Genesee & Wyoming Reports Results For The Second Quarter Of 2012

Genesee & Wyoming Inc. (GWI) (NYSE: GWR) reported net income in the second quarter of 2012 of $36.4 million, compared with net income of $31.1 million in the second quarter of 2011. GWI's diluted earnings per share (EPS) in the second quarter of 2012 were $0.84 with 43.2 million weighted average shares outstanding, compared with diluted EPS of $0.73 with 42.8 million weighted average shares outstanding in the second quarter of 2011.

GWI’s effective tax rate was 33.6% in the second quarter of 2012 compared with 26.8% in the second quarter of 2011. The higher tax rate in the second quarter of the current year was driven primarily by the expiration of the U.S. short line tax credit on December 31, 2011.

In the second 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).
                         
 

IncomeBefore TaxesImpact

After-TaxNet IncomeImpact

Diluted EPSImpact

Q2 2012
Net Gain on Sale of Assets $ 6.2 $ 5.2 $ 0.12
Gain on Insurance Recoveries $ 5.2 $ 3.6 $ 0.08
Business/Corporate Development Expenses $ (1.9 ) $ (1.2 ) $ (0.03 )
Impact of Canadian Pacific Railway Strike $ (0.5 ) $ (0.4 ) $ (0.01 )
 

Q2 2011
Net Gain on Sale of Assets $ 1.1 $ 0.9 $ 0.02
Gain on Insurance Recoveries $ 1.0 $ 0.7 $ 0.02
Gain on Sale of Investment $ 0.6 $ 0.6 $ 0.01
Business/Corporate Development Expenses $ (0.4 ) $ (0.3 ) $ (0.01 )
 
 

Jack Hellmann, President and CEO of GWI commented, “GWI’s business continued to perform well in the second quarter of 2012, as revenues were in line with our expectations at $217 million and our adjusted operating ratio improved by 0.9 percentage points to 75.5%. In our North American & European Operations, despite weakness in our U.S. coal traffic, we maintained an adjusted operating ratio of 75.8%. In our Australian Operations, the reopening of the Edith River Bridge significantly improved traffic flow to Darwin and our second quarter adjusted operating ratio improved to 74.9%.” (1)

“Over the past two weeks, GWI has announced a series of important transactions that we expect to strengthen our long-term earnings growth. In North America, the pending acquisition of RailAmerica will create an expanded national footprint for commercial and industrial development. In Australia, the announced expansion of our export iron ore contracts in South Australia, the acquisition of a freight and intermodal terminal in Alice Springs, as well as the final delivery of new, high-horsepower locomotives further strengthen our service position in central Australia. Finally, our announcement today that we have signed an agreement with Tata Steel Minerals Canada to construct and operate a rail line in the Labrador Trough once again highlights our expanding capabilities to serve the global mining industry.”

Results from Continuing Operations

In the second quarter of 2012, GWI's total operating revenues increased $7.8 million, or 3.7%, to $217.4 million, compared with $209.6 million in the second quarter of 2011. The increase included $6.9 million in revenues from new operations and a $1.0 million, or 0.5%, increase in same railroad operating revenues. During the second quarter of 2012, the depreciation of foreign currencies versus the U.S. dollar decreased same railroad operating revenues by $4.4 million, or 2.1%. Excluding the impact from foreign currency, GWI’s same railroad operating revenues increased $5.4 million, or 2.6%.

Same railroad freight revenues in the second quarter of 2012 increased $1.0 million, or 0.7%, to $147.8 million, compared with $146.8 million in the second quarter of 2011. Excluding a $3.0 million decrease from the impact of foreign currency depreciation, GWI’s same railroad freight revenues increased by $4.0 million, or 2.7%.

GWI's traffic in the second quarter of 2012 was 232,315 carloads, a decrease of 17,193 carloads, or 6.9%, compared with the second quarter of 2011. Traffic in the second quarter of 2012 included 4,315 carloads from new operations. Same railroad traffic decreased 21,508 carloads, or 8.6%, in the second quarter of 2012. The same railroad traffic decrease was principally due to decreases of 13,893 carloads of other commodity traffic, primarily related to a decrease in coal haulage moves, 7,834 carloads of coal traffic and 4,238 carloads of farm and food products traffic, partially offset by an increase of 1,983 carloads of metallic ores traffic and 1,487 carloads of intermodal traffic. All remaining traffic increased by a net 987 carloads.

