Genesee & Wyoming Reports Results for the Fourth Quarter of 2008
GWI’s income from continuing operations in the fourth quarter of 2008 was
In the fourth quarter of 2008, GWI’s results included a tax benefit of
GWI’s results for the fourth quarter of 2008 included gains on the sale of assets of
The table below summarizes the financial impact of the significant items in the fourth quarter of 2008 and 2007 ($ millions, except per share amounts).
After- Tax EPS
Amount Impact
Q4 2008 - Gains on the sale of assets $2.7 $0.07
- Acquisition - expenses ($1.3) ($0.03)
- Retroactive short line tax credit $6.5 $0.18
- Other net tax benefits $2.8 $0.08
Q4 2007 - Gains on the sale of assets $0.5 $0.01
- Acquisition - expenses ($0.4) ($0.01)
- Canadian tax law change $0.6 $0.02
Continuing Operations
In the fourth quarter of 2008, GWI’s revenues increased
Freight revenues in the fourth quarter of 2008 increased by
GWI’s traffic in the fourth quarter of 2008 increased 32,949 carloads, or 17.2%, compared with the fourth quarter of 2007. Same-railroad traffic decreased by 16,814 carloads, or 8.8%. The decrease was principally due to declines of 6,286 carloads of metals traffic, 5,007 carloads of coal, coke & ores traffic, 3,903 carloads of lumber & forest products traffic and 3,712 carloads of pulp & paper traffic. The decline in fourth quarter 2008 coal, coke & ores traffic was primarily due to reduced shipments in GWI’s Rocky Mountain Region where a mine closed in
Average freight revenues per carload declined 1.1% in the fourth quarter of 2008. The impact of acquisitions and the depreciation of the Canadian and Australian dollars reduced average freight revenues per carload by 2.9% and 4.1%, respectively. Excluding currency, same railroad average revenues per carload increased 5.9% in the fourth quarter of 2008.
GWI’s non-freight revenues in the fourth quarter of 2008 increased
GWI’s operating income in the fourth quarter of 2008 increased 35.2% to
Comments from the Chief Executive Officer
“As we enter 2009, we have made appropriate reductions to our cost structure and capital expenditures and we expect to generate strong free cash flow in a weak demand environment. For GWI, we expect that the accretive impact of our recent acquisitions will largely offset the weakness in our same railroad business. GWI also maintains capacity to make opportunistic acquisitions in an environment of significantly reduced bidding competition.”
A presentation including additional information related to Q4 results is posted at http://www.gwrr.com/investors under “Recent Presentations.” Information included on our Web site is not incorporated by reference into this press release.
Annual Consolidated Results – Continuing Operations
For the year ended
GWI’s 2007 results included a net tax benefit of
Free Cash Flow from Continuing Operations (2)
($ in millions) Twelve Months Ended
December 31,
2008 2007
$128.7 $34.5
Net cash provided by operating activities
Net cash used in investing activities (413.8) (70.0)
Net cash paid for acquisitions (a) 345.5 19.4
Contingent consideration held in escrow (b) 7.5 -
Australia taxes on ARG Sale ( c ) - 95.6
Free cash flow (1) $67.9 $79.5
(a) The 2008 period includes: 1) $212.6 million in net cash paid for
the acquisition of the Ohio Central Railroad System (OCR), 2)
$16.7 million in net cash paid for the acquisition of Georgia
Southwestern Railroad, Inc. (Georgia Southwestern), 3) $89.9
million in net cash paid for the acquisition of CAGY Industries
Inc. (CAGY), 4) $22.6 million in net cash paid for the acquisition
of Rotterdam Rail Feeding (RRF) and 5) $3.7 million for final
working capital adjustments related to the December 2007
acquisition of Maryland Midland Railway, Inc. (Maryland Midland).
The 2007 period includes $19.4 million in net cash paid for the
acquisition of Maryland Midland.
(b) Includes $7.5 million of contingent consideration placed into
escrow by GWI that will be paid to the seller of OCR upon
satisfaction of certain conditions.
( c ) Includes Australian taxes resulting from the 2006 ARG Sale totaling
$95.6 million paid in 2007, as calculated using the U.S.
Dollar/Australian Dollar exchange rate on the date of payment.
