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RailAmerica, Inc. Reports Third Quarter 2012 Results

November 5, 2012

JACKSONVILLE, Fla., Nov. 5, 2012 /PRNewswire/ –

Third Quarter Highlights

  • Revenue increased 11% versus third quarter 2011.
  • Operating income down 31%; (up 25% excluding 45G benefit, asset sales, impairments and strategic alternatives expense[1]).
  • Net income of $0.12 per share.
  • Adjusted net income per share[1] of $0.40.

On October 1, 2012, RailAmerica, Inc. (RailAmerica) was acquired by Genesee & Wyoming Inc. (GWI) (NYSE:GWR) and deregistered its common stock and delisted from the New York Stock Exchange. Immediately following the closing of the acquisition, control of RailAmerica was placed into a voting trust with R. Lawrence McCaffrey appointed as trustee. The trust will remain in effect until the U.S. Surface Transportation Board (STB) issues its decision on GWI’s application to control RailAmerica and its railroads, which decision could be as early as the fourth quarter of 2012 or as late as the first quarter of 2013.

For the pendency of the trust, GWI will account for its ownership of RailAmerica under the equity method of accounting. RailAmerica financial results for the third quarter of 2012 are for periods prior to GWI’s ownership of RailAmerica and will not be included in GWI’s financial results for such periods. This press release and a presentation containing supplemental information for the third quarter and year to date results will be posted on RailAmerica’s website www.railamerica.com.

RailAmerica today reported financial results for the quarter ended September 30, 2012. Third quarter 2012 revenue increased 11% to $155.4 million from $139.7 million in the third quarter of 2011. Freight revenue increased 8% to $113.0 million with carloads up 4% and average revenue per car up 4%. Non-freight revenue increased 21% to $42.4 million.

The Company reported third quarter 2012 net income of $5.9 million, or $0.12 per diluted share. This compares to net income of $9.1 million, or $0.17 per diluted share in the third quarter of 2011. Noteworthy items impacting the third quarters of 2012 and 2011 include:

  • Acquisition / Transaction costs: In the third quarter of 2012 the Company incurred $17.0 million of transaction related expenses. $16.6 million was due to the Company’s previously announced exploration of strategic alternatives, which resulted in the sale of RailAmerica to Genesee & Wyoming Inc. The remainder of the expenses were due to acquisition and industrial development related activity.
  • Restricted stock amortization: Third quarter 2012 restricted stock amortization (included in labor and benefits) included $2.4 million related to retirement eligibility vesting for certain participants. The vesting was associated with grants made during the third quarter of 2012 under terms of the agreement to sell the Company. Otherwise these expenses would have been incurred in the first quarter of 2013.
  • Amortization of swap termination costs: Non-cash charges of $1.3 million and $2.7 million were recorded in interest expense during the third quarters of 2012 and 2011, respectively, due to the June 2009 termination of an interest rate swap agreement.
  • 45G tax credits: A $3.9 million income statement benefit was recorded in the third quarter of 2011, but no benefit was recognized in the third quarter of 2012 since the credit is currently not in effect for 2012.
  • Asset impairment: Third quarter of 2011 includes a $1.9 million non-cash impairment charge resulting from an evaluation of our locomotive fleet.
  • Credit facility replacement: Third quarter of 2011 includes a $0.7 million non-cash charge related to the replacement of our asset backed loan facility with a new revolving credit facility.

        Summary of Noteworthy Items Impacting Third Quarter 2011 and 2012
        -----------------------------------------------------------------

                                            For the Three Months Ended September
                                                             30,
    ($ in thousands except
     EPS)                                           2011                     2012
                                                    ----                     ----
                                       Pre Tax     EPS          Pre Tax     EPS
                                       -------     ---          -------     ---

    Strategic alternatives                   $0    $0.00       ($16,587)  ($0.26)
    Acquisition /
     Transaction costs                     (203)   (0.00)           (393)   (0.00)
    Restricted stock
     amortization increase                    -        -          (2,366)   (0.03)
    Amortization of swap
     termination costs                   (2,747)   (0.03)         (1,283)   (0.02)
    45G credits                           3,879     0.05               -        -
    Impairment of assets                 (1,949)   (0.02)              -        -
    Loss on extinguishment
     of credit agreement                   (719)   (0.01)              -        -
    Gain /(loss) on sale of
     assets                                  (8)   (0.00)          1,337     0.02

    Note: Effective tax rate of 39% for 2011 and 37% for all 2012 items
     other than strategic alternatives, which are tax effected at 21%.

