Genesee & Wyoming Inc.

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Genesee & Wyoming Reports Results for the Fourth Quarter of 2012

GREENWICH, Conn.--(BUSINESS WIRE)-- Genesee & Wyoming Inc. (GWI) (NYSE: GWR)

Acquisition of RailAmerica, Inc.

GWI acquired RailAmerica, Inc. (RailAmerica) on October 1, 2012 for approximately $2.0 billion, including the assumption of debt.1 Immediately following the acquisition, GWI placed the shares of RailAmerica into an independent voting trust pending regulatory approval of the transaction by the U.S. Surface Transportation Board (STB). The STB approved the transaction and permitted GWI to take control of RailAmerica on December 28, 2012. Immediately thereafter, GWI commenced integration activities. As a result, GWI’s reported earnings for the fourth quarter of 2012 include after-tax charges of $30.7 million, or $0.61 per diluted common share, associated with the RailAmerica transaction, financing and integration related expenses.

During the pendency of the voting trust in the fourth quarter of 2012, GWI accounted for the earnings of RailAmerica using the equity method of accounting. GWI’s initial allocation of the purchase price to the acquired assets and assumed liabilities is included in GWI’s consolidated balance sheet at December 31, 2012.

Fourth Quarter Highlights and Recent Developments

  • Adjusted diluted earnings per common share (EPS) of $0.79 (adjusted primarily for RailAmerica acquisition and financing-related expenses); Reported diluted earnings per common share of $0.18 (1)
  • Revenues increased 8.0% versus fourth quarter of 2011, led by higher Australian iron ore shipments.
  • Consolidated adjusted operating ratio of 74.6% (adjusted primarily for RailAmerica acquisition and financing-related expenses); Reported operating ratio of 85.2% (2)
  • Australian adjusted operating ratio of 70.0% (adjusted primarily for contract termination expense, business/corporate development costs and net gain on insurance recovery); Reported Australian operating ratio of 71.5% (2)
  • Adjusted equity earnings from RailAmerica of $19.1 million (adjusted primarily for integration costs); Reported equity earnings from RailAmerica of $15.6 million (3)
  • GWI will convert $350 million of Mandatorily Convertible Preferred Stock with a 5% coupon, issued to The Carlyle Group, into approximately 6 million shares of GWI Class A common stock, effective February 13, 2013; the conversion will eliminate annual dividends of $17.5 million and will not increase GWI’s diluted shares outstanding.

Jack Hellmann, President and CEO of GWI, commented, “G&W’s financial results for the fourth quarter of 2012 were consistent with our expectations. Our fourth quarter revenues increased 8%, our adjusted operating income increased 28% and our adjusted operating ratio improved 4.0 percentage points to 74.6%. In Australia, where our grain traffic was unusually low due to now-fixed mechanical issues in the Adelaide Outer Harbor, we nevertheless reported an adjusted operating ratio of 70.0% due to the smooth start-up of iron ore shipments from a new mine. Meanwhile, RailAmerica’s fourth quarter financial results were solid while it was held in a voting trust, contributing adjusted equity earnings of $19.1 million.” (2)(3)

“The integration of RailAmerica is well underway, with new regional management teams largely established, overlapping functions being rationalized and best practices being established in each department. We are optimistic that we will complete the vast majority of the integration work by the end of the second quarter of 2013.”

1 GWI financed the $1.37 billion cash purchase price for RailAmerica’s shares, the refinancing of $1.23 billion of GWI and RailAmerica total outstanding debt prior to the acquisition, as well as transaction and financing-related expenses with approximately $1.80 billion in borrowings under its new five-year Senior Secured Credit Facility, approximately $460 million of cash from public offerings of common stock and tangible equity units and $350 million through a private issuance of mandatorily convertible preferred stock to The Carlyle Group.

Financial Results

GWI reported net income in the fourth quarter of 2012 of $13.4 million, compared with net income of $33.3 million in the fourth quarter of 2011. Excluding the impact of certain significant items discussed below that primarily related to the RailAmerica acquisition, GWI's adjusted net income in the fourth quarter of 2012 was $44.2 million, compared with adjusted net income of $29.1 million in the fourth quarter of 2011 (1).

GWI's reported diluted EPS in the fourth quarter of 2012 were $0.18 with 50.6 million weighted average common shares outstanding, compared with diluted EPS of $0.77 with 42.9 million weighted average common shares outstanding in the fourth quarter of 2011. Excluding the significant items discussed below, GWI's adjusted diluted EPS in the fourth quarter of 2012 were $0.79 with 56.6 million weighted average common shares outstanding, including the common stock equivalents associated with the Mandatorily Convertible Preferred Stock Series A-1 on an “if-converted” basis, compared with adjusted diluted EPS of $0.68 with 42.9 million weighted average shares outstanding in the fourth quarter of 2011 (1).

In the fourth quarter of 2012 and 2011, GWI's results included certain significant items that are set forth in the following table ($ in millions, except per share amounts).

                   
After-Tax
Net (Loss)/ Diluted
(Loss)/ Income (Loss)/
Income Attributable Earnings Per
Before Taxes to GWI Common
Impact Impact Share Impact

Q4 2012

RailAmerica acquisition-related costs $ (12.6 ) $ (10.9 ) $ (0.23 )
RailAmerica financing-related costs $ (15.8 ) $ (9.5 ) $ (0.20 )
RailAmerica integration costs $ (11.4 ) $ (6.8 ) $ (0.12 )
Acquisition/integration costs incurred by RailAmerica $ - $ (3.5 ) $ (0.06 )
Other business/corporate development costs $ (0.5 ) $ (0.3 ) $ (0.01 )
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 )
 
 

Q4 2011

Acquisition-related income tax benefits $ - $ 1.9 $ 0.04
Net gain/(loss) on the sale and impairment of assets $ 3.0 $ 1.9 $ 0.04
Edith River derailment costs $ (1.8 ) $ (1.3 ) $ (0.03 )
Business/corporate development costs $ (0.8 ) $ (0.5 ) $ (0.01 )
Short line tax credit $ - $ 2.2 $ 0.05
 

Explanation of Q4 2012 Significant Items

In the fourth quarter of 2012, GWI incurred $28.8 million of business development costs, primarily associated with the RailAmerica acquisition and related financing transactions. In addition, because GWI took control of RailAmerica’s railroads on December 28, 2012, GWI incurred an additional $11.4 million of integration costs, primarily associated with severance benefits paid to certain RailAmerica senior executives at the end of 2012. In the fourth quarter of 2012, GWI 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.

Results from Continuing Operations

In the fourth quarter of 2012, GWI's total operating revenues increased $16.9 million, or 8.0%, to $227.3 million, compared with $210.4 million in the fourth quarter of 2011. The increase included $2.8 million in revenues from new operations and a $2.0 million increase from the net appreciation of foreign currencies relative to the U.S. dollar. Excluding the net impact from foreign currency appreciation, GWI’s same railroad operating revenues increased $12.2 million, or 5.8%.

Same railroad freight revenues in the fourth quarter of 2012 were $163.1 million, compared with $148.8 million in the fourth quarter of 2011. Excluding $1.6 million from the impact of foreign currency appreciation, GWI’s same railroad freight revenues increased by $12.6 million, or 8.5%.