GWI’s continuing operations generated free cash flow of
Net cash used in investing activities in the twelve months ended
Discontinued Operations
As previously reported, GWI commenced the liquidation of its hurricane damaged operations in
For the year ended
Conference Call and Webcast Details
As previously announced, GWI’s conference call to discuss financial results for the fourth quarter will be held
From time to time GWI may use its Web site as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible at http://www.gwrr.com/investors. In addition, you may automatically receive email alerts and other information about GWI by enrolling your email by visiting the “Email Alert” section at http://www.gwrr.com/investors.
About Genesee & Wyoming Inc.
GWI owns and operates short line and regional freight railroads in
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 involve risks and uncertainties that could cause actual results to differ materially from its current expectations including, but not limited to, economic, political and industry conditions; customer demand, retention and contract continuation; legislative and regulatory developments; increased competition in relevant markets; funding needs and financing sources; susceptibility to various legal claims and lawsuits; strikes or work stoppages; severe weather conditions and other natural occurrences; and others. Words such as “anticipates,” “intends,” “plans,” “believes,” “seeks,” “expects,” “estimates,” variations of these words and similar expressions are intended to identify these forward-looking statements. GWI refers you to the documents that it files from time to time with the Securities and Exchange Commission, such as GWI’s Forms 10-Q and 10-K which contain additional important factors that could cause its actual results to differ from its current expectations and from the forward-looking statements contained in this press release. GWI disclaims any intention to update the current expectations or forward looking statements contained in this press release.
(1) Adjusted Operating Ratio is a non-GAAP financial measure and is not intended to replace operating ratio, its most directly comparable GAAP measure. The information required by Regulation G under the Securities Exchange Act of 1934, including a reconciliation to our operating ratio is included in the tables attached to this press release.
(2) 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 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.
Michael Williams of GWI Corporate Communications
1-203-629-3722
mwilliams@gwrr.com
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2008 2007 2008 2007
OPERATING REVENUES $149,156 $134,542 $601,984 $516,167
OPERATING EXPENSES 118,772 112,075 486,053 419,339
INCOME FROM OPERATIONS 30,384 22,467 115,931 96,828
INTEREST INCOME 340 744 2,093 7,813
INTEREST EXPENSE (8,406) (4,109) (20,610) (14,735)
MINORITY INTEREST (97) - (243) -
OTHER (EXPENSE) INCOME, NET (90) 43 470 889
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 22,131 19,145 97,641 90,795
(BENEFIT) PROVISION FOR INCOME
TAXES (3,172) 4,621 24,909 21,548
INCOME FROM CONTINUING
OPERATIONS 25,303 14,524 72,732 69,247
LOSS FROM DISCONTINUED
OPERATIONS, NET OF TAX (14) (578) (501) (14,072)
NET INCOME $25,289 $13,946 $72,231 $55,175
BASIC EARNINGS PER COMMON
SHARE FROM CONTINUING
OPERATIONS $0.78 $0.46 $2.28 $2.00
BASIC LOSS PER COMMON SHARE
FROM DISCONTINUED OPERATIONS - (0.02) (0.02) (0.41)
BASIC EARNINGS PER COMMON SHARE $0.78 $0.44 $2.26 $1.59
WEIGHTED AVERAGE SHARES -
BASIC 32,404 31,429 31,922 34,625
DILUTED EARNINGS PER COMMON
SHARE FROM CONTINUING
OPERATIONS $0.70 $0.40 $2.00 $1.77
DILUTED LOSS PER COMMON SHARE
FROM DISCONTINUED OPERATIONS - (0.02) (0.01) (0.36)
DILUTED EARNINGS PER COMMON
SHARE $0.70 $0.39 $1.99 $1.41
WEIGHTED AVERAGE SHARES -
DILUTED 36,371 35,919 36,348 39,148
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2008 AND 2007
(In thousands)
(unaudited)
December 31, December 31,
ASSETS 2008 2007
CURRENT ASSETS:
Cash and cash equivalents $31,693 $46,684
Accounts receivable, net 120,874 125,934
Materials and supplies 7,708 7,555
Prepaid expenses and other 12,270 18,147