The Company reported operating income of $21.7 million in the third quarter of 2012 compared to $31.5 million in the third quarter of 2011. In addition to the items mentioned above impacting operating income, third quarter 2012 expenses were up primarily due to the inclusion of operating expenses from acquisitions (Marquette Railroad, Wellsboro & Corning Railroad and TransRail North America (TNA)). Also, incentive compensation increased $4.5 million. Operating income excluding the impact of 45G credits, asset sales, impairments and strategic alternatives expense is shown below.


                                                            For the Three
                                                             Months Ended
                                                            September 30,
                                                            -------------
                                                          2011          2012
                                                          ----          ----
    ($ in thousands)

    Operating revenue                                 $139,665      $155,418
    Operating expense                                  108,177       133,670
                                                       -------       -------
    Operating income, reported                          31,488        21,748

    Less: Benefit from 45G credits                      (3,879)            -
                                                        ------           ---
    Operating income excluding 45G Benefit(1)           27,609        21,748

    Net (gain) loss on sale of assets                        8        (1,337)
    Impairment of assets                                 1,949             -
    Strategic alternatives expense                           -        16,587
                                                           ---        ------
    Operating income excluding 45G Benefit,
     Asset Sales, Impairments and Strategic
     Alternatives expense(1)                            29,566        36,998
                                                        ======        ======

    (1)See schedule at the end of press release for a
     reconciliation of non-GAAP financial measure

A more detailed discussion of financial results for the third quarter of 2012 compared to the third quarter of 2011 follows.

Operating Revenue

Operating revenue increased by $15.8 million, or 11%, to $155.4 million in the three months ended September 30, 2012 from $139.7 million in the three months ended September 30, 2011. The net increase in operating revenue was due to higher non-freight revenue, rate increases, change in commodity mix, and increased carloads.

Total carloads during the three months ended September 30, 2012 increased 4% to 214,357 from 206,975 in the three months ended September 30, 2011. The increase in the average revenue per carload to $527 in the three months ended September 30, 2012, from $506 in the comparable period in 2011 was primarily due to rate increases, commodity mix, and fuel surcharge.

Freight revenue was $113.0 million in the three months ended September 30, 2012 compared to $104.7 million in the three months ended September 30, 2011, an increase of $8.3 million or 8%. This increase was primarily due to the net effect of the following:

  • Industrial products (includes chemicals, pulp, paper & allied products, metallic ores and metals, waste and scrap materials, other, petroleum, and motor vehicles) revenue increased $5.9 million, or 11%, primarily due to motor vehicle carload growth of 84%, which was driven by increased production at multiple automobile manufacturing plants we serve in Indiana, Michigan, California and Washington, chemicals and other which were driven by rates and commodity mix. The increase in the motor vehicles category was partially offset by an 11% decrease in metallic ores and metals carloads and an 8% decrease in pulp, paper and allied products traffic;
  • Agricultural Products (includes agricultural products and food or kindred products) revenue increased $0.5 million, or 2%, primarily due to agricultural products carload increases of 4% as a result of increased shipments in export traffic destined for Asia. This increase in agricultural products was partially offset by a 9% decrease in carloads for food and kindred products driven by soft demand for dried grain products;
  • Construction Products (includes non-metallic minerals and products and forest products) revenue increased $2.0 million, or 11%, primarily due to increased forest products carloads of 12% which was driven by an increase in lumber traffic in the Northeast and Northwest; and
  • Coal revenue decreased $0.1 million, or 1%, although coal volumes increased by 6%. The volume increase was primarily due to several lower rated Class I detour trains routed over one of our lines due to maintenance on the Class I mainline.

Operating Expenses

Operating expenses increased to $133.7 million in the three months ended September 30, 2012 from $108.2 million in the three months ended September 30, 2011. The operating ratio was 86.0% in 2012 compared to 77.5% in 2011. The increase in the operating ratio was primarily due to professional service fees related to the sale of the Company and the absence of track maintenance credits in the third quarter of 2012.

The net increase in operating expenses was due to the following:

