Genesee & Wyoming Reports Results For The Third Quarter Of 2016

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

Third Quarter Consolidated Highlights
  • Operating revenues decreased 8.3% to $501.0 million from $546.3 million.
  • Reported operating income decreased 21.9% to $91.9 million; Adjusted operating income decreased 19.0% to $95.8 million. (1)
  • Reported diluted earnings per common share (EPS) decreased 10.9% to $0.98; Adjusted diluted EPS decreased 13.6% to $0.95; Adjusted diluted EPS excluding the Short Line Tax Credit decreased 25.5% to $0.82. (1)

Third Quarter Segment Highlights
  • North America: Operating revenues from G&W's North American Operations decreased 1.4% to $310.2 million from $314.6 million, primarily due to lower fuel surcharges and a decline in coal shipments. Reported operating income from G&W's North American Operations decreased 3.8% to $87.2 million; Adjusted operating income from G&W's North American Operations decreased 3.2% to $87.8 million. (1)
  • Australia: Operating revenues from G&W's Australian Operations decreased 11.2% to $54.2 million from $61.0 million, primarily due to the loss of a fixed fee payment associated with a now closed iron ore mine and lower metallic ores shipments. Reported operating income from G&W's Australian Operations decreased 70.8% to $4.4 million; Adjusted operating income from G&W's Australian Operations decreased 52.6% to $7.4 million. (1)
  • U.K./Europe: Operating revenues from G&W's U.K./European Operations decreased 20.0% to $136.7 million from $170.7 million, or decreased 10.5% excluding an $18.1 million impact from foreign currency depreciation. Reported operating income from G&W's U.K./European Operations was $0.3 million; Adjusted operating income from G&W's U.K./European Operations was $0.6 million. (1) (2)

Jack Hellmann, President and CEO of G&W, commented, "Our financial results for the third quarter of 2016 were consistent with our expectations with reported diluted EPS of $0.98 and adjusted diluted EPS of $0.95. In North America, better than expected steam coal shipments combined with strong cost controls yielded a better than expected operating ratio of 71.9%. In Australia, financial results were in-line with our outlook as we continued to effectively manage costs in the weak commodity environment. In the U.K./Europe, our financial results in the first full quarter since we restructured the U.K. coal business were below our expectations for three reasons: congestion in the port of Felixstowe which weakened U.K. intermodal shipments; unscheduled reductions in U.K. infrastructure services; and weak performance from continental European intermodal." (1)

"Looking to year-end, our priorities by region are threefold. In North America, we remain focused on maximizing cost efficiency amidst an uneven economic environment. In Australia, we expect to close on the recently announced acquisition of Glencore Rail and the concurrent issuance of a 49% equity stake in our Australian subsidiary to Macquarie, in a transaction that yields a highly competitive Australian growth platform going forward. In the U.K./Europe, we continue to restructure the continental European business and to reduce costs in the U.K. Despite the weak third quarter, we see a clear path to improvement in the U.K./European segment as we finish the year and enter 2017."

"Over the past three months we have announced two important acquisitions, one in Australia, Glencore Rail (expected to close December 1), and one in North America, the Providence and Worcester (expected to close into a voting trust later today). In addition, we continue to be active with a significant pipeline of acquisition opportunities in multiple geographies for which we are maintaining close working relationships with potential financial partners. The broad reach of our global rail footprint is yielding an increasing number of contiguous or adjacent investment opportunities."

Financial Results

G&W's operating revenues decreased $45.3 million, or 8.3%, to $501.0 million in the third quarter of 2016, compared with $546.3 million in the third quarter of 2015. G&W's operating income in the third quarter of 2016 was $91.9 million, compared with $117.6 million in the third quarter of 2015. G&W's adjusted operating income in the third quarter of 2016 was $95.8 million, compared with $118.3 million in the third quarter of 2015. (1)

G&W's reported net income in the third quarter of 2016 was $56.8 million, compared with reported net income of $63.4 million in the third quarter of 2015. Excluding the net impact of certain items affecting comparability between periods discussed below, G&W's adjusted net income in the third quarter of 2016 was $55.4 million, compared with $63.7 million in the third quarter of 2015. (1)

G&W's reported diluted EPS in the third quarter of 2016 were $0.98 with 58.2 million weighted average shares outstanding, compared with reported diluted EPS in the third quarter of 2015 of $1.10 with 57.8 million weighted average shares outstanding. G&W's adjusted diluted EPS in the third quarter of 2016 were $0.95 with 58.2 million weighted average shares outstanding, compared with adjusted diluted EPS in the third quarter of 2015 of $1.10 with 57.8 million weighted average shares outstanding. G&W's adjusted diluted EPS excluding the Short Line Tax Credit in the third quarter of 2016 were $0.82 with 58.2 million weighted average shares outstanding, compared with adjusted diluted EPS in the third quarter of 2015 of $1.10 with 57.8 million weighted average shares outstanding. (1)

Items Affecting Comparability

In the third quarter of 2016 and 2015, G&W's results included certain items affecting comparability between the periods that are set forth in the following table (in millions, except per share amounts):
           
 

Income/(Loss) Before Income Taxes Impact

After-Tax Net Income/(Loss) Impact

Diluted Earnings/(Loss) Per Common Share Impact

Three Months Ended September 30, 2016
Corporate development and related costs $ (4.3 ) $ (3.1 ) $ (0.05 )
Restructuring costs $ (0.2 ) $ (0.2 ) $
Net gain on sale of assets $ 0.5 $ 0.4 $ 0.01
Impact of reduction in U.K. income tax rate $ $ 4.3 $ 0.07
Short Line Tax Credit $ $ 7.8 $ 0.13
 

Three Months Ended September 30, 2015
Corporate development and related costs $ (2.0 ) $ (1.3 ) $ (0.02 )
Net gain on sale of assets $ 1.2 $ 0.9 $ 0.02
 

In the third quarter of 2016, G&W's results included corporate development and related costs of $4.3 million, primarily associated with the Glencore Rail and Providence and Worcester transactions, restructuring costs of $0.2 million and a net gain on the sale of assets of $0.5 million. The third quarter of 2016 also included an income tax benefit of $7.8 million associated with the U.S. Short Line Tax Credit, which was not in effect during the third quarter of 2015, as well as a tax benefit of $4.3 million associated with a reduction in the U.K. income tax rate, which was enacted in September 2016. The Short Line Tax Credit was extended retroactively in the fourth quarter of 2015 for calendar years 2015 and 2016.