Current assets of discontinued operations 1,676 2,213
Deferred income tax assets, net 18,095 7,495
Total current assets 192,316 208,028
PROPERTY AND EQUIPMENT, net 997,486 696,990
INVESTMENT IN UNCONSOLIDATED AFFILIATES 4,986 4,696
GOODWILL 150,401 39,352
INTANGIBLE ASSETS, net 225,508 117,106
DEFERRED INCOME TAX ASSETS, net - 1,353
OTHER ASSETS, net 16,578 10,276
Total assets $1,587,275 $1,077,801
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $26,034 $2,247
Accounts payable 124,162 128,038
Accrued expenses 37,903 37,792
Current liabilities of discontinued
operations 1,121 3,919
Deferred income tax liabilities, net 192 66
Total current liabilities 189,412 172,062
LONG-TERM DEBT, less current portion 535,231 270,519
DEFERRED INCOME TAX LIABILITIES, net 234,973 93,336
DEFERRED ITEMS - grants from
governmental agencies 113,302 94,651
OTHER LONG-TERM LIABILITIES 34,943 15,144
MINORITY INTEREST 1,351 1,108
TOTAL STOCKHOLDERS' EQUITY 478,063 430,981
Total liabilities and stockholders'
equity $1,587,275 $1,077,801
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Year Ended December 31,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $72,231 $55,175
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss from discontinued operations 501 14,072
Depreciation and amortization 40,507 31,773
Compensation cost related to equity awards 5,734 5,412
Excess tax benefits from share-based
compensation (1,829) (1,159)
Deferred income taxes 6,805 7,994
Net gain on sale of assets (8,107) (6,742)
Minority interest 243 -
Changes in assets and liabilities
which provided (used) cash, net of
effect of acquisitions:
Accounts receivable, net 11,541 (5,412)
Materials and supplies (812) 2,400
Prepaid expenses and other 6,597 (6,159)
Accounts payable and accrued expenses (8,972) 29,160
Income tax payable - Australia (3,717) (92,982)
Other assets and liabilities, net 8,024 989
Net cash provided by operating activities
from continuing operations 128,746 34,521
Net cash used in operating activities
From discontinued operations (3,484) (14,000)
Net cash provided by operating
activities 125,262 20,521
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (97,853) (96,081)
Grant proceeds from government agencies 28,551 34,307
Cash paid for acquisitions, net of cash
received (345,477) (19,424)
Contingent consideration held in escrow (7,500) -
Insurance proceeds for the replacement of
assets 419 1,747
Proceeds from disposition of property and
equipment 8,081 9,404
Net cash used in investing activities
from continuing operations (413,779) (70,047)
Net cash provided by (used in) investing
activities from discontinued operations 450 (517)
Net cash used in investing activities (413,329) (70,564)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings,
including capital leases (193,051) (21,448)
Proceeds from issuance of long-term debt 468,076 55,000
Debt issuance costs (4,340) -
Net proceeds from employee stock purchases 9,314 3,384
Treasury stock purchases (2,355) (175,637)
Excess tax benefits from share-based
compensation 1,829 1,159
Net cash provided by (used in) financing
activities from continuing operations 279,473 (137,542)
Net cash used in financing activities
from discontinued operations - (13,301)
Net cash provided by (used in) financing
activities 279,473 (150,843)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS (5,973) 7,581
CHANGE IN CASH BALANCES INCLUDED IN CURRENT
ASSETS OF DISCONTINUED OPERATIONS (424) (217)
DECREASE IN CASH AND CASH EQUIVALENTS (14,991) (193,522)
CASH AND CASH EQUIVALENTS, beginning of period 46,684 240,206
CASH AND CASH EQUIVALENTS, end of period $31,693 $46,684
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended
December 31,
2008 2007
% of % of
Amount Revenue Amount Revenue
Revenues:
Freight $95,188 63.8% $82,137 61.0%
Non-freight 53,968 36.2% 52,405 39.0%
Total revenues $149,156 100.0% $134,542 100.0%
Operating Expense Comparison:
Natural Classification
Labor and benefits $50,288 33.7% $43,348 32.2%
Equipment rents 8,906 6.0% 9,460 7.0%
Purchased services 10,567 7.1% 9,631 7.2%
Depreciation and amortization 11,636 7.8% 8,258 6.1%
Diesel fuel used in operations 11,702 7.8% 13,801 10.3%