  • Labor and benefits expense increased $6.2 million, or 15%, primarily due to higher profit sharing ($4.5 million), restricted stock amortization ($1.9 million) and increased wages as a result of acquisitions ($1.2 million), partially offset by lower health insurance costs ($0.7 million);
  • Equipment rents expense increased $0.3 million, or 3%, primarily due to higher railcar lease expense ($0.5 million) and acquisitions ($0.5 million), partially offset by lower locomotive lease expense ($0.3 million) and car hire ($0.3 million);
  • Purchased services expense increased $18.0 million, or 164%, primarily due to professional services in connection with our sale of the Company ($16.6 million), increased transport services related to the acquisition of TNA ($1.0 million) and write off of project costs ($0.3 million);
  • Diesel fuel expense approximated prior year expense;
  • Casualties and insurance expense decreased $0.4 million, or 9%, primarily due to a decrease in derailment costs ($1.1 million), partially offset by increased reserves related to crossing accidents ($0.5 million);
  • Materials expense increased $1.4 million, or 17%, primarily due to an increase in car repair material purchases resulting from increased car repair activities;
  • Joint facilities expense decreased $0.3 million, or 13% due to a reduction in maintenance charges;
  • Other expenses increased $0.5 million, or less than 5%, primarily due to an increase in railroad lease expense ($0.4 million) and other fees associated with the sale of the Company ($0.2 million), partially offset by lower taxes ($0.2 million);
  • The execution of the track maintenance agreement in 2011 resulted in a shipper paying for $4.0 million of maintenance expenditures, partially offset by $0.1 million of related consulting fees;
  • Asset sales resulted in a net gain of $1.3 million in the three months ended September 30, 2012, related to the sale of land;
  • Impairment of assets was $1.9 million in the three months ended September 30, 2011, related to a tentative sale agreement for various locomotives and further evaluation of the market value of the remaining units identified for potential fleet reductions; and
  • Depreciation and amortization expense decreased $0.7 million, or 6%, including $1.7 million in lower depreciation expense resulting from a road and track asset life study completed during the first quarter of 2012, offset by increased depreciation and amortization associated with acquisitions.

Other Income (Expense) Items

Interest Expense. Interest expense, including amortization of deferred financing costs, decreased $9.0 million to $8.8 million for the three months ended September 30, 2012, from $17.8 million in the three months ended September 30, 2011. This decrease is primarily due to the redemption of $74.0 million of our 9.25% senior notes each in January and June 2012 and $444 million in March 2012 which were replaced with lower cost debt. Interest expense includes $1.9 million and $4.0 million of amortization costs for the three months ended September 30, 2012 and 2011, respectively.

Swap termination cost amortization decreased to $1.3 million during the three months ended September 30, 2012 from $2.7 million during the three months ended September 30, 2011.

Other (Loss) Income. Other loss decreased $0.7 million during the three months ended September 30, 2012 as a result of the write-off of deferred loan costs of $0.6 million during the three months ended September 30, 2011. These costs were partially offset by management fee income that is recorded in connection with transactions where employees receive restricted stock awards from related parties. As part of the restricted stock transactions, the Company recorded an offsetting expense in labor and benefits.

Income Taxes. The effective tax rate for the three months ended September 30, 2012 and 2011 from continuing operations was a provision of 57.8% and 32.7%, respectively. The effective tax rate is affected by recurring items such as tax rates in foreign jurisdictions and the relative amount of income earned in jurisdictions. It is also affected by discrete items that may occur in any given quarter, but are not consistent from quarter to quarter. The effective tax rate for the three months ended September 30, 2012 was adversely impacted by non-deductible professional fees related to the sale of the Company ($2.9 million), partially offset by the reduction of tax reserves due to the lapse of the statute of limitations ($0.5 million). The effective tax rate for the three months ended September 30, 2011 was favorably impacted by the reduction of tax reserves due to the lapse of the statute of limitations ($0.3 million).

The Company will post a presentation containing supplemental information for the third quarter and year to date results on RailAmerica’s website (www.railamerica.com).

RailAmerica, Inc. owns and operates short-line and regional freight railroads in North America, operating a portfolio of 45 individual railroads with approximately 7,500 miles of track in 28 U.S. states and three Canadian provinces.

Cautionary Note Regarding Forward-Looking Statements

Certain items in this press release and other information we provide from time to time may constitute forward-looking statements including, but not necessarily limited to, statements relating to future events and financial performance. Words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “appears,” “may,” “will,” “would,” “could,” “should,” “seeks,” “estimates” and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. RailAmerica, Inc. can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from RailAmerica, Inc.’s expectations include, but are not limited to, prolonged capital markets disruption and volatility, general economic conditions and business conditions, our relationships with Class I railroads and other connecting carriers, our ability to obtain railcars and locomotives from other providers on which we are currently dependent, legislative and regulatory developments including rulings by the Surface Transportation Board or the Railroad Retirement Board, strikes or work stoppages by our employees, our transportation of hazardous materials by rail, rising fuel costs, goodwill assessment risks, acquisition risks, competitive pressures within the industry, risks related to the geographic markets in which we operate and other risks related to our business detailed in RailAmerica’s previous filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. In addition, new risks and uncertainties emerge from time to time, and it is not possible for RailAmerica, Inc. to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. RailAmerica, Inc. expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

[1] See schedule at end of press release for a reconciliation of non-GAAP financial measure.