GWI's traffic in the fourth quarter of 2012 was 229,818 carloads, a decrease of 16,976 carloads, or 6.9%, compared with the fourth quarter of 2011. Traffic in the fourth quarter of 2012 included 4,497 carloads from new operations. Same railroad traffic decreased 21,473 carloads, or 8.7%, in the fourth quarter of 2012. The same railroad traffic decrease was principally due to decreases of 8,920 carloads of coal & coke traffic (primarily GWI’s Illinois and Ohio regions), 8,763 carloads of farm & food products traffic (primarily grain in GWI’s Australia Region), 8,741 carloads of other commodity group traffic (primarily overhead coal in GWI’s Ohio Region) and 3,225 carloads of minerals & stone traffic (primarily salt in GWI’s New York/Pennsylvania Region). These declines were partially offset by increases of 3,130 carloads of metallic ores traffic (primarily GWI’s Australia Region) and 3,125 carloads of lumber & forest products traffic (primarily GWI’s Oregon Region). All remaining traffic increased by a net 1,921 carloads.

Same railroad average freight revenues per carload increased 20.1% in the fourth quarter of 2012 compared with the fourth quarter of 2011. Same railroad average freight revenues per carload were impacted by three factors: a change in the mix of commodities, the appreciation of foreign currencies relative to the U.S. dollar and higher fuel surcharges, which increased same railroad average freight revenues per carload by 8.6%, 1.4% and 0.5%, respectively. Excluding these factors, same railroad average freight revenues per carload increased 9.6%. In addition to higher freight rates, same railroad average freight revenues per carload were positively impacted by changes in the mix of customers, primarily within the metallic ores and other commodities groups.

GWI’s same railroad non-freight revenues in the fourth quarter of 2012 were $61.4 million, compared with same railroad non-freight revenues in the fourth quarter of 2011 of $61.6 million. Excluding a $0.3 million increase from the net impact of foreign currency appreciation, GWI’s same railroad non-freight revenues decreased by $0.5 million, or 0.8%, primarily due to a $4.1 million decrease in third-party fuel sales resulting from GWI’s sale of its third party fuel operation in South Australia in the third quarter of 2012, partially offset by a $1.7 million increase in railcar switching and a $1.0 million increase in other income.

GWI's operating income in the fourth quarter of 2012 was $33.7 million, compared with $45.4 million in the fourth quarter of 2011. GWI’s operating ratio in the fourth quarter of 2012 was 85.2%, compared with an operating ratio of 78.4% in the fourth quarter of 2011. Operating income in the fourth quarter of 2012 included $24.0 million of RailAmerica-related expenses, 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 other business/corporate development costs of $0.5 million, partially offset by $1.4 million of gains on insurance recoveries and the sale of assets. In the fourth quarter of 2011, operating income benefited $3.0 million from the net gain on the sale of assets, partially offset by Edith River derailment costs of $1.8 million and business/corporate development costs of $0.8 million. Excluding these items, GWI’s adjusted operating income increased $12.8 million, or 28.3%, to $57.8 million. GWI’s adjusted operating ratio improved 4.0 percentage points to 74.6% in the fourth quarter of 2012, compared with 78.6% in the fourth quarter of 2011 (2).

RailAmerica Results

As described above, because GWI did not control RailAmerica until December 28, 2012, we accounted for the fourth quarter earnings of RailAmerica using the equity method of accounting. We are providing the following analysis of RailAmerica’s fourth quarter 2012 results in order to provide a comparison to their fourth quarter 2011 results.

RailAmerica’s revenues in the fourth quarter of 2012 increased 2.6% to $151.1 million, compared with $147.3 million in the fourth quarter of 2011. The increase included $5.9 million from new operations. RailAmerica’s same railroad revenues decreased $2.1 million, or 1.5%. Same railroad freight revenues increased 6.5% to $110.0 million, with average revenue per car up 7.6% and carloads down 1.0%. Non-freight revenues declined $6.0 million, or 13.7%, to $38.0 million, primarily due to lower activity at Atlas Railroad Construction Company (Atlas).

RailAmerica’s traffic in the fourth quarter of 2012 was 214,272 carloads, an increase of 2,424 carloads, or 1.1%, compared with the fourth quarter of 2011. Traffic in the fourth quarter of 2012 included 4,709 carloads from new operations. Same railroad traffic decreased 2,285 carloads, or 1.1%, in the fourth quarter of 2012. The same railroad traffic decrease was principally due to a decrease of 7,421 carloads, or 18.0%, in coal traffic, partially offset by an increase of 3,127 carloads, or 3.4%, in industrial products traffic (primarily chemicals and petroleum traffic), and an increase of 2,155 carloads, or 4.5%, in agricultural products and food traffic (primarily export soybean traffic). All remaining traffic decreased by a net 146 carloads.

RailAmerica’s same railroad non-freight revenues in the fourth quarter of 2012 were $35.1 million, compared with same railroad non-freight revenues in the fourth quarter of 2011 of $44.0 million. RailAmerica’s same railroad non-freight revenues decreased by $8.9 million, or 20.1%, primarily due to an $11.5 million decrease in Atlas’ construction activity.

RailAmerica’s operating income in the fourth quarter of 2012 was $26.1 million, a decrease of $11.1 million, compared with $37.2 million in the fourth quarter of 2011. RailAmerica’s operating ratio in the fourth quarter of 2012 was 82.7%, compared with an operating ratio of 74.7% in the fourth quarter of 2011. RailAmerica’s operating income in the fourth quarter of 2012 included $1.4 million of incremental depreciation and amortization expense resulting from GWI’s acquisition accounting for RailAmerica. If the RailAmerica acquisition had occurred in 2011, RailAmerica’s operating income in the fourth quarter of 2011 would have had an incremental depreciation and amortization expense of approximately $1 million. Operating income in the fourth quarter of 2012 also included $5.7 million of acquisition-related expenses. In the fourth quarter of 2011, operating income benefited $3.6 million from the sale of short line tax credits and included $0.3 million of acquisition-related expenses. Adjusting for these items and the estimated acquisition-driven incremental depreciation and amortization expense for the fourth quarter of 2011, RailAmerica’s adjusted operating income was $31.8 million in the fourth quarter of 2012, compared with $33.0 million in the fourth quarter of 2011. RailAmerica’s adjusted operating ratio was 78.9% in the fourth quarter of 2012, compared with 77.6% in the fourth quarter of 2011 (4).

Recent Developments

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. GWI expects the extension of the Short Line Tax Credit to reduce its book income tax expense by approximately $35 million and $25 million, respectively, for fiscal years 2012 and 2013. Since the extension became law in 2013, the 2012 impact will be recorded in the first quarter of 2013.

On February 13, 2013, GWI will convert all of the outstanding Mandatorily Convertible Preferred Stock, Series A-1, par value $0.01 per share (the “Series A-1 Preferred Stock”) issued in conjunction with the RailAmerica acquisition, and held by certain affiliates of Carlyle Partners V, L.P. (“Carlyle”). GWI is permitted to convert the Series A-1 Preferred Stock because it has satisfied the conversion criteria, including that the closing price of GWI’s Class A Common Stock exceed 130% of the conversion price, or $76.03, for 30 consecutive trading days, which condition was satisfied on February 12, 2013. Upon conversion, each share of Series A-1 Preferred Stock will be converted into 17.0978166 shares of GWI’s Class A Common Stock, resulting in the issuance of 5,984,232 shares of the Company’s Class A Common Stock. These shares are included in GWI’s weighted average diluted common shares outstanding in calculating adjusted earnings per diluted share for the three months ended December 31, 2012. In addition, GWI will be required to pay to Carlyle cash in lieu of fractional shares and all accrued and unpaid dividends in respect of the Series A-1 Preferred Stock on the conversion date. Following the conversion, GWI will not incur the quarterly dividend of approximately $4.4 million that would otherwise have been due on the Series A-1 Preferred Stock.