Diesel fuel sold to third parties 5,731 3.8% 8,933 6.6%
Casualties and insurance 3,295 2.2% 3,694 2.8%
Materials 7,330 4.9% 5,798 4.3%
Net gain on sale of assets (3,891) -2.6% (828) -0.6%
Other expenses 13,208 8.9% 9,980 7.4%
Total operating expenses $118,772 79.6% $112,075 83.3%
Functional Classification
Transportation $47,073 31.6% $44,132 32.8%
Maintenance of ways and structures 14,831 9.9% 11,349 8.4%
Maintenance of equipment 18,232 12.2% 17,708 13.2%
Diesel fuel sold to third parties 5,731 3.8% 8,933 6.6%
General and administrative 25,160 16.9% 22,523 16.8%
Net gain on sale of assets (3,891) -2.6% (828) -0.6%
Depreciation and amortization 11,636 7.8% 8,258 6.1%
Total operating expenses $118,772 79.6% $112,075 83.3%
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
Twelve Months Ended
December 31,
2008 2007
% of % of
Amount Revenue Amount Revenue
Revenues:
Freight $369,937 61.5% $329,184 63.8%
Non-freight 232,047 38.5% 186,983 36.2%
Total revenues $601,984 100.0% $516,167 100.0%
Operating Expense Comparison:
Natural Classification
Labor and benefits $191,108 31.7% $167,066 32.4%
Equipment rents 35,170 5.8% 37,308 7.2%
Purchased services 46,169 7.7% 38,990 7.6%
Depreciation and amortization 40,507 6.7% 31,773 6.1%
Diesel fuel used in operations 61,013 10.1% 45,718 8.8%
Diesel fuel sold to third parties 34,624 5.8% 26,975 5.2%
Casualties and insurance 15,136 2.5% 16,179 3.1%
Materials 26,138 4.3% 23,504 4.6%
Net gain on sale of assets (8,107) -1.3% (6,742) -1.3%
Other expenses 44,295 7.4% 38,568 7.5%
Total operating expenses $486,053 80.7% $419,339 81.2%
Functional Classification
Transportation $199,702 33.1% $166,146 32.2%
Maintenance of ways and structures 53,529 8.9% 48,621 9.4%
Maintenance of equipment 72,186 12.0% 70,330 13.6%
Diesel fuel sold to third parties 34,624 5.8% 26,975 5.2%
General and administrative 93,612 15.5% 82,236 15.9%
Net gain on sale of assets (8,107) -1.3% (6,742) -1.3%
Depreciation and amortization 40,507 6.7% 31,773 6.2%
Total operating expenses $486,053 80.7% $419,339 81.2%
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE FREIGHT REVENUES
PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenue per carload)
(unaudited)
Three Months Ended Three Months Ended
December 31, 2008 December 31, 2007
Average Average
Freight Freight
Commodity Freight Revenues Freight Revenues
Group Revenues Carloads Per Carload Revenues Carloads Per Carload
Coal, Coke &
Ores $22,171 58,490 $379 $15,861 51,543 $308
Pulp & Paper 16,362 27,988 585 17,849 30,102 593
Minerals &
Stone 11,217 37,500 299 7,663 29,833 257
Farm & Food
Products 9,720 21,903 444 8,535 15,288 558
Metals 9,353 19,206 487 9,113 18,334 497
Chemicals-
Plastics 8,417 12,328 683 7,002 10,714 654
Lumber & Forest
Products 7,257 16,486 440 8,263 19,955 414
Petroleum
Products 4,873 7,123 684 4,748 7,595 625
Autos & Auto
Parts 1,109 1,912 580 1,779 3,301 539
Intermodal 114 277 412 204 428 477
Other 4,595 21,595 213 1,120 4,766 235
Totals $95,188 224,808 423 $82,137 191,859 428
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE FREIGHT REVENUES
PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenue per carload)
(unaudited)
Twelve Months Ended Twelve Months Ended
December 31, 2008 December 31, 2007
Average Average
Freight Freight
Commodity Freight Revenues Freight Revenues
Group Revenues Carloads Per Carload Revenues Carloads Per Carload
Pulp & Paper $72,353 119,613 $605 $69,598 122,706 $567
Coal, Coke &
Ores 71,628 193,703 370 60,164 195,393 308
Minerals &
Stone 45,126 143,991 313 30,932 122,006 254
Metals 42,076 84,817 496 36,569 78,191 468
Farm & Food
Products 39,011 73,432 531 34,833 68,909 505
Lumber & Forest
Products 33,215 74,665 445 35,967 85,309 422
Chemicals-
Plastics 32,538 48,501 671 27,120 44,164 614
Petroleum
Products 18,503 27,344 677 16,941 27,700 612
Autos & Auto
Parts 6,731 11,112 606 7,096 13,853 512
Intermodal 505 1,213 416 1,060 2,108 503
Other 8,251 36,453 226 8,904 40,930 218
Totals $369,937 814,844 454 $329,184 801,269 411
Reconciliation of non-GAAP Financial Measure
This earnings release contains adjusted operating ratio and free cash flow, which are “non-GAAP financial measure” 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 measure.