                           RAILAMERICA, INC. AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (Unaudited)

                         For the Three Months          For the Nine Months
                                Ended                         Ended
                            September 30,                 September 30,
                            -------------                 -------------
                          2011          2012          2011           2012
                          ----          ----          ----           ----
                              (In thousands, except per share data)

    Operating
     revenue          $139,665      $155,418      $403,817       $454,956
    Operating
     expenses:
      Labor and
       benefits         41,379        47,536       124,855        136,316
      Equipment
       rents             9,046         9,320        26,601         27,655
      Purchased
       services         10,996        28,984        31,429         55,504
      Diesel fuel       13,142        13,170        41,887         39,805
      Casualties and
       insurance         4,006         3,627        11,095         11,812
      Materials          7,879         9,238        18,892         25,393
      Joint
       facilities        2,459         2,132         7,214          7,478
      Other expenses     9,271         9,736        29,876         31,425
      Track
       maintenance
       expense
       reimbursement    (3,879)            -      (13,162)              -
      Net loss
       (gain) on
       sale of
       assets                8        (1,337)          151         (1,495)
      Impairment of
       assets            1,949             -         5,169              -
      Depreciation
       and
       amortization     11,921        11,264        35,421         33,264
                        ------        ------        ------         ------
      Total
       operating
       expenses        108,177       133,670       319,428        367,157
                       -------       -------       -------        -------
      Operating
       income           31,488        21,748        84,389         87,799
                        ------        ------        ------         ------
    Interest
     expense
     (including
     amortization
     costs of
     $3,973,
     $1,948,
     $13,215 and
     $6,727,
     respectively)    (17,792)     (8,764)  (54,526)     (32,442)
    Other (loss)
     income               (231)          426           804        (86,992)
                          ----           ---           ---        -------
      Income (loss)
       before income
       taxes            13,465        13,410        30,667        (31,635)
    Provision for
     (benefit
     from) income
     taxes               4,407         7,752         8,824         (8,271)
                         -----         -----         -----         ------
      Net income
       (loss)            9,058         5,658        21,843        (23,364)
                         -----         -----        ------        -------
      Less: Net loss
       attributable
       to
       noncontrolling
       interest              -       (287)         -        (489)
                           ---          ----           ---           ----
      Net income
       (loss)
       attributable
       to the
       Company          $9,058     $5,945    $21,843    $(22,875)
                        ======        ======       =======       ========

    Basic earnings
     per common
     share:
      Net income
       (loss)
       attributable
       to the
       Company           $0.17      $0.12      $0.41      $(0.45)

    Diluted
     earnings per
     common share:
      Net income
       (loss)
       attributable
       to the
       Company           $0.17      $0.12      $0.41      $(0.45)

    Weighted
     Average
     common shares
     outstanding:
      Basic             52,083        50,395        53,006         50,440
      Diluted           52,083        50,603        53,006         50,440

                           RAILAMERICA, INC. AND SUBSIDIARIES

                              CONSOLIDATED BALANCE SHEETS
                                      (Unaudited)

                                                          December        September
                                                             31,              30,
                                                               2011             2012
                                                               ----             ----
                                                              (In thousands, except
                                                                   share data)
                                            ASSETS
    Current assets:
    Cash and cash equivalents                               $90,999          $85,807
    Restricted cash                                                                300
    Accounts and notes receivable, net of
     allowance of $7,291 and $8,874
     respectively                                            96,813          106,225
    Current deferred tax assets                               9,886            8,347
    Other current assets                                     17,967           26,112
                                                             ------           ------
    Total current assets                                    215,665          226,791
    Property, plant and equipment, net                    1,021,545        1,069,543
    Intangible assets                                       134,851          172,981
    Goodwill                                                211,841          235,042
    Other assets                                             13,478           11,855
    Total assets                                         $1,597,380       $1,716,212
                                                         ==========       ==========

                                  LIABILITIES AND EQUITY
    Current liabilities:
    Current maturities of long-term debt                    $71,991          $82,435
    Accounts payable                                         78,844           92,483
    Accrued expenses                                         28,616           52,966
                                                             ------           ------
    Total current liabilities                               179,451          227,884
    Long-term debt, less current maturities                   1,827          584,118
    Senior secured notes                                    501,876                -
    Deferred income taxes                                   213,421          203,717
    Other liabilities                                        20,680           21,432
                                                             ------           ------
    Total liabilities                                       917,255        1,037,151
                                                            -------        ---------
    Commitments and contingencies
    Stockholders' equity:
    Common stock, $0.01 par value,
     400,000,000 shares authorized;
     50,605,440 shares issued and
     outstanding at December 31, 2011; and
     50,394,421 shares issued and
     outstanding at September 30, 2012                          506           504
    Additional paid in capital and other                    591,341          599,174
    Retained earnings                                        84,272           61,282
    Accumulated other comprehensive income                    4,006           10,915
                                                              -----           ------
    Total stockholders' equity                              680,125          671,875
                                                            -------          -------
    Noncontrolling interest                                       -            7,186
    Total equity                                            680,125          679,061
                                                            -------          -------
    Total liabilities and equity                         $1,597,380       $1,716,212
                                                         ==========       ==========