In the third quarter of 2015, G&W's results included corporate development and related costs of $2.0 million, primarily related to the integration of Freightliner, and a net gain on the sale of assets of $1.2 million.

Third Quarter Results by Segment

Operating revenues from G&W's North American Operations decreased $4.4 million, or 1.4%, to $310.2 million in the third quarter of 2016, compared with $314.6 million in the third quarter of 2015. North American Operations revenues decreased primarily due to lower fuel surcharges and a decline in coal shipments.

North American Operations traffic decreased 17,572 carloads, or 4.2%, to 401,999 carloads in the third quarter of 2016. The traffic decrease was principally due to decreases of 8,169 carloads of coal and coke traffic (primarily in the Central, Northeast and Midwest regions), 3,549 carloads of pulp and paper traffic (primarily in the Southern, Canada and Northeast regions), 3,447 carloads of minerals and stone traffic (primarily in the Northeast Region), 2,529 carloads of metals traffic (primarily in the Southern, Coastal and Canada regions) and 2,257 carloads of other traffic (primarily in the Southern and Canada regions), partially offset by an increase of 3,014 carloads of agricultural products traffic (primarily in the Central and Pacific regions). All remaining traffic decreased by a net 635 carloads.

G&W's North American Operations had operating income of $87.2 million in the third quarter of 2016, compared with $90.6 million in the third quarter of 2015. The operating ratio for North American Operations was 71.9% in the third quarter of 2016, compared with an operating ratio of 71.2% in the third quarter of 2015. Adjusted operating income from G&W's North American Operations in the third quarter of 2016 was $87.8 million, compared with adjusted operating income of $90.7 million in the third quarter of 2015. The adjusted operating ratio for North American Operations was 71.7% in the third quarter of 2016, compared with an adjusted operating ratio of 71.2% in the third quarter of 2015. (1)

Operating revenues from G&W's Australian Operations decreased $6.9 million, or 11.2%, to $54.2 million in the third quarter of 2016, compared with $61.0 million in the third quarter of 2015. Excluding a $2.7 million increase due to the impact of foreign currency appreciation, Australian Operations revenues decreased $9.6 million, or 15.0%, primarily due to the loss of a fixed fee payment associated with a now closed iron ore mine that we previously served and lower metallic ores shipments. (2)

Australian Operations traffic decreased 5,000 carloads, or 10.3%, to 43,532 carloads in the third quarter of 2016. The traffic decrease was principally due to decreases of 2,818 carloads of agricultural product traffic, 878 carloads of metallic ores traffic, 657 carloads of minerals and stone traffic and 628 carloads of intermodal traffic.

G&W's Australian Operations had operating income of $4.4 million in the third quarter of 2016, compared with $15.0 million in the third quarter of 2015. The operating ratio for Australian Operations was 91.9% in the third quarter of 2016, compared with an operating ratio of 75.5% in the third quarter of 2015. Adjusted operating income from G&W's Australian Operations was $7.4 million in the third quarter of 2016, compared with adjusted operating income of $15.6 million in the third quarter of 2015. The adjusted operating ratio for Australian Operations was 86.3% in the third quarter of 2016, compared with an adjusted operating ratio of 74.4% in the third quarter of 2015. (1)

Operating revenues from G&W's U.K./European Operations decreased $34.1 million, or 20.0%, to $136.7 million in the third quarter of 2016, compared with $170.7 million in the third quarter of 2015. Excluding an $18.1 million decrease due to the impact of foreign currency depreciation, U.K./European revenues decreased $16.0 million, or 10.5%, primarily due to lower intermodal services and coal shipments. (2)

U.K./European Operations traffic decreased 10,264 carloads, or 3.4%, to 294,283 carloads in the third quarter of 2016. The traffic decrease was principally due to decreases of 8,402 carloads of coal and coke traffic (primarily in the U.K. and Poland) and 4,106 carloads of intermodal traffic (primarily in the U.K.), partially offset by an increase of 1,761 carloads of minerals and stone traffic.

G&W's U.K./European Operations had operating income of $0.3 million in the third quarter of 2016, compared with $12.0 million in the third quarter of 2015. The operating ratio for U.K./European Operations was 99.8% in the third quarter of 2016, compared with an operating ratio of 93.0% in the third quarter of 2015. Adjusted operating income from G&W's U.K./European Operations was $0.6 million in the third quarter of 2016, compared with adjusted operating income of $12.0 million in the third quarter of 2015. The adjusted operating ratio for U.K./European Operations was 99.5% in the third quarter of 2016, compared with an adjusted operating ratio of 93.0% in the third quarter of 2015. (1)

Free Cash Flow (1)

G&W's free cash flow for the nine months ended September 30, 2016 and 2015 was as follows (in millions):
    Nine Months Ended
September 30,
2016       2015
Net cash provided by operating activities $ 303.6 $ 344.3

Net cash used in investing activities, excluding new businessinvestments
(108.7 ) (927.4 )
Net cash used for acquisitions (a) 1.3   786.3  
Free cash flow before new business investments 196.1 203.1
New business investments, net of grants from outside parties (8.6 ) (58.6 )
Free cash flow (1) $ 187.6   $ 144.5  
 
(a)   The 2015 period primarily consisted of net cash used for the acquisition of Freightliner and Pinsly Arkansas as well as $32.0 million in cash paid for incremental expenses related to the purchase and integration of the acquisitions.
 