Average same railroad freight revenues per carload increased 10.2% in the second quarter of 2012. A change in the mix of commodities and higher fuel surcharges increased average same railroad freight revenues per carload by 4.5% and 0.3%, respectively, partially offset by the depreciation of the Australian and Canadian dollars versus the U.S. dollar, which decreased average same railroad freight revenues per carload by 2.3%. Other than these factors, average same railroad freight revenues per carload increased 7.7%. Average same railroad freight revenues per carload were impacted by changes in the mix of customers within certain commodity groups, primarily other commodities and metals.

GWI’s same railroad non-freight revenues in the second quarter of 2012 were $62.8 million, equal to same railroad non-freight revenues in the second quarter of 2011. Excluding a $1.4 million decrease from the net impact from foreign currency depreciation, GWI’s same railroad non-freight revenues increased by $1.4 million, or 2.2%, primarily due to higher railcar switching revenues in the United States.

GWI's operating income in the second quarter of 2012 was $62.5 million, an increase of $11.3 million, compared with $51.2 million in the second quarter of 2011. GWI’s operating ratio in the second quarter of 2012 was 71.3%, compared with an operating ratio of 75.6% in the second quarter of 2011. Operating income in the second quarter of 2012 included gains on the sale of assets of $6.2 million and insurance recoveries of $5.2 million primarily related to a business interruption claim associated with lost profits incurred in the first quarter as a result of the Edith River Bridge derailment. This recovery represents a partial payment of our total expected business interruption claim. Additional recovery for business interruption losses is expected in the fourth quarter of 2012. Operating income in the second quarter of 2012 was negatively impacted by $1.9 million of business/corporate development costs and $0.5 million of lost income due to the 9-day strike of Canadian Pacific’s railroad engineers in May 2012. Operating income in the second quarter of 2011 included $1.1 million in gains on the sale of assets and $1.0 million in insurance recoveries, partially offset by $0.4 million of business/corporate development expenses. Excluding these items, GWI’s adjusted operating ratio was 75.5% in the second quarter of 2012, compared with 76.4% in the second quarter of 2011. (1)

Six Month Consolidated Results - Continuing Operations

For the six months ended June 30, 2012, GWI reported income from continuing operations of $58.6 million, a 10.1% increase over $53.3 million for the six months ended June 30, 2011. GWI's diluted earnings per share from continuing operations were $1.36 for the six months ended June 30, 2012 with 43.1 million weighted average shares outstanding, an 8.8% increase over $1.25 for the six months ended June 30, 2011 with 42.7 million weighted average shares outstanding. For the six months ended June 30, 2012, GWI's operating revenues increased $23.4 million, or 5.8%, to $424.9 million, compared with $401.5 million in the six months ended June 30, 2011. GWI's income from operations for the six months ended June 30, 2012 increased $13.4 million, or 14.8%, from $90.4 million for the six months ended June 30, 2011 to $103.8 million for six months ended June 30, 2012.

GWI's 2011 results include a tax benefit of $4.7 million ($0.11 per diluted share) associated with the short line tax credit, which expired in December 2011.
       

Free Cash Flow from Continuing Operations (2)
 
(in millions) Six Months Ended

June 30,
    2012               2011  
Net cash provided by operating activities $ 90.9 $ 52.0
Net cash used in investing activities, excluding
Australian new business investments

(26.4
) (23.7 )
Net cash paid/(received) for acquisitions/divestitures 0.8 (0.9 )
Cash paid for acquisition-related expenses (a)   -     13.0  
Free cash flow before Australian new
business investments

65.3
40.4
Australian new business investments  

(54.5
)   (22.6 )
Free cash flow (2) $ 10.7   $ 17.8  
 
 

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

GWI’s free cash flow from continuing operations for the six months ended June 30, 2012 was $10.7 million. GWI’s continuing operations generated free cash flow of $17.8 million for the six months ended June 30, 2011. (2)

Conference Call and Webcast Details

As previously announced, GWI's conference call to discuss financial results for the second quarter will be held Thursday, August 2, 2012, at 11 a.m. EDT. The dial-in number for the teleconference in the U.S. is (800) 230-1059; outside the U.S. is (612) 234-9960, or the call may be accessed live over the Internet (listen only) under the "Investors" tab of GWI's website ( http://www.gwrr.com), by selecting "Second Quarter Earnings Conference Call Webcast." Management will be referring to a slide presentation that will also be available under the “Investors” tab of GWI’s website prior to the conference call. An audio replay of the conference call will be accessible via the “Investors” tab of GWI's website starting at 1 p.m. EDT on August 2, 2012, until the following quarter’s earnings press release. Telephone replay is available for 30 days beginning at 1 p.m. EDT on August 2 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 222299.

About Genesee & Wyoming Inc.