                         RAILAMERICA, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                     (Unaudited)

                                                   For the Nine Months
                                                          Ended
                                                     September 30,
                                                     -------------
                                                     2011            2012
                                                     ----            ----
                                                     (In thousands)
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income (loss)                             $21,843        $(23,364)
    Adjustments to reconcile net income (loss) to
     net cash provided by operating activities:
    Depreciation and amortization, including
     amortization of debt issuance costs
     classified in interest expense                39,012          35,752
    Amortization of swap termination costs          9,625           4,237
    Net (gain) loss on sale or disposal of
     properties                                       151          (1,495)
    Impairment of assets                            5,169               -
    Loss on extinguishment of debt                      -          88,107
    Deferred financing costs expensed                 719               -
    Equity compensation costs                       7,381          11,946
    Deferred income taxes and other                 4,453         (10,257)
    Changes in operating assets and liabilities,
     net of acquisitions:
    Accounts receivable                           (33,167)         (5,594)
    Other current assets                           (7,209)         (7,919)
    Accounts payable                               17,048          (1,368)
    Accrued expenses                                7,967          23,833
    Other assets and liabilities                   (1,253)           (125)
                                                   ------            ----
      Net cash provided by operating activities    71,739         113,753
                                                   ------         -------

    CASH FLOWS FROM INVESTING ACTIVITIES:
    Purchase of property, plant and equipment     (93,518)        (72,147)
    NECR government grant reimbursements           31,329           7,129
    Proceeds from sale of assets                    7,598           6,511
    Acquisitions, net of cash acquired            (12,716)        (53,107)
    Change in restricted cash                           -            (300)
    Other                                             (65)             16
                                                      ---             ---
      Net cash used in investing activities       (67,372)       (111,898)
                                                  -------        --------

    CASH FLOWS FROM FINANCING ACTIVITIES:
    Principal payments on long-term debt             (263)         (3,051)
    Proceeds from issuance of long-term debt            -         582,075
    Repurchase of senior secured notes                  -        (649,720)
    Repayment of revolving credit facility              -         (60,000)
    Proceeds from revolving credit facility             -         135,000
    Repurchase of common stock                    (57,664)           (520)
    Financing costs paid                           (2,891)        (11,196)
                                                   ------         -------
      Net cash used in financing activities       (60,818)         (7,412)
                                                  -------          ------

    Effect of exchange rates on cash                 (743)            365
                                                     ----             ---

    Net decrease in cash                          (57,194)         (5,192)
    Cash, beginning of period                     152,968          90,999
                                                  -------          ------
    Cash, end of period                           $95,774         $85,807
                                                  =======         =======


                               RAILAMERICA, INC. AND SUBSIDIARIES
                                 SELECTED FINANCIAL INFORMATION
                                     (Dollars in thousands)
                                           (Unaudited)

                                                         Three Months Ended September 30,
                                                                 2011                      2012
                                                                 ----                      ----
    Operating revenue                         $139,665          100.0%       $155,418     100.0%
    Operating expenses:
    Labor and benefits                          41,379           29.7%         47,536      30.6%
    Equipment rents                              9,046            6.5%          9,320       6.0%
    Purchased services                          10,996            7.9%         28,984      18.7%
    Diesel fuel                                 13,142            9.4%         13,170       8.5%
    Casualties and insurance                     4,006            2.9%          3,627       2.3%
    Materials                                    7,879            5.6%          9,238       5.9%
    Joint facilities                             2,459            1.8%          2,132       1.4%
    Other expenses                               9,271            6.6%          9,736       6.3%
    Track maintenance expense reimbursement     (3,879)         (2.8%)              -       0.0%
    Net loss (gain) on sale of assets                8            0.0%         (1,337)    (0.9%)
    Impairment of assets                         1,949            1.4%              -       0.0%
    Depreciation and amortization               11,921            8.5%         11,264       7.2%
                                                ------            ---          ------       ---
    Total operating expenses                   108,177           77.5%        133,670      86.0%
                                               -------           ----         -------      ----
    Operating income                           $31,488           22.5%        $21,748      14.0%
                                               -------           ----         -------      ----