Conference Call and Webcast Details

As previously announced, G&W's conference call to discuss financial results for the third quarter of 2016 will be held on Tuesday, November 1, 2016, at 11 a.m. EDT. The dial-in number for the teleconference in the U.S. is (800) 230-1074; outside the U.S. is (612) 288-0337, or the call may be accessed live over the Internet (listen only) at www.gwrr.com/investors. Management will be referring to a slide presentation that will also be available at gwrr.com/investors. The webcast will be archived at www.gwrr.com/investors until the following quarter's earnings press release. Telephone replay is available for 30 days beginning at 1 p.m. EDT on November 1, 2016, by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 372822.

About G&W

G&W owns or leases 121 freight railroads worldwide that are organized in 10 operating regions with approximately 7,200 employees and more than 2,800 customers.
  • G&W's eight North American regions serve 41 U.S. states and four Canadian provinces and include 113 short line and regional freight railroads with more than 13,000 track-miles.
  • G&W's Australia Region provides rail freight services in New South Wales, the Northern Territory and South Australia and operates the 1,400-mile Tarcoola-to-Darwin rail line.
  • G&W's U.K./European Region is led by Freightliner, the U.K.'s largest rail maritime intermodal operator and second-largest rail freight company. Operations also include heavy-haul in Poland and Germany and cross-border intermodal services connecting Northern European seaports with key industrial regions throughout the continent.

G&W subsidiaries provide rail service at more than 40 major ports in North America, Australia and Europe and perform contract coal loading and railcar switching for industrial customers.

From time to time, we may use our website as a channel of distribution of material company information. Financial and other material information regarding G&W is routinely posted on and accessible at www.gwrr.com/investors. In addition, you may automatically receive email alerts and other information about us by enrolling your email address in the "Email Alerts" section of www.gwrr.com/investors. The information contained on or connected to our Internet website is not deemed to be incorporated by reference in this press release or filed with the SEC.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains forward-looking statements regarding future events and the future performance of Genesee & Wyoming Inc. that are based on current expectations, estimates and projections about our industry, management's beliefs, and assumptions made by management. Words such as "anticipates," "intends," "plans," "believes," "could," "should," "seeks," "expects," "will," "estimates," "trends," "outlook," variations of these words and similar expressions are intended to identify these forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast, including the following: risks related to the operation of our railroads; severe weather conditions and other natural occurrences, which could result in shutdowns, derailments, railroad network congestion or other substantial disruption of operations; customer demand and changes in our operations; exposure to the credit risk of customers and counterparties; changes in commodity prices; consummation and integration of acquisitions; economic, political and industry conditions (including employee strikes or work stoppages); retention and contract continuation; legislative and regulatory developments, including changes in environmental and other laws and regulations to which we are subject; increased competition in relevant markets; funding needs and financing sources, including our ability to obtain government funding for capital projects; international complexities of operations, currency fluctuations, finance, tax and decentralized management; challenges of managing rapid growth including retention and development of senior leadership; unpredictability of fuel costs; susceptibility to various legal claims and lawsuits; increase in, or volatility associated with, expenses related to estimated claims, self-insured retention amounts, and insurance coverage limits; consummation of new business opportunities; decrease in revenues and/or increase in costs and expenses; susceptibility to the risks of doing business in foreign countries; our ability to integrate acquired businesses successfully or to realize the expected synergies associated with acquisitions; and others including, but not limited to, those noted in our 2015 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q under "Risk Factors." Therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Forward-looking statements speak only as of the date of this press release or as of the date they were made. G&W does not undertake, and expressly disclaims, any duty to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.
 
1. Adjusted operating income, adjusted operating ratio, adjusted net income, adjusted diluted earnings per common share (EPS) and free cash flow are non-GAAP financial measures and are not intended to replace financial measures calculated in accordance with GAAP. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to their most directly comparable financial measures calculated in accordance with GAAP, is included in the tables attached to this press release.
 
2. Foreign exchange impact is calculated by comparing the prior period results translated from local currency to U.S. dollars using current period exchange rates to the prior period results in U.S. dollars as reported.
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(in thousands, except per share amounts)
(unaudited)
               
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
OPERATING REVENUES $ 501,002 $ 546,299 $ 1,484,993 $ 1,485,548
OPERATING EXPENSES 409,151   428,740   1,248,952   1,195,918  
OPERATING INCOME 91,851 117,559 236,041 289,630
INTEREST INCOME 416 225 827 375
INTEREST EXPENSE (17,333 ) (17,464 ) (53,049 ) (48,744 )

LOSS ON SETTLEMENT OF FOREIGN CURRENCYFORWARD PURCHASE CONTRACTS
(18,686 )
OTHER INCOME/(LOSS), NET 1,494   (103 ) 2,947   545  
INCOME BEFORE INCOME TAXES 76,428 100,217 186,766 223,120
PROVISION FOR INCOME TAXES (19,643 ) (36,855 ) (54,563 ) (83,017 )
NET INCOME $ 56,785   $ 63,362   $ 132,203   $ 140,103  

BASIC EARNINGS PER COMMON SHAREATTRIBUTABLE TO GENESEE & WYOMING INC.COMMON STOCKHOLDERS:
BASIC EARNINGS PER COMMON SHARE $ 0.99   $ 1.12   $ 2.31   $ 2.47  
WEIGHTED AVERAGE SHARES - BASIC 57,266   56,819   57,160   56,673  