GWI owns and operates short line and regional freight railroads and provides railcar switching services in the United States, Australia, Canada, the Netherlands and Belgium. In addition, we operate the Tarcoola to Darwin rail line, which links the Port of Darwin with the Australian interstate rail network in South Australia. Operations currently include 66 railroads organized in 10 regions, with more than 7,600 miles of owned and leased track and approximately 1,400 additional miles under track access arrangements. We provide rail service at 17 ports in North America 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," "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, 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; uncertainties as to the timing of the merger between us and RailAmerica, Inc. that was announced on July 23, 2012; the conditions imposed by the Surface Transportation Board to approve the merger; the possibilities that various closing conditions for the merger will not be satisfied or waived; our success integrating RailAmerica, Inc. into our operations and our ability to achieve synergies as a result of the merger; 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) 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 reconciliation to the operating income and operating ratios calculated using amounts determined in accordance with GAAP, 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 Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to net cash provided by operating activities, is included in the tables attached to this press release.
 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2012 AND 2011
(in thousands, except per share amounts)
(unaudited)
                                     
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
 
OPERATING REVENUES $ 217,419 $ 209,589 $ 424,855 $ 401,500
 
OPERATING EXPENSES   154,946     158,424     321,068     311,132  
INCOME FROM OPERATIONS 62,473 51,165 103,787 90,368
 
INTEREST INCOME 964 858 1,831 1,633
INTEREST EXPENSE (8,622 ) (10,253 ) (17,238 ) (20,192 )
GAIN ON SALE OF INVESTMENTS - 625 - 894
OTHER INCOME, NET   15     170     999     469  
 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 54,830 42,565 89,379 73,172
 
PROVISION FOR INCOME TAXES   18,443     11,420     30,748     19,905  
 
INCOME FROM CONTINUING OPERATIONS 36,387 31,145 58,631 53,267
 
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX   (24 )   -     (27 )   -  
 
NET INCOME $ 36,363     31,145   $ 58,604     53,267  
 
BASIC EARNINGS PER SHARE:
BASIC EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 0.90 $ 0.78 $ 1.45 $ 1.34
BASIC LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -     -     -  
BASIC EARNINGS PER COMMON SHARE $ 0.90   $ 0.78   $ 1.45   $ 1.34  
 
WEIGHTED AVERAGE SHARES - BASIC   40,614     39,903     40,487     39,695  
 
DILUTED EARNINGS PER SHARE:
DILUTED EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 0.84 $ 0.73 $ 1.36 $ 1.25
DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -     -     -  
DILUTED EARNINGS PER COMMON SHARE $ 0.84   $ 0.73   $ 1.36   $ 1.25  
 
WEIGHTED AVERAGE SHARES - DILUTED   43,153     42,757     43,116     42,654  
 
 

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2012 AND DECEMBER 31, 2011
(in thousands)
(unaudited)
                 
June 30, December 31,
ASSETS 2012 2011
 
CURRENT ASSETS:
Cash and cash equivalents $ 50,219 $ 27,269
Accounts receivable, net 159,792 165,768
Materials and supplies 16,343 14,445
Prepaid expenses and other 15,621 13,332
Deferred income tax assets, net   19,666   19,385
Total current assets   261,641   240,199
 
PROPERTY AND EQUIPMENT, net 1,712,879 1,643,589
GOODWILL 159,963 160,277
INTANGIBLE ASSETS, net 227,145 230,628
DEFERRED INCOME TAX ASSETS, net 2,442 2,342
OTHER ASSETS, net   17,716   17,122
Total assets $ 2,381,786 $ 2,294,157
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Current portion of long-term debt $ 64,351 $ 57,168
Accounts payable 112,095 134,081
Accrued expenses 70,497 69,097
Deferred income tax liabilities, net   -   925
Total current liabilities   246,943   261,271
 
LONG-TERM DEBT, less current portion 563,599 569,026
DEFERRED INCOME TAX LIABILITIES, net 307,681 285,780
DEFERRED ITEMS - grants from outside parties 208,785 198,824
OTHER LONG-TERM LIABILITIES 17,873 18,622
 
TOTAL STOCKHOLDERS' EQUITY   1,036,905   960,634
Total liabilities and stockholders' equity $ 2,381,786 $ 2,294,157
 
 

               
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011
(in thousands)
(unaudited)
 
Six Months Ended
June 30,
2012 2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 58,604 $ 53,267
Adjustments to reconcile net income to net cash provided
by operating activities:
Loss from discontinued operations, net of tax 27 -
Depreciation and amortization 35,967 32,158
Compensation cost related to equity awards 3,948 3,839
Excess tax benefits from share-based compensation (2,687 ) (2,049 )
Deferred income taxes 21,608 11,071
Net gain on sale of assets (7,429 ) (2,098 )
Gain on sale of investments - (894 )
Gain on insurance recoveries (5,186 ) (1,043 )
Insurance proceeds received 21,373 24
Changes in assets and liabilities which provided (used) cash, net of effect of acquisitions:
Accounts receivable, net 3,617 (17,612 )
Materials and supplies (1,870 ) (1,763 )
Prepaid expenses and other (2,331 ) 2,048
Accounts payable and accrued expenses (35,365 ) (24,174 )
Other assets and liabilities, net   579     (813 )