                                                     Nine Months Ended September 30,
                                                     -------------------------------
                                                                 2011                      2012
                                                                 ----                      ----
    Operating revenue                         $403,817          100.0%       $454,956     100.0%
    Operating expenses:
    Labor and benefits                         124,855           30.9%        136,316      30.0%
    Equipment rents                             26,601            6.6%         27,655       6.1%
    Purchased services                          31,429            7.8%         55,504      12.2%
    Diesel fuel                                 41,887           10.4%         39,805       8.7%
    Casualties and insurance                    11,095            2.7%         11,812       2.6%
    Materials                                   18,892            4.7%         25,393       5.6%
    Joint facilities                             7,214            1.8%          7,478       1.6%
    Other expenses                              29,876            7.4%         31,425       6.9%
    Track maintenance expense reimbursement    (13,162)         (3.3%)              -       0.0%
    Net loss (gain) on sale of assets              151            0.0%         (1,495)    (0.3%)
    Impairment of assets                         5,169            1.3%              -       0.0%
    Depreciation and amortization               35,421            8.8%         33,264       7.3%
                                                ------            ---          ------       ---
    Total operating expenses                   319,428           79.1%        367,157      80.7%
                                               -------           ----         -------
    Operating income                           $84,389           20.9%        $87,799      19.3%
                                               -------           ----         -------      ----
                       RAILAMERICA, INC. AND SUBSIDIARIES
                         SELECTED FINANCIAL INFORMATION
                             (Dollars in thousands)
                                   (Unaudited)

                                   Three Months Ended September 30,
                                           2011                      2012
                                           ----                      ----
    Operating revenue   $139,665          100.0%       $155,418     100.0%
    Operating expenses:
    Labor and benefits    41,379           29.7%         47,536      30.6%
    Equipment rents        9,046            6.5%          9,320       6.0%
    Purchased services    10,996            7.9%         28,984      18.7%
    Diesel fuel           13,142            9.4%         13,170       8.5%
    Casualties and
     insurance             4,006            2.9%          3,627       2.3%
    Materials              7,879            5.6%          9,238       5.9%
    Joint facilities       2,459            1.8%          2,132       1.4%
    Other expenses         9,271            6.6%          9,736       6.3%
    Track maintenance
     expense
     reimbursement        (3,879)         (2.8%)              -       0.0%
    Net loss (gain) on
     sale of assets            8            0.0%         (1,337)    (0.9%)
    Impairment of
     assets                1,949            1.4%              -       0.0%
    Depreciation and
     amortization         11,921            8.5%         11,264       7.2%
                          ------            ---          ------       ---
    Total operating
     expenses            108,177           77.5%        133,670      86.0%
                         -------           ----         -------      ----
    Operating income     $31,488           22.5%        $21,748      14.0%
                         -------           ----         -------      ----

                               Nine Months Ended September 30,
                               -------------------------------
                                           2011                      2012
                                           ----                      ----
    Operating revenue   $403,817          100.0%       $454,956     100.0%
    Operating expenses:
    Labor and benefits   124,855           30.9%        136,316      30.0%
    Equipment rents       26,601            6.6%         27,655       6.1%
    Purchased services    31,429            7.8%         55,504      12.2%
    Diesel fuel           41,887           10.4%         39,805       8.7%
    Casualties and
     insurance            11,095            2.7%         11,812       2.6%
    Materials             18,892            4.7%         25,393       5.6%
    Joint facilities       7,214            1.8%          7,478       1.6%
    Other expenses        29,876            7.4%         31,425       6.9%
    Track maintenance
     expense
     reimbursement       (13,162)         (3.3%)              -       0.0%
    Net loss (gain) on
     sale of assets          151            0.0%         (1,495)    (0.3%)
    Impairment of
     assets                5,169            1.3%              -       0.0%
    Depreciation and
     amortization         35,421            8.8%         33,264       7.3%
                          ------            ---          ------       ---
    Total operating
     expenses            319,428           79.1%        367,157      80.7%
                         -------           ----         -------
    Operating income     $84,389           20.9%        $87,799      19.3%
                         -------           ----         -------      ----

                   RAILAMERICA, INC. AND SUBSIDIARIES
     Railroad Freight Revenue, Carloads and Average Freight Revenue
                               Per Carload
                Comparison by Commodity Group (Unaudited)

                               Three Months Ended                               Three Months Ended
                               September 30, 2011                               September 30, 2012
                               ------------------                               ------------------
                                                  Average                                        Average
                                                  Freight                                        Freight
                  Freight                      Revenue per       Freight                      Revenue per
                  Revenue       Carloads         Carload         Revenue       Carloads         Carload
                  -------       --------         -------         -------       --------         -------
                              (Dollars in thousands, except average freight revenue per carload)
    Chemicals      $16,220        24,037               $675       $18,149        24,858               $730
     Agricultural
     Products       15,911        29,044                548        16,419        30,179                544
    Metallic
     Ores and
     Metals         10,744        17,828                603        10,819        15,778                686
    Non-
     Metallic
     Minerals
     and
     Products       10,144     21,508             472     10,734     21,718             494
    Pulp,
     Paper
     and
     Allied
     Products       11,043     18,639             592     10,143     17,207             589
    Forest
     Products        7,937        12,647                628         9,356        14,112                663
    Coal             8,738        35,335                247         8,646        37,495                231
    Food or
     Kindred
     Products        7,479        14,032                533         7,520        12,826                586
    Waste and
     Scrap
     Materials       6,435        14,965                430         6,728        14,130                476
    Petroleum        3,746         8,274                453         5,267        10,059                524
    Other            4,547         7,906                575         5,872        10,916                538
    Motor
     Vehicles        1,715         2,760                621         3,395         5,079                668
                     -----         -----                ---         -----         -----                ---
    Total         $104,659       206,975               $506      $113,048       214,357               $527
                  ========       =======               ====      ========       =======               ====