Adjusted Operating Ratio Description and Discussion
Management views its Operating Ratio, calculated as total Operating Expenses divided by total Revenues, as an important measure of GWI’s operating performance. Because management believes that this is useful for investors in assessing GWI’s financial results compared to the same period in the prior year, the Adjusted Operating Ratio for the three months ended
The following table sets forth a reconciliation of GWI’s Operating Ratio calculated using amounts determined in accordance with GAAP to the Adjusted Operating Ratio described above for the three months ended
Total
Total Operating Operating Operating
2008 Revenues Expenses Income Ratio
As Reported $149.2 $118.8 $30.4 79.6%
Net Gain on Sale of Assets - 3.9 3.9
Acquisition Expenses - (2.0) (2.0)
Adjusted $149.2 $120.7 $28.5 80.9%
Total
Total Operating Operating Operating
2007 Revenues Expenses Income Ratio
As Reported $134.5 $112.1 $22.5 83.3%
Net Gain on Sale of Assets - 0.8 0.8
Acquisition Expenses - (0.7) (0.7)
Adjusted $134.5 $112.2 $22.4 83.4%
Free Cash Flow Description and Discussion
Management views Free Cash Flow as an important financial measure of how well GWI is managing its assets. Subject to the limitations discussed below, Free Cash Flow is a useful indicator of cash flow that may be available for discretionary use by GWI. Free Cash Flow is defined as Net Cash Provided by Operating Activities from Continuing Operations less Net Cash Used in Investing Activities from Continuing Operations, excluding the cost of acquisitions, contingent consideration held in escrow and tax effects of divestitures. Free Cash Flow from Discontinued Operations is defined as Net Cash Used In Operating Activities from Discontinued Operations less Net Cash Provided by (Used in) Investing Activities from Discontinued Operations. Key limitations of the Free Cash Flow measure include the assumptions that GWI will be able to refinance its existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt. Free Cash Flow is not intended to represent, and should not be considered more meaningful than, or as an alternative to, measures of cash flow determined in accordance with GAAP.
The following table sets forth a reconciliation of GWI’s Net Cash Provided by Operating Activities from Continuing Operations to GWI’s Free Cash Flow ($ in millions):
Year Ended
December 31,
2008 2007
Net cash provided by operating activities from
continuing operations $128.7 $34.5
Net cash used in investing activities from
continuing operations (413.8) (70.0)
Cash paid for acquisitions, net of cash
acquired 345.5 19.4
Contingent consideration held in escrow 7.5 -
Australia taxes on ARG Sale - 95.6
Free cash flow $67.9 $79.5
The following table sets forth a reconciliation of GWI’s Net Cash Used In Operating Activities from Discontinued Operations to GWI’s Free Cash Flow from Discontinued Operations ($ in millions):
Year Ended
December 31,
2008 2007
Net cash used in operating
activities from discontinued
operations
$(3.5) $(14.0)
Net cash provided by (used in)
investing activities from
discontinued operations
0.5 (0.5)
Free cash flow from discontinued
operations
$(3.0) $(14.5)
SOURCE Genesee & Wyoming Inc.