       Net cash provided by operating activities from continuing operations
90,855 51,961

       Net cash used in by operating activities from discontinued operations
  (27 )   (5 )

       Net cash provided by operating activities
  90,828     51,956  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (106,538 ) (62,065 )
Grant proceeds from outside parties 18,281 11,700
Cash paid for acquisitions, net of cash acquired (837 ) (440 )
Proceeds from sale of investments - 1,369
Proceeds from disposition of property and equipment   8,141     3,106  

       Net cash used in investing activities from continuing operations
(80,953 ) (46,330 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital leases (131,390 ) (115,764 )
Proceeds from issuance of long-term debt 133,118 94,612
Proceeds from employee stock purchases 10,742 12,631
Treasury stock purchases (1,763 ) (1,287 )
Excess tax benefits from share-based compensation   2,687     2,049  

       Net cash provided by/(used in) financing activities from continuing operations
  13,394     (7,759 )
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   (319 )   653  
 
CHANGE IN CASH BALANCES INCLUDED IN CURRENT ASSETS OF DISCONTINUED OPERATIONS   -     1  
 
INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 22,950 (1,479 )
CASH AND CASH EQUIVALENTS, beginning of period   27,269     27,417  
CASH AND CASH EQUIVALENTS, end of period $ 50,219   $ 25,938  
 
 

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                               
Three Months Ended
June 30,
2012 2011
% of % of
Amount Revenue Amount Revenue

Revenues:
Freight $ 154,176 70.9 % $ 146,788 70.0 %
Non-freight   63,243   29.1 %   62,801   30.0 %
 
Total revenues $ 217,419   100.0 % $ 209,589   100.0 %
 

Operating Expense Comparison:

Natural Classification
Labor and benefits $ 61,366 28.3 % $ 58,966 28.1 %
Equipment rents 8,967 4.1 % 10,986 5.3 %
Purchased services 19,304 8.9 % 19,705 9.4 %
Depreciation and amortization 18,334 8.4 % 16,297 7.8 %
Diesel fuel used in operations 21,134 9.8 % 22,654 10.8 %
Diesel fuel sold to third parties 4,111 1.9 % 4,500 2.1 %
Casualties and insurance 5,943 2.7 % 6,228 3.0 %
Materials 6,783 3.1 % 6,090 2.9 %
Net gain on sale of assets ( 6,199 ) (2.9 %) ( 1,088 ) (0.5 %)
Gain on insurance recoveries ( 5,186 ) (2.4 %) ( 1,018 ) (0.5 %)
Other expenses   20,389   9.4 %   15,104   7.2 %
 
Total operating expenses $ 154,946   71.3 % $ 158,424   75.6 %
 

Functional Classification
Transportation $ 66,228 30.5 % $ 68,050 32.4 %
Maintenance of ways and structures 22,511 10.4 % 19,636 9.4 %
Maintenance of equipment 22,759 10.5 % 24,052 11.5 %
Diesel fuel sold to third parties 4,111 1.9 % 4,500 2.1 %
General and administrative 32,388 14.9 % 27,995 13.4 %
Net gain on sale of assets ( 6,199 ) (2.9 %) ( 1,088 ) (0.5 %)
Gain on insurance recoveries ( 5,186 ) (2.4 %) ( 1,018 ) (0.5 %)
Depreciation and amortization   18,334   8.4 %   16,297   7.8 %
 
Total operating expenses $ 154,946   71.3 % $ 158,424   75.6 %
 
 

                           
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
             
Three Months Ended June 30, 2012

North American & EuropeanOperations
Australian Operations Total Operations
Revenues:

Amount
% of Total

Revenues
Amount % of Total

Revenues
Amount % of Total

Revenues
Freight $ 101,996 70.3 % $ 52,180 72.1 % $ 154,176 70.9 %
Non-freight (excluding fuel sales) 43,059 29.7 % 15,846 21.9 % 58,905 27.1 %
Fuel sales to third parties   -   0.0 %   4,338   6.0 %   4,338   2.0 %
Total revenues 145,055 100.0 % 72,364 100.0 % 217,419 100.0 %
 