                            Nine Months Ended                          Nine Months Ended
                            September 30, 2011                         September 30, 2012
                            ------------------                         ------------------
                                                  Average                                        Average
                                                  Freight                                        Freight
                  Freight                      Revenue per       Freight                      Revenue per
                  Revenue       Carloads         Carload         Revenue       Carloads         Carload
                  -------       --------         -------         -------       --------         -------
                        (Dollars in thousands, except average freight revenue per carload)
    Chemicals      $48,708        73,435               $663       $52,335        72,914               $718
     Agricultural
     Products       48,888        93,900                521        52,033        99,076                525
    Metallic
     Ores and
     Metals         32,276        52,815                611        34,214        51,447                665
    Non-
     Metallic
     Minerals
     and
     Products       29,633     64,132             462     31,541     63,907             494
    Pulp,
     Paper
     and
     Allied
     Products       31,256     52,800             592     29,028     50,920             570
    Forest
     Products       22,695        36,735                618        28,155        42,658                660
    Coal            25,127       110,762                227        24,276       108,813                223
    Food or
     Kindred
     Products       22,148        41,921                528        22,692        40,494                560
    Waste and
     Scrap
     Materials      18,105        43,575                415        19,506        42,682                457
    Petroleum       13,698        27,936                490        16,249        30,833                527
    Other           10,530        21,980                479        13,947        29,988                465
    Motor
     Vehicles        4,797         8,121                591        10,446        16,132                648
                     -----         -----                ---        ------        ------                ---
    Total         $307,861       628,112               $490      $334,422       649,864               $515
                  ========       =======               ====      ========       =======               ====

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

Adjusted net income (loss) is a supplemental measure of profitability that is not calculated or presented in accordance with U.S. generally accepted accounting principles (“GAAP”). We use non-GAAP financial measures as a supplement to our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business. However, Adjusted net income (loss) has limitations as an analytical tool. It is not a measurement of our profitability under GAAP and should not be considered as an alternative to Net income (loss) as a measure of profitability.

Adjusted net income (loss) assists us in measuring our performance and profitability of our operations without the impact of transaction costs related to debt and credit facility extinguishment, exploration of strategic alternatives, acquisitions, industrial development, impairment of assets and swap termination. The following table sets forth the reconciliation of Adjusted net income (loss).


                                                                                          2011
                                                                                          ----
     (In
     thousands,
     except
     per
     share
     data)               Q1                  Q2                 Q3               Q3 YTD
                      After       Per     After     Per    After      Per     After       Per
                        Tax      Share      Tax   Share      Tax    Share       Tax     Share
                     ------     ------   ------  ------   ------   ------    ------    ------

     Net
     income            $4,085     $0.07   $8,700   $0.17   $9,058    $0.17    $21,843    $0.41

    Add:
     Amortization
     of
     swap
     termination
     costs           2,243      0.04    1,953    0.04    1,675     0.03      5,871     0.11
     Impairment
     of
     assets                 -         -    1,964    0.04    1,189     0.02      3,153     0.06
     Loss
     on
     extinguishment
     of
     credit
     facility            -         -        -       -      439     0.01        439     0.01
     Acquisition
     expense               44      0.00      148    0.00      124     0.00        316     0.01

     Adjusted
     net
     income            $6,372     $0.12  $12,765   $0.24  $12,485    $0.24    $31,622    $0.60

     Weighted
     Average
     common
     shares
     outstanding
     (diluted)      54,651    52,282    52,083      53,006

                                                                                          2012
                                                                                          ----
     (In
     thousands,
     except
     per
     share
     data)               Q1                Q2              Q3              Q3 YTD
                      After       Per     After     Per    After      Per     After       Per
                        Tax      Share      Tax   Share      Tax    Share       Tax     Share
                     ------     ------   ------  ------   ------   ------    ------    ------

     Net
     income
     (loss)          ($40,219)   ($0.80) $11,399   $0.23   $5,945    $0.12   ($22,875) ($0.45)