DILUTED EARNINGS PER COMMON SHAREATTRIBUTABLE TO GENESEE & WYOMING INC.COMMON STOCKHOLDERS:
DILUTED EARNINGS PER COMMON SHARE $ 0.98   $ 1.10   $ 2.28   $ 2.42  
WEIGHTED AVERAGE SHARES - DILUTED 58,180   57,846   58,083   57,833  
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2016 AND DECEMBER 31, 2015
(in thousands)
(unaudited)
       
September 30, December 31,
2016 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 26,366 $ 35,941
Accounts receivable, net 366,121 382,458
Materials and supplies 47,626 45,790
Prepaid expenses and other 47,018   43,197
Total current assets 487,131   507,386
PROPERTY AND EQUIPMENT, net 4,209,583 4,215,063
GOODWILL 824,957 826,575
INTANGIBLE ASSETS, net 1,053,664 1,128,952
DEFERRED INCOME TAX ASSETS, net 2,623 2,270
OTHER ASSETS, net 37,928   22,836
Total assets $ 6,615,886   $ 6,703,082
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 85,841 $ 75,966
Accounts payable 246,171 282,275
Accrued expenses 163,893   169,586
Total current liabilities 495,905   527,827
LONG-TERM DEBT, less current portion 1,977,649 2,205,785
DEFERRED INCOME TAX LIABILITIES, net 994,670 983,136
DEFERRED ITEMS - grants from outside parties 302,223 292,198
OTHER LONG-TERM LIABILITIES 185,749 174,675
TOTAL EQUITY 2,659,690   2,519,461
Total liabilities and equity $ 6,615,886   $ 6,703,082
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016 AND 2015
(in thousands)
(unaudited)
    Nine Months Ended
September 30,
2016     2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 132,203 $ 140,103
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 151,095 138,568
Stock-based compensation 13,835 10,341
Excess tax benefits from share-based compensation (25 ) (1,393 )
Deferred income taxes 25,088 46,795
Net loss/(gain) on sale and impairment of assets 11,993 (1,981 )
Insurance proceeds received 103
Loss on settlement of foreign currency forward purchase contracts 18,686

Changes in assets and liabilities which provided/(used) cash, net of effect ofacquisitions:
Accounts receivable, net (10,731 ) 52,847
Materials and supplies (2,642 ) (2,325 )
Prepaid expenses and other (1,930 ) 14,929
Accounts payable and accrued expenses (29,484 ) (71,446 )
Other assets and liabilities, net 14,156   (970 )
Net cash provided by operating activities from continuing operations 303,558   344,257  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (159,523 ) (276,150 )
Grant proceeds from outside parties 29,952 31,456
Cash paid for acquisitions, net of cash acquired (735,556 )

Net payment from settlement of foreign currency forward purchase contracts relatedto an acquisition
(18,686 )
Insurance proceeds for the replacement of assets 10,319 9,658
Proceeds from disposition of property and equipment 2,003   3,223  
Net cash used in investing activities (117,249 ) (986,055 )
CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on revolving line-of-credit, long-term debt and capital leaseobligations
(501,087 ) (502,839 )
Proceeds from revolving line-of-credit and long-term borrowings 300,495 1,139,511
Debt amendment/issuance costs (9,622 )
Proceeds from employee stock purchases 5,969 5,478
Excess tax benefits from share-based compensation 25 1,393
Treasury stock purchases (3,065 ) (3,245 )
Net cash (used in)/provided by financing activities (197,663 ) 630,676  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 1,779   (9,632 )
DECREASE IN CASH AND CASH EQUIVALENTS (9,575 ) (20,754 )
CASH AND CASH EQUIVALENTS, beginning of period 35,941   59,727  
CASH AND CASH EQUIVALENTS, end of period $ 26,366   $ 38,973  
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                               
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue

Operating revenues:
Freight revenues $ 349,807 69.8 % $ 378,936 69.4 % $ 1,017,003 68.5 % $ 1,051,760 70.8 %

Freight-relatedrevenues
129,520 25.9 % 145,508 26.6 % 396,666 26.7 % 361,524 24.3 %
All other revenues 21,675   4.3   % 21,855   4.0   % 71,324   4.8 % 72,264   4.9   %
Total operating revenues $ 501,002   100.0   % $ 546,299   100.0   % $ 1,484,993   100.0 % $ 1,485,548   100.0   %
 

Operating expenses:

Labor and benefits (a)
$ 156,235 31.2 % $ 158,675 29.1 % $ 475,297 32.0 % $ 456,089 30.7 %
Equipment rents 36,778 7.3 % 44,630 8.2 % 113,634 7.7 % 110,145 7.3 %
Purchased services (b) 50,991 10.2 % 55,291 10.1 % 149,125 10.0 % 135,849 9.2 %

Depreciation andamortization
50,841 10.2 % 48,303 8.8 % 151,095 10.2 % 138,568 9.3 %

Diesel fuel used intrain operations
30,134 6.1 % 34,264 6.3 % 83,851 5.7 % 101,856 6.9 %

Electricity used intrain operations
3,226 0.6 % 5,164 0.9 % 9,895 0.7 % 10,530 0.7 %

Casualties andinsurance
9,252 1.9 % 11,466 2.1 % 28,814 1.9 % 30,027 2.0 %
Materials 19,678 3.9 % 25,140 4.6 % 62,662 4.2 % 70,764 4.8 %
Trackage rights 22,781 4.5 % 21,765 4.0 % 64,509 4.3 % 57,270 3.9 %

Net (gain)/loss on saleand impairment ofassets (c)
(524 ) (0.1

)

%
(1,174 ) (0.2

)

%
11,993 0.8 % (1,981 ) (0.1

)