Operating expenses
Labor and benefits 47,281 32.6 % 14,085 19.5 % 61,366 28.2 %
Equipment rents 6,302 4.3 % 2,665 3.7 % 8,967 4.1 %
Purchased services 6,462 4.5 % 12,842 17.7 % 19,304 8.9 %
Depreciation and amortization 12,541 8.6 % 5,793 8.0 % 18,334 8.4 %
Diesel fuel used in operations 13,017 9.0 % 8,117 11.2 % 21,134 9.7 %
Diesel fuel sold to third parties - 0.0 % 4,111 5.7 % 4,111 1.9 %
Casualties and insurance 3,950 2.7 % 1,993 2.8 % 5,943 2.7 %
Materials 6,268 4.3 % 515 0.7 % 6,783 3.1 %
Net gain on sale of assets (6,184 ) (4.3 %) (15 ) 0.0 % (6,199 ) (2.9 %)
Gain on insurance recoveries - 0.0 % (5,186 ) (7.2 %) (5,186 ) (2.4 %)
Other expenses   15,520   10.7 %   4,869   6.7 %   20,389   9.4 %
Total operating expenses   105,157   72.5 %   49,789   68.8 %   154,946   71.3 %
 
Income from Operations $ 39,898   $ 22,575   $ 62,473  
 
Carloads 176,597 55,718 232,315
 
Net expenditures for additions to property & equipment $ 13,934 $ 32,442 $ 46,376
 
Three Months Ended June 30, 2011

North American & EuropeanOperations
Australian Operations Total Operations
Revenues: Amount % of Total

Revenues
Amount % of Total

Revenues
Amount % of Total

Revenues
Freight $ 96,598 69.3 % $ 50,190 71.5 % $ 146,788 70.0 %
Non-freight (excluding fuel sales) 42,737 30.7 % 15,472 22.0 % 58,209 27.8 %
Fuel sales to third parties   -   0.0 %   4,592   6.5 %   4,592   2.2 %
Total revenues 139,335 100.0 % 70,254 100.0 % 209,589 100.0 %
 
Operating expenses
Labor and benefits 46,167 33.1 % 12,799 18.2 % 58,966 28.1 %
Equipment rents 6,513 4.7 % 4,473 6.4 % 10,986 5.2 %
Purchased services 7,117 5.1 % 12,588 17.9 % 19,705 9.4 %
Depreciation and amortization 11,565 8.3 % 4,732 6.7 % 16,297 7.8 %
Diesel fuel used in operations 14,056 10.1 % 8,598 12.2 % 22,654 10.8 %
Diesel fuel sold to third parties - 0.0 % 4,500 6.4 % 4,500 2.1 %
Casualties and insurance 4,733 3.4 % 1,495 2.1 % 6,228 3.0 %
Materials 5,650 4.1 % 440 0.6 % 6,090 2.9 %

Net gain on sale of assets
(1,076 ) (0.8 %) (12 ) 0.0 % (1,088 ) (0.5 %)
Gain on insurance recoveries - 0.0 % (1,018 ) (1.4 %) (1,018 ) (0.5 %)
Other expenses   10,873   7.8 %   4,231   6.0 %   15,104   7.2 %
Total operating expenses   105,598   75.8 %   52,826   75.2 %   158,424   75.6 %
 
Income from Operations $ 33,737   $ 17,428   $ 51,165  
 
Carloads 195,677 53,831 249,508
 
Net expenditures for additions to property & equipment $ 14,742 $ 27,412 $ 42,154
 
 

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
                                                                       
Three Months Ended June 30, 2012
 

North American & EuropeanOperations
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* $ 170 1,624 $ 105 $ 22,917 15,086 $ 1,519 $ 23,087 16,710 $ 1,382
Coal & Coke 16,462 39,697 415 - - - 16,462 39,697 415
Farm & Food Products 5,902 11,991 492 11,491 16,308 705 17,393 28,299 615
Pulp & Paper 15,789 23,481 672 - - - 15,789 23,481 672
Metallic Ores ** 2,721 2,883 944 13,770 8,265 1,666 16,491 11,148 1,479
Metals 15,531 24,014 647 - - - 15,531 24,014 647
Minerals & Stone 9,859 19,444 507 3,343 15,959 209 13,202 35,403 373
Chemicals & Plastics 13,841 16,558 836 - - - 13,841 16,558 836
Lumber & Forest Products 8,701 17,756 490 - - - 8,701 17,756 490
Petroleum Products 6,073 7,349 826 659 100 6,590 6,732 7,449 904
Autos & Auto Parts 2,115 2,546 831 - - - 2,115 2,546 831
Other 4,832 9,254 522 - - - 4,832 9,254 522
           
