calculated using amounts determined in accordance with GAAP to the adjusted income from operations and adjusted operating ratios by segment described above ($ in millions):

                 
North
American &
European Australian Total
Three Months Ended December 31, 2013 Operations Operations Operations

Operating revenues

$

308.5

$

83.2

$

391.7

Operating expenses

 

238.3

   

58.6

   

296.8

 

Operating income

$

70.2

 

$

24.6

 

$

94.8

 

Operating ratio

77.2

%

70.4

%

75.8

%

 
Operating expenses

$

238.3

$ 58.6 $ 296.8
RailAmerica integration/acquisition costs (1.0 )

-

(1.0 )
Business development and financing costs (1.2 )

-

(1.2 )
Net gain on sale of assets   1.5     (0.2 )   1.3  

Adjusted operating expenses

$

237.6

 

$

58.4

 

$

295.9

 
 
Adjusted income from operations $ 70.9   $ 24.9   $ 95.7  
Adjusted operating ratio 77.0 % 70.1 % 75.6 %
 
                 
North
American &
European Australian Total
Three Months Ended December 31, 2012

Operations

Operations Operations

Operating revenues

$

146.4

$

80.9

$

227.3

Operating expenses

 

135.8

   

57.8

   

193.7

 

Operating income

$

10.6

 

$

23.1

 

$

33.7

 

Operating ratio

92.8

%

71.5

%

85.2

%

 

Operating expenses

$

135.8

$ 57.8 $ 193.7

RailAmerica integration/acquisition costs

(23.5 )

-

(23.5 )
Business development and financing costs (0.3 ) (0.6 ) (1.0 )
Gain on insurance recoveries

-

0.6 0.6
Net gain on sale of assets 0.8

-

0.8
Contract termination expense in Australia  

-

    (1.1 )   (1.1 )
Adjusted operating expenses $ 112.8   $ 56.6  

$

169.5  
 

Adjusted income from operations

 

$

33.6

 

$

24.2

 

$

57.8

 

Adjusted operating ratio

77.1

%

70.0

%

74.6

%

 

Adjusted Income Before Income Taxes and Income From Equity Investment, Adjusted Net Income and Adjusted Diluted Earnings Per Common Share

Management views income before income taxes and income from equity investment, net income and diluted EPS as important measures of G&W's operating performance. Because management believes this information is useful for investors in assessing G&W's financial results, the income before income taxes and income from equity investment, net income and diluted EPS for the year ended December 31, 2013 used to calculate adjusted income before income taxes and income from equity investment, adjusted net income and adjusted diluted EPS are presented excluding RailAmerica integration and acquisition-related costs, business development and financing costs, net gain on sale of assets, the retroactive fiscal year 2012 short line tax credit and valuation allowance on foreign tax credits and are further adjusted to exclude the 2013 short line tax credit. The income before income taxes and income from equity investment, net income and diluted EPS for the year ended December 31, 2012 used to calculate adjusted income before income taxes and income from equity investment, adjusted net income and adjusted diluted EPS are presented excluding the RailAmerica integration/acquisition costs, business development and financing costs, acquisition costs incurred by RailAmerica, gain on insurance recoveries, net gain on sale of assets, contract termination expense in Australia and the contingent forward sale contract mark-to-market expense. The adjusted income before income taxes and income from equity investment, adjusted net income and adjusted diluted EPS excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, the net income and diluted EPS calculated using amounts in accordance with GAAP. Adjusted income before income taxes and income from equity investment, adjusted net income and adjusted diluted EPS amounts may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of income before income taxes and income from equity investment, net income and diluted EPS calculated using amounts determined in accordance with GAAP to the adjusted income before income taxes and income from equity investment, adjusted net income and adjusted diluted EPS described above (in millions, except per share amounts):

                         
Income
Before
Income
Taxes &

Diluted

Income Earnings/
from (Loss) Per
Equity Common
Investment

Diluted

Share
Twelve Months Ended December 31, 2013

(Pre-Tax Income)

Net Income Shares Impact
As reported

$

318.4

$ 272.1 56.7 $ 4.79
Add back certain items, net of tax:
RailAmerica integration/acquisition costs 17.0 10.7 0.19
Business development and financing costs 2.2 1.4 0.03
Net gain on sale of assets (4.7 ) (3.2 ) (0.06 )
Retroactive Short Line Tax Credit for 2012

-

(41.0 ) (0.72 )
Valuation allowance on FTC  

-

    2.0       0.03  
As adjusted $ 332.9 $ 242.0 56.7 $ 4.26
Impact of 2013 short line tax credit  

-

    (25.9 )     (0.46 )

As adjusted (excluding short line tax credit)

$

332.9

 

$

216.1

 

56.7

$

3.80

 

 

 

 

Income
Before
Income
Taxes & Diluted
Income Earnings/
from (Loss) Per
Equity Common
Investment Diluted Share
Twelve Months Ended December 31, 2012

(Pre-Tax Income)

Net Income Shares Impact
As reported $ 83.3 $ 52.4 51.3 $ 1.02
Add back certain items, net of tax:
RailAmerica integration/acquisition costs 29.5 21.0 0.41
Business development and financing costs 18.1 11.0 0.21

Acquisition/integration costs incurred by RailAmerica

-

3.5

0.07

Gain on insurance recoveries (0.8 ) (0.5 ) (0.01 )
Net gain on sale of assets (11.2 ) (8.6 ) (0.17 )
Contract termination expense in Australia 1.1 0.8 0.02
Contingent forward sale contract mark-to-market expense  

50.1

   

50.1

     

0.98

 
As adjusted $ 170.0   $ 129.7   51.3 $ 2.53  
 

Free Cash Flow

Management views free cash flow as an important financial measure of how well G&W is managing its assets. Subject to the limitations discussed below, free cash flow is a useful indicator of cash flow that may be available for discretionary use by G&W. Free cash flow is defined as net cash provided by operating activities less net cash used in investing activities, excluding net cash used for acquisitions. 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. Free cash flow is not intended to represent, and should not be considered more meaningful than, or as an alternative to, net cash provided by operating activities or other measures of cash flow determined in accordance with GAAP. Free cash flow may be different from similarly-titled non-GAAP financial measures used by other companies.

The following table sets forth a reconciliation of net cash provided by operating activities to free cash flow ($ in millions):

 
Twelve Months Ended
December 31,
2013         2012
Net cash provided by operating activities $ 411.9 $ 170.7
Net cash used in investing activities (208.7 ) (2,101.7 )
Net cash used for acquisitions   12.9     1,964.2  

Free cash flow

$

216.1

 

$

33.2

 

 

Contact:
Genesee & Wyoming Inc.
Michael Williams of G&W Corporate Communications
1-203-202-8900
mwilliams@gwrr.com

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