Consolidated Annual Results – Continuing Operations

GWI reported net income for the twelve months ended December 31, 2012, of $52.4 million, compared with net income of $119.5 million for the twelve months ended December 31, 2011. Excluding the impact of certain significant items listed below that primarily related to the RailAmerica acquisition, GWI's adjusted net income in the twelve months ended December 31, 2012 was $129.7 million, compared with adjusted net income of $105.6 million in the twelve months ended December 31, 2011 (1).

GWI's diluted EPS for the twelve months ended December 31, 2012 were $1.02 with 51.3 million weighted average shares outstanding, compared with diluted EPS of $2.79 with 42.8 million weighted average shares outstanding for the twelve months ended December 31, 2011. Excluding the significant items listed below, GWI's adjusted diluted EPS for the twelve months ended December 31, 2012 were $2.53 with 51.3 million weighted average shares outstanding, compared with adjusted diluted EPS of $2.47 with 42.8 million weighted average shares outstanding for the twelve months ended December 31, 2011 (1).

GWI’s 2012 and 2011 results included certain significant items that are set forth in the following table ($ in millions, except per share amounts).

                       
After-Tax

 

Net (Loss)/

 

(Loss)/

Income

Diluted

Income

Attributable

(Loss)/

Before Taxes

to GWI

Earnings Per

Impact

Impact

Share Impact

2012

RailAmerica acquisition-related costs $ (18.6 ) $ (14.5 ) $ (0.28 )
RailAmerica financing-related costs $ (15.8 ) $ (9.5 ) $ (0.19 )
RailAmerica integration costs $ (11.4 ) $ (6.8 ) $ (0.13 )
Acquisition/integration costs incurred by RailAmerica $ - $ (3.5 ) $ (0.07 )
Other business/corporate development costs $ (1.8 ) $ (1.2 ) $ (0.02 )
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 )
Mark-to-market loss on Carlyle Convertible $ (50.1 ) $ (50.1 ) $ (0.98 )
 

2011

Acquisition-related income tax benefits $ - $ 1.9 $ 0.04
Gain on insurance recoveries $ 1.1 $ 0.7 $ 0.02
Net gain/(loss) on the sale and impairment of assets $ 5.7 $ 3.9 $ 0.09
Edith River derailment costs $ (1.8 ) $ (1.3 ) $ (0.03 )
Business/corporate development costs $ (3.5 ) $ (2.3 ) $ (0.05 )
Short line tax credit $ - $ 10.2 $ 0.24
Gain on sale of investment $ 0.9 $ 0.8 $ 0.02
 

Free Cash Flow from Continuing Operations (5)

(in millions)   Twelve Months Ended
December 31,
2012         2011
Net cash provided by operating activities $ 166.4 $ 173.5
Net cash used in investing activities, excluding
Australian new business investments (1,999.8 ) (156.9 )
Net cash used/(received) for acquisitions/divestitures (a) 1,964.2 88.6
Australian stamp duty (b)   -     13.0  
Free cash flow before Australian new
business investments 130.8 118.1
Australian new business investments   (101.9 )   (78.2 )
Free cash flow (5) $ 28.9   $ 39.9  
 

(a) The 2012 period included $1.9 billion in net cash paid for the acquisition of RailAmerica, Inc. as well as $38.9 million in cash paid for incremental expenses related to the purchase, integration and financing of the acquisition. The 2011 period included $89.9 million in net cash paid for the acquisition of Arizona Eastern Railway Company.

(b) The payment of the Australian stamp duty in the 2011 period related to the acquisition of FreightLink in Australia, which was accrued as of December 31, 2010.

GWI’s free cash flow from continuing operations for the twelve months ended December 31, 2012 and 2011 was $28.9 million and $39.9 million, respectively (5). GWI’s free cash flow from continuing operations for the twelve months ended December 31, 2012 included $6.3 million in net cash payments related to the December 2011 Edith River derailment and $9.1 million for the settlement of a cross-currency swap that matured in December 2012.

Conference Call and Webcast Details

As previously announced, GWI's conference call to discuss financial results for the fourth quarter will be held Tuesday, February 12, 2013, at 4:30 p.m. EST. 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 "Fourth Quarter Earnings Conference Call Webcast." Management will be referring to a slide presentation that will also be available at www.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 6:30 p.m. EST on February 12 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 277581.

About GWI

GWI 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 more than 15,000 miles of owned and leased track, 4,500 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 2011 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. GWI 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. Net income and 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. The operating income and operating ratios that exclude the items described above are non-GAAP financial measures and are not intended to replace the operating income 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 operating income and operating ratios calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

3. Equity earnings from RailAmerica that exclude certain items is a non-GAAP financial measure and is not intended to replace the equity earnings 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 equity earnings calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

4. RailAmerica’s operating income and operating ratio that exclude certain items are non-GAAP financial measures and are not intended to replace the operating income and operating ratios calculated using total operating expenses and operating revenue, 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 operating income and operating ratios calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

5. 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 TWELVE MONTHS ENDED DECEMBER 31, 2012 AND 2011
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
  2012     2011     2012     2011  
 
OPERATING REVENUES $ 227,316 $ 210,386 $ 874,916 $ 829,096
 
OPERATING EXPENSES   193,656     164,998     684,594     637,317  
INCOME FROM OPERATIONS 33,660 45,388 190,322 191,779
 
INTEREST INCOME 966 757 3,725 3,243
INTEREST EXPENSE (36,793 ) (7,852 ) (62,845 ) (38,617 )
GAIN ON SALE OF INVESTMENTS - 13 - 907
CONTINGENT FORWARD SALE CONTRACT MARK-TO-MARKET EXPENSE - - (50,106 ) -
OTHER INCOME, NET   448     1,307     2,300     712  
 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (1,719 ) 39,613 83,396 158,024
 
PROVISION FOR INCOME TAXES (351 ) (6,339 ) (46,402 ) (38,531 )
 
INCOME FROM EQUITY INVESTMENT, NET   15,557     -     15,557     -  
 
INCOME FROM CONTINUING OPERATIONS 13,487 33,274 52,551 119,493
 
(LOSS)/EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX   (91 )   1     (118 )   (9 )
 
NET INCOME 13,396 33,275 52,433 119,484
PREFERRED STOCK DIVIDEND ACCRUED   4,375     -     4,375     -  
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 9,021   $ 33,275   $ 48,058   $ 119,484  
 
BASIC EARNINGS PER SHARE:
BASIC EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 0.19 $ 0.83 $ 1.13 $ 2.99
BASIC (LOSS)/EARNINGS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -     -     -  
BASIC EARNINGS PER COMMON SHARE $ 0.19   $ 0.83   $ 1.13   $ 2.99  
 
WEIGHTED AVERAGE SHARES - BASIC   48,116     40,166     42,693     39,912  
 
DILUTED EARNINGS PER SHARE:
DILUTED EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 0.18 $ 0.77 $ 1.02 $ 2.79
DILUTED (LOSS)/EARNINGS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -     -     -  
DILUTED EARNINGS PER COMMON SHARE $ 0.18   $ 0.77   $ 1.02   $ 2.79  
 
WEIGHTED AVERAGE SHARES - DILUTED   50,590     42,946     51,316     42,772  
 

         
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2012 AND DECEMBER 31, 2011
(in thousands)
(unaudited)
 

December 31,

December 31,

ASSETS   2012   2011
 
CURRENT ASSETS:
Cash and cash equivalents $ 64,772 $ 27,269
Accounts receivable, net 263,695 165,768
Materials and supplies 32,389 14,445
Prepaid expenses and other 30,827 13,332
Deferred income tax assets, net   74,181   19,385
Total current assets   465,864   240,199
 