Totals $ 101,996 176,597 $ 578 $ 52,180 55,718 $ 937 $ 154,176 232,315 $ 664
 
* Represents intermodal units
** Includes carload and intermodal units
 
Three Months Ended June 30, 2011
 

North American & EuropeanOperations
  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* $ 120 1,010 $ 119 $ 21,929 14,213 $ 1,543 $ 22,049 15,223 $ 1,448
Coal & Coke 20,122 47,531 423 - - - 20,122 47,531 423
Farm & Food Products 5,871 13,881 423 11,569 18,434 628 17,440 32,315 540
Pulp & Paper 15,480 23,823 650 - - - 15,480 23,823 650
Metallic Ores 1,319 2,096 629 12,607 5,855 2,153 13,926 7,951 1,751
Metals 11,686 22,198 526 - - - 11,686 22,198 526
Minerals & Stone 9,105 20,127 452 3,408 15,203 224 12,513 35,330 354
Chemicals & Plastics 11,376 15,135 752 - - - 11,376 15,135 752
Lumber & Forest Products 8,224 16,961 485 - - - 8,224 16,961 485
Petroleum Products 5,255 6,915 760 677 126 5,373 5,932 7,041 842
Autos & Auto Parts 2,203 2,881 765 - - - 2,203 2,881 765
Other 5,837 23,119 252 - - - 5,837 23,119 252
                 
Totals $ 96,598   195,677 $ 494 $ 50,190   53,831 $ 932 $ 146,788   249,508 $ 588
 
* Represents intermodal units
 
 

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                                   
Six Months Ended
June 30,
2012 2011
% of % of
Amount Revenue Amount Revenue

Revenues:
Freight $ 298,760 70.3 % $ 279,593 69.6 %
Non-freight   126,095   29.7 %   121,907   30.4 %
 
Total revenues $ 424,855   100.0 % $ 401,500   100.0 %
 

Operating Expense Comparison:

Natural Classification
Labor and benefits $ 127,123 29.9 % $ 117,048 29.1 %
Equipment rents 18,784 4.4 % 21,530 5.4 %
Purchased services 37,335 8.8 % 37,147 9.3 %
Depreciation and amortization 35,967 8.5 % 32,158 8.0 %
Diesel fuel used in operations 43,132 10.2 % 44,075 11.0 %
Diesel fuel sold to third parties 9,101 2.1 % 8,579 2.1 %
Casualties and insurance 11,490 2.7 % 11,666 2.9 %
Materials 12,890 3.0 % 12,673 3.2 %
Net gain on saleof assets ( 7,429 ) (1.7 %) ( 2,098 ) (0.5 %)
Gain on insurance recoveries ( 5,186 ) (1.2 %) ( 1,043 ) (0.3 %)
Other expenses   37,861   8.9 %   29,397   7.3 %
 
Total operating expenses $ 321,068   75.6 % $ 311,132   77.5 %
 

Functional Classification
Transportation $ 134,392 31.6 % $ 130,020 32.5 %
Maintenance of ways and structures 43,804 10.3 % 37,499 9.3 %
Maintenance of equipment 45,460 10.7 % 47,559 11.8 %
Diesel fuel sold to third parties 9,101 2.1 % 8,579 2.1 %
General and administrative 64,959 15.3 % 58,458 14.6 %

Net gain on sale of assets
( 7,429 ) (1.7 %) ( 2,098 ) (0.5 %)
Gain on insurance recoveries ( 5,186 ) (1.2 %) ( 1,043 ) (0.3 %)
Depreciation and amortization   35,967   8.5 %   32,158   8.0 %
 
Total operating expenses $ 321,068   75.6 % $ 311,132   77.5 %
 
 

                               
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
             
Six Months Ended June 30, 2012

North American & EuropeanOperations
Australian Operations Total Operations
Revenues: Amount

% ofTotal

Revenues
Amount % of Total

Revenues
Amount % of Total

Revenues
Freight $ 204,044 70.6% $ 94,716 69.8% $ 298,760 70.3%
Non-freight (excluding fuel sales) 85,084 29.4% 31,387 23.1% 116,471 27.4%
Fuel sales to third parties - 0.0% 9,624 7.1% 9,624 2.3%
Total revenues 289,128 100.0% 135,727 100.0% 424,855 100.0%
 