%
Restructuring costs 223 % % 6,320 0.4 % %
Other expenses (d) 29,536   5.9   % 25,216   4.6   % 91,757   6.2 % 86,801   5.8   %
Total operating expenses $ 409,151   81.7   % $ 428,740   78.5   % $ 1,248,952   84.1 % $ 1,195,918   80.5   %
 
(a)   Includes $0.3 million and $0.4 million corporate development and related costs for the three and nine months ended September 30, 2016, respectively. Includes $0.6 million and $2.3 million of severance costs for the three and nine months ended September 30, 2015, respectively. Includes $0.1 million corporate development and related costs for both the three and nine months ended September 30, 2015.
(b) Includes $0.2 million corporate development and related costs for both the three and nine months ended September 30, 2015.
(c) Includes an impairment charge of $13.0 million associated with an Australia iron ore customer entering into voluntary administration for the nine months ended September 30, 2016.
(d) Includes the write-off of accounts receivable of $8.1 million associated with an Australia iron ore customer entering into voluntary administration for the nine months ended September 30, 2016. Includes $4.0 million and $6.9 million corporate development and related costs for the three and nine months ended September 30, 2016, respectively. Includes $1.0 million and $1.9 million corporate development and related costs for the three and nine months ended September 30, 2015, respectively. Includes $12.6 million in Freightliner acquisition costs for the nine months ended September 30, 2015.
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
NORTH AMERICAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                               
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016   2015
Amount

% of Revenue
Amount

% of Revenue
Amount

% of Revenue
Amount

% of Revenue

Operating revenues:
Freight revenues $ 232,247 74.9 % $ 241,410 76.7 % $ 681,154 74.5 % $ 722,593 76.6 %

Freight-relatedrevenues
62,124 20.0 % 56,823 18.1 % 184,627 20.2 % 170,473 18.1 %
All other revenues 15,823   5.1 % 16,330   5.2 % 48,766   5.3 % 50,101   5.3 %
Total operating revenues $ 310,194   100.0 % $ 314,563   100.0 % $ 914,547   100.0 % $ 943,167   100.0 %
 

Operating expenses:
Labor and benefits (a) $ 97,426 31.4 % $ 93,887 29.8 % $ 295,603 32.3 % $ 303,635 32.2 %
Equipment rents 14,207 4.6 % 16,669 5.3 % 43,481 4.8 % 50,940 5.4 %
Purchased services (b) 15,207 4.9 % 17,263 5.5 % 47,171 5.2 % 46,612 4.9 %

Depreciation andamortization
37,085 12.0 % 35,158 11.2 % 110,398 12.1 % 105,399 11.2 %

Diesel fuel used intrain operations
14,217 4.6 % 16,444 5.2 % 41,578 4.5 % 60,226 6.4 %

Casualties andinsurance
6,145 2.0 % 7,547 2.4 % 20,398 2.2 % 20,661 2.2 %
Materials 12,222 3.9 % 13,704 4.4 % 38,168 4.2 % 45,389 4.8 %
Trackage rights 9,047 2.9 % 6,023 1.9 % 26,799 2.9 % 18,816 2.0 %

Net gain on saleand impairment ofassets
(456 ) (0.1 )% (1,025 ) (0.3 )% (851 ) (0.1 )% (1,724 ) (0.2 )%
Restructuring costs 111 % % 805 0.1 % %
Other expenses (c) 17,830   5.7 % 18,329   5.8 % 54,843   6.0 % 68,947   7.3 %
Total operating expenses $ 223,041   71.9 % $ 223,999   71.2 % $ 678,393   74.2 % $ 718,901   76.2 %
Operating income $ 87,153   $ 90,564   $ 236,154   $ 224,266  

Expenditures foradditions to property &equipment, net of grantsfrom outside parties
$ 30,343 $ 86,620 $ 95,282 $ 205,330
 
(a)   Includes $0.1 million and $0.2 million corporate development and related costs for the three and nine months ended September 30, 2016, respectively. Includes $0.1 million corporate development and related costs for both the three and nine months ended September 30, 2015.
(b) Includes $0.2 million corporate development and related costs for both the three and nine months ended September 30, 2015.
(c)

Includes $1.0 million and $3.0 million corporate development and related costs for the three and nine months ended September 30, 2016, respectively. Includes $1.0 million and $1.9 million corporate development and related costs for the three and nine months ended September 30, 2015, respectively. Includes $12.6 million of Freightliner acquisition costs for the nine months ended September 30, 2015.
 

GENESEE & WYOMING INC. AND SUBSIDIARIES
AUSTRALIAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                               
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016   2015
Amount % of Revenue Amount

% of Revenue
Amount % of Revenue Amount

% of Revenue

Operating revenues:
Freight revenues $ 29,219 54.0 % $ 32,780 53.7 % $ 80,390 49.9 % $ 118,602 63.2 %

Freight-relatedrevenues
23,523 43.4 % 26,206 43.0 % 76,142 47.2 % 62,243 33.1 %
All other revenues 1,408   2.6 % 2,027   3.3 % 4,699   2.9 % 6,918   3.7 %
Total operating revenues $ 54,150   100.0 % $ 61,013   100.0 % $ 161,231   100.0 % $ 187,763   100.0 %
 

Operating expenses:
Labor and benefits (a) $ 16,753 30.9 % $ 16,078 26.4 % $ 49,321 30.6 % $ 52,212 27.8 %
Equipment rents 1,559 2.9 % 3,083 5.1 % 4,884 3.0 % 9,289 4.9 %
Purchased services 6,083 11.2 % 5,080 8.3 % 17,432 10.8 % 15,838 8.4 %

Depreciation andamortization
7,129 13.2 % 7,151 11.7 % 21,018 13.0 % 20,771 11.1 %

Diesel fuel used intrain operations
5,467 10.1 % 6,004 9.8 % 14,042 8.7 % 15,903 8.5 %