    Add:
     Amortization
     of
     swap
     termination
     costs           1,002      0.02      859    0.02      808     0.02      2,669     0.05
     Loss
     on
     extinguishment
     of
     debt           51,938      1.03    3,570    0.07        -        -     55,507     1.10
     Acquisition
     /
     industrial
     development
     /
     strategic
     alternatives
     expense           239      0.00    1,376    0.03   13,351     0.26     14,967     0.30

     Adjusted
     net
     income           $12,961     $0.26  $17,203   $0.34  $20,105    $0.40    $50,268    $0.99

     Weighted
     Average
     common
     shares
     outstanding
     (diluted)      50,518    50,578    50,603      50,440

Note: Numbers may not add due to rounding

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

Operating Income Excluding 45G Benefit, Operating Ratio Excluding 45G Benefit, Operating Income Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense and Operating Ratio Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense are supplemental measures of profitability that are not calculated or presented in accordance with U.S. generally accepted accounting principles (“GAAP”). We use non-GAAP financial measures as a supplement to our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business. However, Operating Income Excluding 45G Benefit, Operating Ratio Excluding 45G Benefit, Operating Income Excluding 45G Benefit, Asset Sales, Impairments, & Strategic Alternatives Expense and Operating Ratio Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense have limitations as analytical tools. They are not measurements of our profitability under GAAP and should not be considered as alternatives to Operating Income or Operating Ratio as measures of profitability.

Operating Income Excluding 45G Benefit and Operating Ratio Excluding 45G Benefit assist us in measuring our performance and profitability of our operations without the impact of monetizing the 45G tax benefit. Operating Income Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense and Operating Ratio Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense assist us in measuring our performance and profitability of our operations without the impact of monetizing the 45G tax benefit, Asset Sales, Impairments & Strategic Alternatives Expense. The following table sets forth the reconciliation of Operating Income Excluding 45G Benefit from our Operating Income, Operating Ratio Excluding 45G Benefit from our Operating Ratio, Operating Income Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense from our Operating Income and Operating Ratio Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense from our Operating Ratio.


                                                                       2011
                                                                       ----
    ($ in thousands)             Q1                 Q2                Q3
                                ---                ---               ---

    Operating revenue    $124,937         $139,215         $139,665
    Operating expense     100,734          110,517          108,177
                          -------          -------          -------
    Operating Income,
     reported              24,203           28,698           31,488

    Operating ratio
     Reported                       80.6%            79.4%             77.5%

    Less: Benefit from
     45G credits           (4,150)   3.3%   (5,133)   3.7%   (3,879)    2.8%
                           ------    ---    ------    ---    ------     ---
    Operating income
     excluding 45G
     Benefit               20,053           23,565           27,609

    Operating ratio
     excluding 45G
     Benefit                        83.9%            83.1%             80.3%

    Net (gain) loss on
     sale of assets           207   -0.2%      (64)   0.0%        8     0.0%
    Strategic
     Alternatives
     Expense                    -    0.0%        -    0.0%        -     0.0%
    Impairment of
     assets                     -    0.0%    3,220   -2.3%    1,949    -1.4%
                              ---    ---     -----   ----     -----    ----
    Operating income
     excluding 45G
     Benefit, Asset
     Sales,
     Impairments &
     Strategic
     Alternatives
     Expense           20,260     26,721     29,566

    Operating ratio,
     excluding 45G
     Benefit, Asset
     Sales,
     Impairments &
     Strategic
     Alternatives
     Expense           83.8%   80.8%     78.9%

                                                                       2012
                                                                       ----
    ($ in thousands)           Q1              Q2                Q3
                              ---             ---               ---

    Operating revenue    $143,442         $156,096         $155,418
    Operating expense     111,566          121,921          133,670
                          -------          -------          -------
    Operating Income,
     reported              31,876           34,175           21,748

    Operating ratio
     Reported                       77.8%            78.1%             86.0%

    Less: Benefit from
     45G credits                -    0.0%        -    0.0%        -     0.0%
                              ---    ---       ---    ---       ---     ---
    Operating income
     excluding 45G
     Benefit               31,876           34,175           21,748

    Operating ratio
     excluding 45G
     Benefit                        77.8%            78.1%             86.0%
    Strategic
     Alternatives
     Expense                    -    0.0%    1,740   -1.1%   16,587   -10.7%
    Net (gain) loss on
     sale of assets          (163)   0.1%        5    0.0%   (1,337)    0.9%

    Operating income
     excluding 45G
     Benefit, Asset
     Sales,
     Impairments &
     Strategic
     Alternatives
     Expense           31,713     35,920     36,998

    Operating ratio,
     excluding 45G
     Benefit, Asset
     Sales,
     Impairments &
     Strategic
     Alternatives
     Expense           77.9%   77.0%     76.2%

Note: Numbers may not add due to rounding

SOURCE RailAmerica, Inc.


Source: PR Newswire