PROPERTY AND EQUIPMENT, net 3,396,295 1,643,589
GOODWILL 524,069 160,277
INTANGIBLE ASSETS, net 670,206 230,628
DEFERRED INCOME TAX ASSETS, net 2,396 2,342
OTHER ASSETS, net  

56,884

  17,122
Total assets $

5,115,714

$ 2,294,157
 
LIABILITIES AND EQUITY
 
CURRENT LIABILITIES:
Current portion of long-term debt $ 87,569 $ 57,168
Accounts payable 226,375 134,081
Accrued expenses 97,427 69,097
Deferred income tax liabilities, net   3,083   925
Total current liabilities   414,454   261,271
 
LONG-TERM DEBT, less current portion 1,770,566 569,026
DEFERRED INCOME TAX LIABILITIES, net 744,658 285,780
DEFERRED ITEMS - grants from outside parties 228,579 198,824
OTHER LONG-TERM LIABILITIES 57,471 18,622
SERIES A-1 PREFERRED STOCK 399,524 -
 
TOTAL EQUITY  

1,500,462

  960,634
Total liabilities and equity $

5,115,714

$ 2,294,157
 

         
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2012 AND 2011
(in thousands)
(unaudited)
 
Twelve Months Ended

December 31

  2012     2011  
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 48,058 $ 119,484
Adjustments to reconcile net income to net cash provided
by operating activities:
Loss from discontinued operations, net of tax 118 9
Income from equity investment, net (15,557 ) -
Depreciation and amortization 73,405 66,481
Compensation cost related to equity awards 12,151 7,776
Excess tax benefits from share-based compensation (5,335 ) (2,820 )
Deferred income taxes

29,926

26,291
Net (gain)/loss on sale and impairment of assets (11,225 ) (5,660 )
Gain on sale of investments - (907 )
Gain on insurance recoveries (5,760 ) (1,061 )
Insurance proceeds received 21,479 646
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 (262 ) (12,307 )
Materials and supplies

(567

) (1,206 )
Prepaid expenses and other

(2,625

) 3,543
Accounts payable and accrued expenses

(32,810

) (25,556 )
Other assets and liabilities, net  

5,320

    (1,235 )
Net cash provided by operating activities from continuing operations

166,422

173,478
Net cash used in operating activities from discontinued operations   (118 )   (13 )
Net cash provided by operating activities  

166,304

    173,465  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (231,694 ) (178,668 )
Grant proceeds from outside parties 39,632 22,642
Cash paid for acquisitions, net of cash acquired (1,925,296 ) (89,935 )
Proceeds from sale of investments - 1,369
Insurance proceeds for the replacement of assets 370 -
Proceeds from disposition of property and equipment   15,298     9,464  
Net cash used in investing activities from continuing operations   (2,101,690 )   (235,128 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital leases (1,013,166 ) (533,544 )
Proceeds from issuance of long-term debt 2,192,916 581,394
Debt issuance costs (38,839 ) (4,742 )
Proceeds from employee stock purchases 19,320 17,433
Treasury stock purchases (4,314 ) (1,326 )
Net proceeds from TEU issuance 222,856 -
Net proceeds from Class A common stock issuance 234,340 -
Net proceeds from Series A-1 preferred stock issuance 349,418 -
Excess tax benefits from share-based compensation   5,335     2,820  
Net cash provided by financing activities from continuing operations   1,967,866     62,035  
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS  

5,023

    (521 )
 
CHANGE IN CASH BALANCES INCLUDED IN CURRENT ASSETS OF DISCONTINUED OPERATIONS   -     1  
 
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 37,503 (148 )
CASH AND CASH EQUIVALENTS, beginning of period   27,269     27,417  
CASH AND CASH EQUIVALENTS, end of period $ 64,772   $ 27,269  
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                         

Three Months Ended

December 31

2012 2011
% of % of
Amount Revenue Amount Revenue

Revenues:

Freight $ 165,410 72.8 % $ 148,793 70.7 %
Non-freight   61,906   27.2 %   61,593   29.3 %
 
Total revenues $ 227,316   100.0 % $ 210,386   100.0 %
 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 66,543 29.3 % $ 60,118 28.6 %
Equipment rents 9,252 4.1 % 10,998 5.2 %
Purchased services 22,240 9.8 % 21,249 10.1 %
Depreciation and amortization 18,458 8.1 % 17,700 8.4 %
Diesel fuel used in operations 23,756 10.5 % 22,983 10.9 %
Diesel fuel sold to third parties 862 0.4 % 4,745 2.3 %
Casualties and insurance 7,131 3.1 % 5,783 2.7 %
Materials 6,116 2.7 % 6,902 3.3 %
Net (gain)/loss on sale and impairment of assets ( 778 ) (0.3 %) ( 2,952 ) (1.4 %)
Gain on insurance recoveries ( 574 ) (0.3 %) ( 18 ) 0.0 %
Other expenses 16,700 7.3 % 17,490 8.3 %
RailAmerica integration costs 11,359 5.0 % - 0.0 %
RailAmerica acquisition-related costs   12,591   5.5 %   -   0.0 %
 
Total operating expenses $ 193,656   85.2 % $ 164,998   78.4 %

 

Functional Classification

Transportation $ 72,945 32.1 % $ 67,604 32.1 %
Maintenance of ways and structures 21,655 9.5 % 22,468 10.7 %
Maintenance of equipment 23,920 10.5 % 23,875 11.3 %
Diesel fuel sold to third parties 862 0.4 % 4,745 2.3 %
General and administrative 33,218 14.7 % 31,576 15.0 %
RailAmerica integration costs 11,359 5.0 % - 0.0 %
RailAmerica acquisition-related costs 12,591 5.5 % - 0.0 %
Net (gain)/loss on sale and impairment of assets ( 778 ) (0.3 %) ( 2,952 ) (1.4 %)
Gain on insurance recoveries ( 574 ) (0.3 %) ( 18 ) 0.0 %
Depreciation and amortization   18,458   8.1 %   17,700   8.4 %
 
Total operating expenses $ 193,656   85.2 % $ 164,998   78.4 %
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                                         
North American & European
Three Months Ended December 31, 2012 Operations   Australian Operations Total Operations
% of Total % of Total % of Total
Revenues: Amount Revenues   Amount Revenues   Amount Revenues
Freight $ 101,228 69.1 % $ 64,182 79.4 % $ 165,410 72.8 %
Non-freight (excluding fuel sales) 45,214 30.9 % 15,787 19.5 % 61,001 26.8 %
Fuel sales to third parties   -   0.0 %   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 6,840 4.7 % 15,400 19.1 % 22,240 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 - 0.0 % 862 1.1 % 862 0.4 %
Casualties and insurance 4,587 3.0 % 2,544 3.1 % 7,131 3.1 %
Materials 5,718 3.9 % 398 0.5 % 6,116 2.7 %
Net (gain)/loss on sale and impairment of assets (802 ) (0.5 %) 24 0.0 % (778 ) (0.3 %)
Gain on insurance recoveries - 0.0 % (574 ) (0.7 %) (574 ) (0.3 %)
Other expenses 11,519 7.9 % 5,181 6.4 % 16,700 7.3 %
RailAmerica integration costs 11,359 7.8 % - 0.0 % 11,359 5.0 %
RailAmerica acquisition-related costs   12,591   8.6 %   -   0.0 %   12,591   5.5 %
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
 
North American & European

Three Months Ended December 31, 2011

Operations   Australian Operations Total Operations
% of Total % of Total % of Total
Revenues: Amount Revenues   Amount Revenues   Amount Revenues
Freight $ 98,643 70.4 % $ 50,150 71.4 % $ 148,793 70.7 %
Non-freight (excluding fuel sales) 41,529 29.6 % 15,010 21.4 % 56,539 26.9 %
Fuel sales to third parties   -   0.0 %   5,054   7.2 %   5,054   2.4 %
Total revenues 140,172 100.0 % 70,214 100.0 % 210,386 100.0 %
 