Casualties andinsurance
1,938 3.6 % 1,696 2.8 % 5,026 3.1 % 5,463 2.9 %
Materials 2,744 5.1 % 2,964 4.9 % 8,033 5.0 % 7,898 4.2 %
Trackage rights 2,884 5.3 % 2,457 4.0 % 7,201 4.5 % 10,877 5.8 %

Net loss/(gain) on saleand impairment ofassets (b)
10 % (7 ) % 12,992 8.1 % (45 ) %
Restructuring costs 73 0.1 % % 789 0.5 % %
Other expenses (c) 5,138   9.5 % 1,541   2.5 % 18,491   11.5 % 5,224   2.8 %
Total operating expenses $ 49,778   91.9 % $ 46,047   75.5 % $ 159,229   98.8 % $ 143,430   76.4 %

Operating income
$ 4,372   $ 14,966   $ 2,002   $ 44,333  

Expenditures foradditions to property &equipment, net of grantsfrom outside parties
$ 2,440 $ 6,354 $ 8,094 $ 20,128
 
(a)   Includes $0.6 million and $2.3 million of severance costs for the three and nine months ended nine September 30, 2015, respectively.
(b) Includes an impairment charge of $13.0 million associated with an iron ore customer entering into voluntary administration for the nine months ended September 30, 2016.
(c) Includes $3.0 million and $3.9 million corporate development and related costs for the three and nine months ended September 30, 2016, respectively. Includes the write-off of accounts receivable of $8.1 million associated with an iron ore customer entering into voluntary administration for the nine months ended September 30, 2016.
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
U.K./EUROPEAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                               
Three Months Ended September 30, Nine Months Ended September 30,
2016 2015 2016 2015
Amount

% of Revenue
Amount

% of Revenue
Amount

% of Revenue
Amount

% of Revenue

Operating revenues:
Freight revenues $ 88,341 64.6 % $ 104,746 61.4 % $ 255,459 62.4 % $ 210,565 59.4 %

Freight-relatedrevenues
43,873 32.1 % 62,479 36.6 % 135,897 33.2 % 128,808 36.3 %
All other revenues 4,444   3.3 % 3,498   2.0 % 17,859   4.4 % 15,245   4.3 %
Total operating revenues $ 136,658   100.0 % $ 170,723   100.0 % $ 409,215   100.0 % $ 354,618   100.0 %
 

Operating expenses:
Labor and benefits (a) $ 42,056 30.8 % $ 48,710 28.6 % $ 130,373 31.8 % $ 100,242 28.2 %
Equipment rents 21,012 15.4 % 24,878 14.6 % 65,269 15.9 % 49,916 14.1 %
Purchased services 29,701 21.7 % 32,948 19.3 % 84,522 20.7 % 73,399 20.7 %

Depreciation andamortization
6,627 4.9 % 5,994 3.5 % 19,679 4.8 % 12,398 3.5 %

Diesel fuel used intrain operations
10,450 7.7 % 11,816 6.9 % 28,231 6.9 % 25,727 7.3 %

Electricity used intrain operations
3,226 2.4 % 5,164 3.0 % 9,895 2.4 % 10,530 3.0 %

Casualtiesand insurance
1,169 0.9 % 2,223 1.3 % 3,390 0.8 % 3,903 1.1 %
Materials 4,712 3.4 % 8,472 5.0 % 16,461 4.0 % 17,477 4.9 %
Trackage rights 10,850 7.9 % 13,285 7.8 % 30,509 7.5 % 27,577 7.8 %

Net gain on sale andimpairment of assets
(78 ) (0.1 )% (142 ) (0.1 )% (148 ) % (212 ) (0.1 )%
Restructuring costs 39 % % 4,726 1.2 % %
Other expenses 6,568   4.8 % 5,346   3.1 % 18,423   4.5 % 12,630   3.6 %
Total operating expenses $ 136,332   99.8 % $ 158,694   93.0 % $ 411,330   100.5 % $ 333,587   94.1 %

Operating income/(loss)
$ 326   $ 12,029   $ (2,115 ) $ 21,031  

Expenditures foradditions to property &equipment, net of grantsfrom outside parties
$ 9,457 $ 14,195 $ 26,195 $ 19,236
 
(a)   Includes $0.2 million corporate development and related costs for both the three and nine months ended September 30, 2016.
 

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

Three Months Ended September 30, 2016
North American Operations Australian Operations U.K./European Operations Total Operations
Commodity Group

Freight Revenues

Carloads*

Average Revenues Per Carload

Freight Revenues

Carloads*

Average Revenues Per Carload

Freight Revenues
Carloads*

Average Revenues Per Carload

Freight Revenues
Carloads*

Average Revenues Per Carload
Agricultural Products $ 29,367 54,024 $ 544 $ 3,909 8,624 $ 453 $ 628 652 $ 963 $ 33,904 63,300 $ 536
Autos & Auto Parts 4,358 7,035 619 4,358 7,035 619
Chemicals & Plastics 34,078 42,402 804 34,078 42,402 804
Coal & Coke 21,434 63,028 340 3,199 9,276 345 24,633 72,304 341
Food & Kindred Products 8,549 15,557 550 8,549 15,557 550
Intermodal 10 112 89 17,688 15,417 1,147 67,553 239,055 283 85,251 254,584 335
Lumber & Forest Products 21,301 35,253 604 21,301 35,253 604
Metallic Ores 3,401 4,536 750 5,516 4,846 1,138 8,917 9,382 950
Metals 24,127 31,978 754 24,127 31,978 754
Minerals & Stone 31,144 53,530 582 1,918 14,567 132 16,961 45,300 374 50,023 113,397 441
Petroleum Products 16,882 24,959 676 188 78 2,410 17,070 25,037 682
Pulp & Paper 26,897 41,721 645 26,897 41,721 645
Waste 6,213 13,420 463 6,213 13,420 463
Other 4,486   14,444   311         4,486   14,444   311
Totals $ 232,247   401,999   $ 578 $ 29,219   43,532   $ 671 $ 88,341   294,283   $ 300 $ 349,807   739,814   $ 473
               