Operating expenses
Labor and benefits 98,371 34.0% 28,752 21.2% 127,123 29.9%
Equipment rents 13,028 4.5% 5,756 4.3% 18,784 4.4%
Purchased services 12,721 4.4% 24,614 18.1% 37,335 8.8%
Depreciation and amortization 24,859 8.6% 11,108 8.2% 35,967 8.5%
Diesel fuel used in operations 28,226 9.8% 14,906 11.0% 43,132 10.2%
Diesel fuel sold to third parties - 0.0% 9,101 6.7% 9,101 2.1%
Casualties and insurance 7,362 2.5% 4,128 3.0% 11,490 2.7%
Materials 12,152 4.2% 738 0.5% 12,890 3.0%
Net gain on sale of assets (7,295) (2.5%) (134) (0.1%) (7,429) (1.7%)
Gain on insurance recoveries - 0.0% (5,186) (3.8%) (5,186) (1.2%)
Other expenses 28,493 9.9% 9,368 6.9% 37,861 8.9%
Total operating expenses 217,917 75.4% 103,151 76.0% 321,068 75.6%
 
Income from Operations $ 71,211 $ 32,576 $ 103,787
 
Carloads 350,853 103,640 454,493
 
Net expenditures for additions to property & equipment $ 26,738 $ 61,519 $ 88,257
 
Six Months Ended June 30, 2011

North American & EuropeanOperations
Australian Operations Total Operations
Revenues: Amount % of Total

Revenues
Amount % of Total

Revenues
Amount % of Total

Revenues
Freight $ 187,327 69.0% $ 92,266 71.1% $ 279,593 69.6%
Non-freight (excluding fuel sales) 84,315 31.0% 28,581 22.0% 112,896 28.1%
Fuel sales to third parties - 0.0% 9,011 6.9% 9,011 2.3%
Total revenues 271,642 100.0% 129,858 100.0% 401,500 100.0%
 
Operating expenses
Labor and benefits 92,626 34.1% 24,422 18.8% 117,048 29.1%
Equipment rents 13,006 4.8% 8,524 6.5% 21,530 5.4%
Purchased services 13,482 5.0% 23,665 18.2% 37,147 9.3%
Depreciation and amortization 22,911 8.4% 9,247 7.1% 32,158 8.0%
Diesel fuel used in operations 29,033 10.7% 15,042 11.6% 44,075 11.0%
Diesel fuel sold to third parties - 0.0% 8,579 6.6% 8,579 2.1%
Casualties and insurance 8,056 3.0% 3,610 2.8% 11,666 2.9%
Materials 11,912 4.4% 761 0.6% 12,673 3.2%
Net gain on sale of assets (2,084) (0.8%) (14) 0.0% (2,098) (0.5%)
Gain on insurance recoveries (25) 0.0% (1,018) (0.8%) (1,043) (0.3%)
Other expenses 22,053 8.1% 7,344 5.7% 29,397 7.3%
Total operating expenses 210,970 77.7% 100,162 77.1% 311,132 77.5%
 
Income from Operations $ 60,672 $ 29,696 $ 90,368
 
Carloads 389,907 104,157 494,064
 
Net expenditures for additions to property & equipment $ 21,811 $ 28,554 $ 50,365
 
 

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
                                                                       
Six Months Ended June 30, 2012
 

North American & EuropeanOperations
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* $ 262 2,344 $ 112 $ 41,527 27,822 $ 1,493 $ 41,789 30,166 $ 1,385
Coal & Coke 31,524 71,696 440 - - - 31,524 71,696 440
Farm & Food Products 14,172 28,050 505 22,613 32,976 686 36,785 61,026 603
Pulp & Paper 31,748 48,257 658 - - - 31,748 48,257 658
Metallic Ores ** 4,946 5,412 914 23,360 12,823 1,822 28,306 18,235 1,552
Metals 32,287 50,685 637 - - - 32,287 50,685 637
Minerals & Stone 18,116 35,724 507 5,815 29,795 195 23,931 65,519 365
Chemicals & Plastics 28,081 33,604 836 - - - 28,081 33,604 836
Lumber & Forest Products 16,528 33,594 492 - - - 16,528 33,594 492
Petroleum Products 12,909 15,256 846 1,401 224 6,254 14,310 15,480 924
Autos & Auto Parts 4,175 4,952 843 - - - 4,175 4,952 843
Other 9,296 21,279 437 - - - 9,296 21,279 437
           