Operating expenses
Labor and benefits 47,367 33.8 % 12,751 18.2 % 60,118 28.6 %
Equipment rents 6,609 4.7 % 4,389 6.2 % 10,998 5.2 %
Purchased services 7,478 5.4 % 13,771 19.6 % 21,249 10.1 %
Depreciation and amortization 12,375 8.8 % 5,325 7.6 % 17,700 8.4 %
Diesel fuel used in operations 14,984 10.7 % 7,999 11.4 % 22,983 10.9 %
Diesel fuel sold to third parties - 0.0 % 4,745 6.8 % 4,745 2.3 %
Casualties and insurance 3,293 2.4 % 2,490 3.5 % 5,783 2.7 %
Materials 6,060 4.3 % 842 1.2 % 6,902 3.3 %
Net (gain)/loss on sale and impairment of assets (2,473 ) (1.8 %) (479 ) (0.7 %) (2,952 ) (1.4 %)
Gain on insurance recoveries (18 ) 0.0 % - 0.0 % (18 ) 0.0 %
Other expenses   13,486   9.6 %   4,004   5.7 %   17,490   8.3 %
Total operating expenses   109,161   77.9 %   55,837   79.5 %   164,998   78.4 %
 
Income from Operations $ 31,011   $ 14,377   $ 45,388  
 
Carloads 194,217 52,577 246,794
 
Net expenditures for additions to property & equipment $ 25,518 $ 42,895 $ 68,413
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(in thousands, except average revenues per carload)
(unaudited)
                                                                 

Three Months Ended December 31, 2012

 
North American & European Operations Australian Operations Total Operations
Freight Average Revenues Freight Average Revenues Freight Average Revenues
Commodity Group Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
 
Intermodal* $ 121 1,244 $ 97 $ 27,318 17,542 $ 1,557 $ 27,439 18,786 $ 1,461
Coal & Coke 16,701 41,553 402 - - - 16,701 41,553 402
Farm & Food Products 5,717 13,549 422 6,863 7,246 947 12,580 20,795 605
Pulp & Paper 16,539 25,787 641 - - - 16,539 25,787 641
Metallic Ores ** 2,473 2,652 933 26,293 9,323 2,820 28,766 11,975 2,402
Metals 15,451 22,078 700 - - - 15,451 22,078 700
Minerals & Stone 7,581 16,662 455 3,134 15,197 206 10,715 31,859 336
Chemicals & Plastics 13,411 16,368 819 - - - 13,411 16,368 819
Lumber & Forest Products 9,193 18,992 484 - - - 9,193 18,992 484
Petroleum Products 7,017 8,990 781 574 83 6,916 7,591 9,073 837
Autos & Auto Parts 2,007 2,622 765 - - - 2,007 2,622 765
Other 5,017 9,930 505 - - - 5,017 9,930 505
           
Totals $ 101,228 180,427 $ 561 $ 64,182 49,391 $ 1,299 $ 165,410 229,818 $ 720
 

* Represents intermodal units

** Includes carload and intermodal units
 

Three Months Ended December 31, 2011

 
North American & European Operations   Australian Operations Total Operations
Freight Average Revenues Freight Average Revenues Freight Average Revenues
Commodity Group Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
 
Intermodal* $ 83 712 $ 117 $ 24,265 16,500 $ 1,471 $ 24,348 17,212 $ 1,415
Coal & Coke 17,280 50,473 342 - - - 17,280 50,473 342
Farm & Food Products 5,935 12,300 483 10,655 16,986 627 16,590 29,286 566
Pulp & Paper 14,952 23,572 634 - - - 14,952 23,572 634
Metallic Ores 2,701 3,187 848 12,239 5,658 2,163 14,940 8,845 1,689
Metals 14,398 22,667 635 - - - 14,398 22,667 635
Minerals & Stone 9,672 21,096 458 2,240 13,314 168 11,912 34,410 346
Chemicals & Plastics 12,589 16,025 786 - - - 12,589 16,025 786
Lumber & Forest Products 7,769 15,764 493 - - - 7,769 15,764 493
Petroleum Products 6,199 7,504 826 751 119 6,311 6,950 7,623 912
Autos & Auto Parts 1,647 2,246 733 - - - 1,647 2,246 733
Other 5,418 18,671 290 - - - 5,418 18,671 290
           
Totals $ 98,643 194,217 $ 508 $ 50,150 52,577 $ 954 $ 148,793 246,794 $ 603
 

* Represents intermodal units

 

 
RAILAMERICA, INC.
RAILROAD FREIGHT REVENUE, VOLUME AND REVENUE PER UNIT
COMPARISON BY COMMODITY GROUP
(in thousands, except average revenue per unit)
(unaudited)
                 
Three Months Ended December 31, 2012
 
Commodity Groups Revenue Volume Revenue Per Unit
 
Agricultural Products $ 18,837 37,261 $ 508
Chemicals 18,054 24,454 739
Coal 7,600 33,504 227
Food or Kindred Products 7,640 12,885 593
Forest Products 9,673 14,379 676
Metallic Ores and Metals 10,368 13,623 761
Motor Vehicles 3,516 5,425 662
Non-Metallic Minerals and Products 9,814 19,763 497
Other 4,862 10,583 459
Petroleum 6,547 12,254 535
Pulp, Paper & Allied Products 9,953 16,746 594
Waste & Scrap Materials 6,227 13,395 467
   
Totals $ 113,091 214,272 $ 529
 
 
Three Months Ended December 31, 2011
 
Commodity Groups Revenue Volume Revenue Per Unit
 
Agricultural Products $ 16,289 32,827 $ 496
Chemicals 14,666 21,180 692
Coal 9,333 40,925 228
Food or Kindred Products 8,014 14,680 546
Forest Products 7,821 12,149 644
Metallic Ores and Metals 11,155 17,436 640
Motor Vehicles 2,794 4,610 606
Non-Metallic Minerals and Products 9,696 20,482 473
Other 3,582 8,021 447
Petroleum 4,771 9,776 488
Pulp, Paper & Allied Products 8,353 14,878 561
Waste & Scrap Materials 6,809 14,884 457
     
Totals $ 103,283   211,848 $ 488
 

                       
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
 

Twelve Months Ended

December 31

2012   2011  
% of % of
Amount Revenue Amount Revenue

Revenues:

Freight $ 624,809 71.4 % $ 582,947 70.3 %
Non-freight   250,107   28.6 %   246,149   29.7 %
 
Total revenues $ 874,916   100.0 % $ 829,096   100.0 %
 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 257,618 29.5 % $ 236,152 28.5 %
Equipment rents 37,322 4.3 % 43,885 5.3 %
Purchased services 80,572 9.2 % 78,710 9.5 %
Depreciation and amortization 73,405 8.4 % 66,481 8.0 %
Diesel fuel used in operations 88,399 10.1 % 88,499 10.7 %
Diesel fuel sold to third parties 11,322 1.3 % 16,986 2.0 %
Casualties and insurance 24,858 2.8 % 22,469 2.7 %
Materials 25,240 2.9 % 26,419 3.2 %
Net (gain)/loss on sale and impairment of assets ( 11,225 ) (1.3 %) ( 5,660 ) (0.7 %)
Gain on insurance recoveries ( 5,760 ) (0.7 %) ( 1,061 ) (0.1 %)
Other expenses 72,799 8.3 % 64,437 7.8 %
RailAmerica integration costs 11,452 1.3 % - 0.0 %
RailAmerica acquisition-related costs   18,592   2.1 %   -   0.0 %
 