Three Months Ended September 30, 2015
North American Operations Australian Operations U.K./European Operations Total Operations
Commodity Group

Freight Revenues
    Carloads*    

Average Revenues Per Carload

Freight Revenues
   

Carloads*
   

Average Revenues Per Carload

Freight Revenues
    Carloads*    

Average Revenues Per Carload

Freight Revenues
    Carloads*    

Average Revenues Per Carload
Agricultural Products $ 29,643 51,010 $ 581 $ 4,796 11,442 $ 419 $ 131 169 $ 775 $ 34,570 62,621 $ 552
Autos & Auto Parts 4,302 6,997 615 4,302 6,997 615
Chemicals & Plastics 34,942 43,829 797 34,942 43,829 797
Coal & Coke 24,609 71,197 346 6,616 17,678 374 31,225 88,875 351
Food & Kindred Products 8,712 15,261 571 8,712 15,261 571
Intermodal 6 66 91 18,133 16,045 1,130 79,880 243,161 329 98,019 259,272 378
Lumber & Forest Products 20,154 34,770 580 20,154 34,770 580
Metallic Ores 4,897 6,291 778 7,686 5,724 1,343 12,583 12,015 1,047
Metals 26,522 34,507 769 26,522 34,507 769
Minerals & Stone 31,411 56,977 551 1,771 15,224 116 18,119 43,539 416 51,301 115,740 443
Petroleum Products 16,365 25,242 648 394 97 4,062 16,759 25,339 661
Pulp & Paper 29,348 45,270 648 29,348 45,270 648
Waste 5,386 11,453 470 5,386 11,453 470
Other 5,113   16,701   306         5,113   16,701   306
Totals $ 241,410   419,571   $ 575 $ 32,780   48,532   $ 675 $ 104,746   304,547   $ 344 $ 378,936   772,650   $ 490
 

* Represents physical railcars and the estimated railcar equivalents of commodities transported by metric ton or other measure, as well as intermodal units.
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
                                               

Nine Months Ended September 30, 2016
North American Operations Australian Operations U.K./European Operations Total Operations
Commodity Group

Freight Revenues
Carloads*

Average Revenues Per Carload

Freight Revenues
Carloads*

Average Revenues Per Carload

Freight Revenues
Carloads*

Average Revenues Per Carload

Freight Revenues
Carloads*

Average Revenues Per Carload
Agricultural Products $ 84,601 159,369 $ 531 $ 13,319 32,701 $ 407 $ 1,364 1,494 $ 913 $ 99,284 193,564 $ 513
Autos & Auto Parts 13,373 21,987 608 13,373 21,987 608
Chemicals & Plastics 103,569 131,636 787 103,569 131,636 787
Coal & Coke 53,311 157,943 338 10,951 26,589 412 64,262 184,532 348
Food & Kindred Products 24,956 44,969 555 24,956 44,969 555
Intermodal 12 136 88 49,305 44,360 1,111 201,001 679,693 296 250,318 724,189 346
Lumber & Forest Products 63,013 104,646 602 126 315 400 63,139 104,961 602
Metallic Ores 13,078 16,883 775 11,490 9,182 1,251 40 93 430 24,608 26,158 941
Metals 78,327 103,764 755 78,327 103,764 755
Minerals & Stone 85,440 149,093 573 5,698 47,552 120 41,977 114,610 366 133,115 311,255 428
Petroleum Products 52,335 76,410 685 578 211 2,739 52,913 76,621 691
Pulp & Paper 79,087 124,017 638 79,087 124,017 638
Waste 15,552 33,226 468 15,552 33,226 468
Other 14,500   47,235   307         14,500   47,235   307
Totals $ 681,154   1,171,314   $ 582 $ 80,390   134,006   $ 600 $ 255,459   822,794   $ 310 $ 1,017,003   2,128,114   $ 478

Nine Months Ended September 30, 2015
    North American Operations     Australian Operations     U.K./European Operations     Total Operations
Commodity Group

Freight Revenues
    Carloads*    

Average Revenues Per Carload

Freight Revenues
    Carloads*    

Average Revenues Per Carload

Freight Revenues
    Carloads*    

Average Revenues Per Carload

Freight Revenues
    Carloads*    

Average Revenues Per Carload
Agricultural Products $ 94,762 163,037 $ 581 $ 18,222 40,854 $ 446 $ 272 376 $ 723 $ 113,256 204,267 $ 554
Autos & Auto Parts 13,675 21,670 631 13,675 21,670 631
Chemicals & Plastics 106,181 135,509 784 106,181 135,509 784
Coal & Coke 73,713 214,254 344 16,598 43,433 382 90,311 257,687 350
Food & Kindred Products 26,235 45,875 572 26,235 45,875 572
Intermodal 7 78 90 54,293 46,051 1,179 156,572 476,660 328 210,872 522,789 403
Lumber & Forest Products 60,147 102,325 588 60,147 102,325 588
Metallic Ores 15,018 18,770 800 39,666 23,607 1,680 54,684 42,377 1,290
Metals 79,935 104,232 767 79,935 104,232 767
Minerals & Stone 89,541 160,233 559 5,436 43,918 124 37,123 91,585 405 132,100 295,736 447
Petroleum Products 49,417 76,154 649 985 230 4,283 50,402 76,384 660
Pulp & Paper 85,722 133,337 643 85,722 133,337 643
Waste 13,390 28,970 462 13,390 28,970 462
Other 14,850   51,728   287         14,850   51,728   287
Totals $ 722,593   1,256,172   $ 575 $ 118,602   154,660   $ 767 $ 210,565   612,054   $ 344 $ 1,051,760   2,022,886   $ 520
 

* Represents physical railcars and the estimated railcar equivalents of commodities transported by metric ton or other measure, as well as intermodal units.