Totals $ 204,044 350,853 $ 582 $ 94,716 103,640 $ 914 $ 298,760 454,493 $ 657
 
* Represents intermodal units
** Includes carload and intermodal units
 
Six Months Ended June 30, 2011
 

North American & EuropeanOperations
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* $ 218 1,856 $ 117 $ 39,762 27,085 $ 1,468 $ 39,980 28,941 $ 1,381
Coal & Coke 38,993 101,735 383 - - - 38,993 101,735 383
Farm & Food Products 12,721 28,161 452 21,373 35,036 610 34,094 63,197 539
Pulp & Paper 30,259 48,132 629 - - - 30,259 48,132 629
Metallic Ores 2,844 4,874 584 23,272 10,046 2,317 26,116 14,920 1,750
Metals 23,023 44,738 515 - - - 23,023 44,738 515
Minerals & Stone 15,399 34,276 449 6,780 31,781 213 22,179 66,057 336
Chemicals & Plastics 21,840 29,484 741 - - - 21,840 29,484 741
Lumber & Forest Products 15,613 32,536 480 - - - 15,613 32,536 480
Petroleum Products 11,303 14,620 773 1,079 209 5,163 12,382 14,829 835
Autos & Auto Parts 4,349 5,771 754 - - - 4,349 5,771 754
Other 10,765 43,724 246 - - - 10,765 43,724 246
           
Totals $ 187,327 389,907 $ 480 $ 92,266 104,157 $ 886 $ 279,593 494,064 $ 566
 
* Represents intermodal units
 
 

Reconciliation of non-GAAP Financial Measures

This earnings release contains references to adjusted operating income, adjusted operating ratios 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.

Adjusted Operating Income and Adjusted Operating Ratios Description and Discussion

Management views its Operating Income, calculated as Operating Revenues less Operating Expenses, and Operating Ratio, calculated as Operating Expenses divided by Operating Revenues, as an important measure 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 Ratio for the three months ended June 30, 2012, used to calculate Adjusted Operating Income and Adjusted Operating Ratio, is presented excluding net gain on sale of assets, gain on insurance recoveries, business/corporate development expenses and the impact of the Canadian Pacific Railway strike. The Operating Income and Operating Ratio for the three months ended June 30, 2011, used to calculate Adjusted Operating Income and Adjusted Operating Ratio, is presented excluding net gain on sale of assets, gain on insurance recoveries and business/corporate development expenses. The Adjusted Operating Income and 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 Operating Ratios by segment described above ($ in millions):
                           
 
 
Three months ended June 30, 2012

North American& EuropeanOperations

AustralianOperations

TotalOperations
Operating revenues $ 145.1 $ 72.4 $ 217.4
Operating expenses   105.2     49.8     154.9  
Operating income $ 39.9   $ 22.6   $ 62.5  
Operating ratio 72.5 % 68.8 % 71.3 %
 
Operating income $ 145.1 $ 72.4 $ 217.4
Impact of Canadian Pacific Railway strike   0.7     -     0.7  
Adjusted operating revenues $ 145.7   $ 72.4   $ 218.1  
 
Operating expenses $ 105.2 $ 49.8 $ 154.9
Net gain on sale of assets 6.2 - 6.2
Gain on insurance recoveries - 5.2 5.2
Business/corporate development expenses (1.1 ) (0.8 ) (1.9 )
Impact of Canadian Pacific Railway strike   0.2     -     0.2  
Adjusted operating expenses $ 110.5   $ 54.2   $ 164.7  
 
Adjusted operating income $ 34.6   $ 18.2   $ 52.8  
Adjusted operating ratio 75.8 % 74.9 % 75.5 %
 
 
 
Three months ended June 30, 2011

North American& EuropeanOperations

AustralianOperations

TotalOperations
Operating revenues $ 139.3 $ 70.3 $ 209.6
 
Operating expenses   105.6     52.8     158.4  
Operating income $ 33.7   $ 17.4   $ 51.2  
Operating ratio 75.8 % 75.2 % 75.6 %
 
Operating expenses $ 105.6 $ 52.8 $ 158.4
Net gain on sale of assets 1.1 - 1.1
Gain on insurance recoveries - 1.0 1.0
Business/corporate development expenses   -     (0.4 )   (0.4 )
Adjusted operating expenses $ 106.7   $ 53.4   $ 160.1  
 
Adjusted operating income $ 32.6   $ 16.8   $ 49.5  
Adjusted operating ratio 76.6 % 76.1 % 76.4 %
 
 

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 net cash paid/(received) for acquisitions/divestitures and the cash paid for acquisition-related expenses. 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):
   
 
Six Months Ended

June 30,
2012         2011
Net cash provided by operating activities from continuing operations $ 90.9 $ 52.0
Net cash used in investing activities from continuing operations (a) (81.0 ) (46.3 )
Net cash paid/(received) for acquisitions/divestitures 0.8 (0.9 )
Cash paid for acquisition-related expenses (b)   -     13.0  
Free cash flow $ 10.7   $ 17.8  
 
 
 

(a) The 2012 and 2011 periods include $54.5 million and $22.6 million, respectively, in Australian new business investments.
(b) The 2011 period includes Australian stamp duty expenses accrued as of December 31, 2010, but paid in 2011.
 
 

Copyright Business Wire 2010

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