Total operating expenses $ 684,594   78.2 % $ 637,317   76.9 %
 

Functional Classification

Transportation $ 276,316 31.5 % $ 263,405 31.8 %
Maintenance of ways and structures 87,751 10.0 % 81,354 9.8 %
Maintenance of equipment 92,531 10.6 % 96,084 11.6 %
Diesel fuel sold to third parties 11,322 1.3 % 16,986 2.0 %
General and administrative 130,210 15.0 % 119,728 14.5 %
RailAmerica integration costs 11,452 1.3 % - 0.0 %
RailAmerica acquisition-related costs 18,592 2.1 % - 0.0 %
Net (gain)/loss on sale and impairment of assets ( 11,225 ) (1.3 %) ( 5,660 ) (0.7 %)
Gain on insurance recoveries ( 5,760 ) (0.7 %) ( 1,061 ) (0.1 %)
Depreciation and amortization   73,405   8.4 %   66,481   8.0 %
 
Total operating expenses $ 684,594   78.2 % $ 637,317   76.9 %
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                                         
North American & European
Twelve Months Ended December 31, 2012 Operations Australian Operations Total Operations
% of Total % of Total % of Total
Revenues: Amount Revenues Amount Revenues Amount Revenues
Freight $ 412,839 70.5 % $ 211,970 73.3 % $ 624,809 71.4 %
Non-freight (excluding fuel sales) 173,054 29.5 % 65,185 22.6 % 238,239 27.2 %
Fuel sales to third parties   -   0.0 %   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 20.9 % 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 8.6 % 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 - 0.0 % 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 %
Net (gain)/loss on sale and impairment of assets (9,178 ) (1.6 %) (2,047 ) (0.7 %) (11,225 ) (1.3 %)
Gain on insurance recoveries - 0.0 % (5,760 ) (2.0 %) (5,760 ) (0.7 %)
Other expenses 53,338 9.1 % 19,461 6.7 % 72,799 8.3 %
RailAmerica integration costs 11,452 2.0 % - 0.0 % 11,452 1.3 %
RailAmerica acquisition-related costs   18,592   3.2 %   -   0.0 %   18,592   2.1 %
Total operating expenses   470,506   80.4 %   214,088   74.1 %   684,594   78.2 %
 
Income from Operations $ 115,387   $ 74,935   $ 190,322  
 
Carloads 543,021 154,255 697,276
 
Net expenditures for additions to property & equipment $ 69,636 $ 122,426 $ 192,062
 
North American & European
Twelve Months Ended December 31, 2011 Operations   Australian Operations Total Operations
% of Total % of Total % of Total
Revenues: Amount Revenues   Amount Revenues   Amount Revenues
Freight $ 388,797 69.7 % $ 194,150 71.5 % $ 582,947 70.3 %
Non-freight (excluding fuel sales) 168,824 30.3 % 59,323 21.9 % 228,147 27.5 %
Fuel sales to third parties   -   0.0 %   18,002   6.7 %   18,002   2.2 %
Total revenues 557,621 100.0 % 271,475 100.0 % 829,096 100.0 %
 
Operating expenses
Labor and benefits 186,467 33.4 % 49,685 18.3 % 236,152 28.5 %
Equipment rents 26,460 4.7 % 17,425 6.4 % 43,885 5.3 %
Purchased services 27,880 5.0 % 50,830 18.7 % 78,710 9.5 %
Depreciation and amortization 47,218 8.5 % 19,263 7.1 % 66,481 8.0 %
Diesel fuel used in operations 57,394 10.3 % 31,105 11.5 % 88,499 10.7 %
Diesel fuel sold to third parties - 0.0 % 16,986 6.3 % 16,986 2.0 %
Casualties and insurance 14,710 2.6 % 7,759 2.9 % 22,469 2.7 %
Materials 24,138 4.3 % 2,281 0.8 % 26,419 3.2 %
Net (gain)/loss on sale and impairment of assets (5,167 ) (0.9 %) (493 ) (0.2 %) (5,660 ) (0.7 %)
Gain on insurance recoveries (43 ) 0.0 % (1,018 ) (0.4 %) (1,061 ) (0.1 %)
Other expenses   48,918   8.8 %   15,519   5.7 %   64,437   7.8 %
Total operating expenses   427,975   76.7 %   209,342   77.1 %   637,317   76.9 %
 
Income from Operations $ 129,646   $ 62,133   $ 191,779  
 
Carloads 785,377 211,671 997,048
 
Net expenditures for additions to property & equipment $ 59,383 $ 96,643 $ 156,026
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(in thousands, except average revenues per carload)
(unaudited)
                                                                 

Twelve Months Ended December 31, 2012

 
North American & European Operations Australian Operations Total Operations
Freight Average Revenues Freight Average Revenues Freight Average Revenues
Commodity Group Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
 
Intermodal* $ 503 4,644 $ 108 $ 94,231 62,062 $ 1,518 $ 94,734 66,706 $ 1,420
Coal & Coke 69,786 166,239 420 - - - 69,786 166,239 420
Farm & Food Products 25,471 53,518 476 38,534 50,672 760 64,005 104,190 614
Pulp & Paper 65,350 101,086 646 - - - 65,350 101,086 646
Metallic Ores ** 10,549 11,183 943 64,639 30,734 2,103 75,188 41,917 1,794
Metals 62,331 94,945 656 - - - 62,331 94,945 656
Minerals & Stone 34,267 70,319 487 12,018 59,772 201 46,285 130,091 356
Chemicals & Plastics 55,104 66,637 827 - - - 55,104 66,637 827
Lumber & Forest Products 34,951 71,294 490 - - - 34,951 71,294 490
Petroleum Products 26,153 32,185 813 2,548 406 6,276 28,701 32,591 881
Autos & Auto Parts 8,313 10,148 819 - - - 8,313 10,148 819
Other 20,061 41,250 486 - - - 20,061 41,250 486
           
Totals $ 412,839 723,448 $ 571 $ 211,970 203,646 $ 1,041 $ 624,809 927,094 $ 674
 

* Represents intermodal units

** Includes carload and intermodal units
 

Twelve Months Ended December 31, 2011

 
North American & European Operations   Australian Operations Total Operations
Freight Average Revenues Freight Average Revenues Freight Average Revenues
Commodity Group Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
 
Intermodal* $ 371 3,150 $ 118 $ 87,286 58,836 $ 1,484 $ 87,657 61,986 $ 1,414
Coal & Coke 77,104 205,761 375 - - - 77,104 205,761 375
Farm & Food Products 24,237 53,653 452 43,270 69,673 621 67,507 123,326 547
Pulp & Paper 61,350 96,597 635 - - - 61,350 96,597 635
Metallic Ores 7,614 10,731 710 48,536 21,951 2,211 56,150 32,682 1,718
Metals 51,461 90,153 571 - - - 51,461 90,153 571
Minerals & Stone 35,549 77,963 456 12,417 60,746 204 47,966 138,709 346
Chemicals & Plastics 46,444 60,958 762 - - - 46,444 60,958 762
Lumber & Forest Products 31,502 64,914 485 - - - 31,502 64,914 485
Petroleum Products 23,274 29,563 787 2,641 465 5,680 25,915 30,028 863
Autos & Auto Parts 7,826 10,425 751 - - - 7,826 10,425 751
Other 22,065 81,509 271 - - - 22,065 81,509 271
           
Totals $ 388,797 785,377 $ 495 $ 194,150 211,671 $ 917 $ 582,947 997,048 $ 585
 

* Represents intermodal units

 

 
RAILAMERICA, INC.
RAILROAD FREIGHT REVENUE, VOLUME AND REVENUE PER UNIT
COMPARISON BY COMMODITY GROUP
(in thousands, except average revenue per unit)
(unaudited)
                 
Twelve Months Ended December 31, 2012
 
Commodity Groups Revenue Volume Revenue Per Unit
 
Agricultural Products $ 70,951 136,337 $ 520
Chemicals 70,397 97,368 723
Coal 31,877 142,317 224
Food or Kindred Products 30,334 53,379 568
Forest Products 37,875 57,037 664
Metallic Ores and Metals 44,583 65,070 685
Motor Vehicles 14,039 21,557 651
Non-Metallic Minerals and Products 41,355 83,670 494
Other 18,781 40,571 463
Petroleum 22,801 43,087 529
Pulp, Paper & Allied Products 38,982 67,666 576
Waste & Scrap Materials 25,759 56,077 459
   
Totals $ 447,734 864,136 $ 518
 
 
Twelve Months Ended December 31, 2011
 
Commodity Groups Revenue Volume Revenue Per Unit
 
Agricultural Products $ 65,177 126,727 $ 514
Chemicals 63,374 94,615 670
Coal 34,460 151,687 227
Food or Kindred Products 30,161 56,601 533
Forest Products 30,516 48,884 624
Metallic Ores and Metals 43,431 70,251 618
Motor Vehicles 7,591 12,731 596
Non-Metallic Minerals and Products 39,329 84,614 465
Other 14,097 30,001 470
Petroleum 18,470 37,712 490
Pulp, Paper & Allied Products 39,609 67,678 585
Waste & Scrap Materials 24,914 58,459 426
     
Totals $ 411,129   839,960 $ 489
 

Reconciliation of non-GAAP Financial Measures

This earnings release contains references to adjusted operating income, adjusted operating ratios, adjusted net income, adjusted diluted earnings per share and free cash flow, which are "non-GAAP financial measures" as this term is defined in Regulation G of the Securities Exchange Act of 1934. In accordance with Regulation G, GWI has reconciled these non-GAAP financial measures to its most directly comparable U.S. GAAP measures.

GWI’s Adjusted Net Income and Adjusted Diluted Earnings Per Common Share

Managements views its Net Income and Diluted Earnings Per Common Share as important measures of GWI’s operating performance. Because management believes this information is useful for investors in assessing GWI’s financial results, the Net Income and Diluted Earnings Per Common Share for the three months ended December 31, 2012 used to calculate Adjusted Net Income and Adjusted Diluted Earnings Per Common Share, are presented excluding the RailAmerica acquisition-related costs, RailAmerica financing-related costs, RailAmerica integration costs, acquisition costs incurred by RailAmerica, other business/corporate development costs, gain on insurance recoveries, net gain on sale of assets and contract termination expense in Australia. The Net Income and Diluted Earnings Per Share for the three months ended December 31, 2011 used to calculate Adjusted Net Income and Adjusted Diluted Earnings Per Share, are presented excluding the acquisition-related income tax benefits, net (gain)/loss on sale/impairment of assets, Edith River derailment costs, business/corporate development costs and short line tax credit. The Adjusted Net Income and Adjusted Diluted Earnings Per Common Share presented 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 Earnings Per Common Share calculated using amounts in accordance with GAAP. Adjusted Net Income and Adjusted Diluted Earnings Per Common Share amounts may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of GWI’s Net Income and Diluted Earnings Per Common Share calculated using amounts determined in accordance with GAAP to the Adjusted Net Income and Adjusted Diluted Earnings Per Common Share described above (in millions, except per share amounts):

                   
Diluted
Earnings/(Loss)
Per Common
Three Months Ended December 31, 2012 Net Income Diluted shares Share Impact
As reported $ 13.4 50.6 $ 0.18
Add back certain items, net of tax:
RailAmerica acquisition-related costs 10.9 6.0 0.23
RailAmerica financing-related costs 9.5 0.20
RailAmerica integration costs 6.8 0.12
Acquisition/integration costs incurred by RailAmerica 3.5 0.06
Other business/corporate development costs 0.3 0.01
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  
 
Adjusted net income $ 44.2   56.6 $ 0.79  
 
Diluted shares - As reported 50.6
Preferred   6.0  
Diluted shares - Adjusted   56.6  
 
 
Diluted
Earnings/(Loss)
Three Months Ended December 31, 2011 Net Income Diluted shares Per Share Impact
As reported $ 33.3 42.9 $ 0.77
Add back certain items, net of tax:
Acquisition-related income tax benefits (1.9 ) (0.04 )
Net (gain)/loss on sale/impairment of assets (1.9 ) (0.04 )
Edith River derailment costs 1.3 0.03
Business/corporate development costs 0.5 0.01
Short line tax credit   (2.2 )   (0.05 )
 
Adjusted net income $ 29.1   42.9 $ 0.68  
 

GWI’s Adjusted Operating Income and Adjusted Operating Ratios Description and Discussion

Management views its Operating Income, calculated as Operating Revenues less Operating Expenses and Operating Ratios, calculated as Operating Expenses divided by Operating Revenues, as important measures of GWI’s operating performance. Because management believes this information is useful for investors in assessing GWI’s financial results compared with the same period in the prior year, the Operating Income and Operating Ratios for the three months ended December 31, 2012, used to calculate Adjusted Operating Income and Adjusted Operating Ratios, are presented excluding RailAmerica acquisition-related costs, RailAmerica integration costs, other business/corporate development costs, gain on insurance recoveries, net gain on sale of assets and contract termination expense in Australia. The Operating Income and Operating Ratios for the three months ended December 31, 2011, used to calculate Adjusted Operating Income and Adjusted Operating Ratios, are presented excluding business/corporate development costs, net gain/(loss) on sale and impairment of assets and Edith River derailment costs. The Adjusted Operating Income 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 Operating Income and Operating Ratios calculated using amounts in accordance with GAAP. Adjusted Operating Income 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 GWI’s Operating Income and Operating Ratios by segment calculated using amounts determined in accordance with GAAP to the Adjusted Operating Income and Adjusted Operating Ratios by segment described above (in millions):

                 
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 acquisition-related costs (12.5 ) (0.1 ) (12.6 )
RailAmerica integration costs (11.4 ) - (11.4 )
Other business/corporate development costs 0.0 (0.5 ) (0.5 )
Gain on insurance recoveries - 0.6 0.6
Net gain on sale of assets 0.8 (0.0 ) 0.8
Contract termination expense in Australia   -     (1.1 )   (1.1 )
Adjusted operating expenses $ 112.8   $ 56.6   $ 169.5  
 
Adjusted operating income $ 33.6   $ 24.2   $ 57.8  
Adjusted operating ratio 77.1 % 70.0 % 74.6 %
 
 
North American
& European Australian Total
Three months ended December 31, 2011 Operations Operations Operations
Operating revenues $ 140.2 $ 70.2 $ 210.4
Operating expenses   109.2     55.8     165.0  
Operating income $ 31.0   $ 14.4   $ 45.4  
Operating ratio 77.9 % 79.5 % 78.4 %
 
Operating expenses $ 109.2 $ 55.8 $ 165.0
Business/corporate development costs (0.4 ) (0.4 ) (0.8 )
Net gain/(loss) on sale and impairment of assets 2.5 0.5 3.0
Edith River derailment costs   -     (1.8 )   (1.8 )
Adjusted operating expenses $ 111.2   $ 54.1   $ 165.3  
 
Adjusted operating income $ 29.0   $ 16.1   $ 45.1  
Adjusted operating ratio 79.3 % 77.0 % 78.6 %
 

Adjusted Income from Equity Investment, Net

Management views its Equity Earnings from RailAmerica as an important measure of RailAmerica’s operating performance. Because management believes this information is useful for investors in assessing GWI’s financial results, the Equity Earnings from RailAmerica for the three months ended December 31, 2012 is presented excluding integration costs and acquisition expenses. The Adjusted Equity Earnings presented excluding these effects is not intended to represent, and should not be considered more meaningful than, or as an alternative to, the Equity Earnings calculated using amounts in accordance with GAAP. Adjusted Equity Earnings may be different from similarly-titled non-GAAP financial measures used by other companies.

 
Three Months Ended December 31, 2012
Income from equity investment, net $

15.6

Add back certain items, net of tax

Integration costs 3.4

Acquisition expenses

  0.1  
Adjusted income from equity investment, net $ 19.1  
 

RailAmerica’s Adjusted Operating Income and Adjusted Operating Ratio Description and Discussion

Management views RailAmerica’s Operating Income, calculated as Operating Revenues less Operating Expenses, and Operating Ratio, calculated as Operating Expenses divided by Operating Revenues, as important measures of RailAmerica’s operating performance. Because management believes this information is useful for investors in assessing RailAmerica’s financial results compared with the same period in the prior year, the Operating Income and Operating Ratio for the three months ended December 31, 2012, used to calculate Adjusted Operating Income and Adjusted Operating Ratio, are presented excluding integration costs and acquisition expenses. The Operating Income and Operating Ratio for the three months ended December 31, 2011, used to calculate Adjusted Operating Income and Adjusted Operating Ratio, are presented excluding acquisition expenses and the short line tax credit. In addition, the 2011 period is adjusted for the pro forma impact of depreciation and amortization expense as if GWI acquired RailAmerica in 2011. The Adjusted Operating Income and Operating Ratio presented excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, the Operating Income and Operating Ratios calculated using amounts in accordance with GAAP. Adjusted Operating Income and Operating Ratio may be different from similarly-titled non-GAAP financial measures used by other companies.

The following table sets forth a reconciliation of RailAmerica’s Operating Income and Operating Ratio calculated using amounts determined in accordance with GAAP to the Adjusted Operating Income and Operating Ratio described above ($ in millions):

 
Three Months Ended
December 31,
  2012             2011  
Operating revenues $ 151.1 $ 147.3
Operating expenses   124.9     110.1  
Operating income $ 26.1   $ 37.2  
Operating ratio 82.7 % 74.7 %
 
Operating expenses $ 124.9 $ 110.1
Integration costs

(5.5

) -
Acquisition expenses (0.1 ) (0.3 )
Pro forma depreciation and amortization expense - 1.0
Short line tax credit   -     3.6  
Adjusted operating expenses $ 119.3   $ 114.3  
 
Adjusted operating income $ 31.8   $ 33.0  
Adjusted operating ratio 78.9 % 77.6 %
 

GWI’s Adjusted Net Income and Adjusted Diluted Earnings Per Share

Managements views its Net Income and Diluted Earnings Per Share as important measures of GWI’s operating performance. Because management believes this information is useful for investors in assessing GWI’s financial results, the Net Income and Diluted Earnings Per Share for the twelve months ended December 31, 2012 used to calculate Adjusted Net Income and Adjusted Diluted Earnings Per Share, are presented excluding the RailAmerica acquisition-related costs, RailAmerica financing-related costs, RailAmerica integration costs, acquisition costs incurred by RailAmerica, other business/corporate development costs, gain on insurance recoveries, net gain on sale of assets, contract termination expense in Australia, and mark-to-market loss on Carlyle Convertible. The Net Income and Diluted Earnings Per Share for the twelve months ended December 31, 2011 used to calculate Adjusted Net Income and Adjusted Diluted Earnings Per Share, are presented excluding the acquisition-related income tax benefits, gain on insurance recoveries, net (gain)/loss on sale/impairment of assets, Edith River derailment costs, business/corporate development cost, short line tax credit and gain on sale of investment. The Adjusted Net Income and Adjusted Diluted Earnings Per Share presented 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 Earnings Per Share calculated using amounts in accordance with GAAP. Adjusted Net Income and Adjusted Diluted Earnings Per Share amounts may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of GWI’s Net Income and Diluted Earnings Per Share calculated using amounts determined in accordance with GAAP to the Adjusted Net Income and Adjusted Diluted Earnings Per Share described above (in millions, except per share amounts):

                   
Diluted
Earnings/(Loss)
Twelve Months Ended December 31, 2012 Net Income Diluted shares Per Share Impact
As reported $ 52.4 51.3 $ 1.02
Add back certain items, net of tax:
RailAmerica acquisition-related costs 14.5 0.28
RailAmerica financing-related costs 9.5 0.19
RailAmerica integration costs 6.8 0.13
Acquisition/integration costs incurred by RailAmerica 3.5 0.07
Other business/corporate development costs 1.2 0.02
Gain on insurance recoveries (0.5 ) (0.01 )
Net gain on sale of assets (8.6 ) (0.17 )
Contract termination expense in Australia 0.8 0.02
Mark-to-market loss on Carlyle Convertible   50.1     0.98  
 
Adjusted net income $ 129.7   51.3 $ 2.53  
 
Diluted shares - As reported 51.3
Preferred   -  
Diluted shares - Adjusted   51.3  
 
 
Diluted
Earnings/(Loss)
Twelve Months Ended December 31, 2011 Net Income Diluted shares Per Share Impact
As reported $ 119.5 42.8 $ 2.79
Add back certain items, net of tax:
Acquisition-related income tax benefits (1.9 ) (0.04 )
Gain on insurance recoveries (0.7 ) (0.02 )
Net (gain)/loss on sale/impairment of assets (3.9 ) (0.09 )
Edith River derailment costs 1.3 0.03
Business/corporate development costs 2.3 0.05
Short line tax credit (10.2 ) (0.24 )
Gain on sale of investment   (0.8 )   (0.02 )
 
Adjusted net income $ 105.6   42.8 $ 2.47  
 

GWI’s Free Cash Flow Description and Discussion

Management views Free Cash Flow as an important financial measure of how well GWI 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 GWI. Free Cash Flow is defined as Net Cash Provided by Operating Activities from Continuing Operations less Net Cash Used in Investing Activities from Continuing Operations, excluding net cash used for acquisitions/divestitures and the cash paid for Australian stamp duty. Key limitations of the Free Cash Flow measure include the assumptions that GWI 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, 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 GWI's Net Cash Provided by Operating Activities from Continuing Operations to GWI's Free Cash Flow ($ in millions):

 
Twelve Months Ended
December 31,
  2012             2011  
Net cash provided by operating activities from continuing operations $ 166.4 $ 173.5
Net cash used in investing activities from continuing operations (2,101.7 ) (235.1 )
Net cash used for acquisitions/divestitures (a) 1,964.2 88.6
Cash paid for acquisition-related expenses (b)   -     13.0  
Free cash flow $ 28.9   $ 39.9  
 

(a) The 2012 period included $1.9 billion in net cash paid for the acquisition of RailAmerica, Inc. as well as $38.9 million in cash paid for incremental expenses related to the purchase, integration and financing of the acquisition. The 2011 period included $89.9 million in net cash paid for the acquisition of Arizona Eastern Railway Company.

(b) The payment of the Australian stamp duty in the 2011 period related to the acquisition of FreightLink in Australia, which was accrued as of December 31, 2010.

Genesee & Wyoming Inc.
Michael Williams of GWI Corporate Communications
1-203-629-3722
mwilliams@gwrr.com

Source: Genesee & Wyoming Inc.

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