Non-GAAP Financial Measures

This earnings release contains references to adjusted operating income, adjusted operating ratio, adjusted net income, adjusted diluted earnings per common share (EPS) and free cash flow, which are "non-GAAP financial measures" as this term is defined in 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. In accordance with these rules, G&W has reconciled these non-GAAP financial measures to their most directly comparable U.S. GAAP measures.

Management views these non-GAAP financial measures as important measures of G&W's operating performance or, in the case of free cash flow, an important financial measure of how well G&W is managing its assets and a useful indicator of cash flow that may be available for discretionary use by G&W. Management also views these non-GAAP financial measures as a way to assess comparability between periods. Key limitations of the free cash flow measure include the assumptions that G&W will be able to refinance its existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt.

These non-GAAP financial measures are not intended to represent, and should not be considered more meaningful than, or as an alternative to, their most directly comparable GAAP measures. These non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of each of these non-GAAP financial measures to their most directly comparable GAAP measure ($ in millions, except per share amounts).

Reconciliations of Non-GAAP Financial Measures

Adjusted Operating Income and Adjusted Operating Ratio
   
Three Months Ended
September 30, 2016

North American Operations
   

Australian Operations
   

U.K./European Operations
   

Total Operations
Operating revenues $ 310.2 $ 54.2 $ 136.7 $ 501.0
Operating expenses 223.0   49.8   136.3   409.2  

Operating income (a)
$ 87.2   $ 4.4   $ 0.3   $ 91.9  
Operating ratio (b) 71.9 % 91.9 % 99.8 % 81.7 %
 
Operating expenses $ 223.0 $ 49.8 $ 136.3 $ 409.2
Corporate development and related costs (1.0 ) (2.9 ) (0.3 ) (4.3 )
Restructuring costs (0.1 ) (0.1 ) (0.2 )
Net gain on sale of assets 0.5     0.1   0.5  
Adjusted operating expenses $ 222.4   $ 46.8   $ 136.0   $ 405.2  
 
Adjusted operating income $ 87.8   $ 7.4   $ 0.6   $ 95.8  
Adjusted operating ratio 71.7 % 86.3 % 99.5 % 80.9 %
 

   
Three Months Ended
September 30, 2015

North American Operations
   

Australian Operations
   

U.K./European Operations
   

Total Operations
Operating revenues $ 314.6 $ 61.0 $ 170.7 $ 546.3
Operating expenses 224.0   46.0   158.7   428.7  
Operating income (a) $ 90.6   $ 15.0   $ 12.0   $ 117.6  
Operating ratio (b) 71.2 % 75.5 % 93.0 % 78.5 %
 
Operating expenses $ 224.0 $ 46.0 $ 158.7 $ 428.7
Corporate development and related costs (1.2 ) (0.7 ) (0.1 ) (2.0 )
Net gain on sale of assets 1.0     0.1   1.2  
Adjusted operating expenses $ 223.9   $ 45.4   $ 158.7   $ 428.0  
 
Adjusted operating income $ 90.7   $ 15.6   $ 12.0   $ 118.3  
Adjusted operating ratio 71.2 % 74.4 % 93.0 % 78.3 %
 
(a)   Operating income is calculated as operating revenues less operating expenses.
(b) Operating ratio is calculated as operating expenses divided by operating revenues.
 

Adjusted Net Income and Adjusted Diluted Earnings Per Common Share
               
Three Months Ended September 30, 2016

Income Before Income Taxes

Provision for Income Taxes

 
Net Income

Diluted Earnings Per Common Share
As reported $ 76.4 $ (19.6 ) $ 56.8 $ 0.98
Add back certain items:
Corporate development and related costs 4.3 (1.2 ) 3.1 0.05
Restructuring costs 0.2 (0.1 ) 0.2
Impact of reduction in U.K. income tax rate (4.3 ) (4.3 ) (0.07 )
Net gain on sale of assets (0.5 ) 0.1   (0.4 ) (0.01 )
Adjusted $ 80.4 $ (25.0 ) $ 55.4 $ 0.95
Short Line Tax Credit   (7.8 ) (7.8 ) (0.13 )
Adjusted (excluding Short Line Tax Credit) $ 80.4   $ (32.8 ) $ 47.6   $ 0.82  
 

Three Months Ended September 30, 2015    

Income Before Income Taxes
   

Provision for Income Taxes
    Net Income    

Diluted Earnings Per Common Share
As reported $ 100.2 $ (36.9 ) $ 63.4 $ 1.10
Add back certain items:
Corporate development and related costs 2.0 (0.7 ) 1.3 0.02
Net gain on sale of assets (1.2 ) 0.2   (0.9 ) (0.02 )
As adjusted $ 101.0   $ (37.3 ) $ 63.7   $ 1.10  
 

Free Cash Flow
    Nine Months Ended
September 30,
2016     2015
Net cash provided by operating activities $ 303.6 $ 344.3
Net cash used in investing activities (117.2 ) (986.1 )
Net cash used for acquisitions 1.3   786.3  
Free cash flow $ 187.6 $ 144.5
New business investments, net of grants from outside parties 8.6   58.6  
Free cash flow before new business investments $ 196.1   $ 203.1  

View source version on businesswire.com: http://www.businesswire.com/news/home/20161101005450/en/

Copyright Business Wire 2010

If you liked this article you might like

Stronger Dollar Will Benefit Small and Mid-Cap Stocks, Says Mizuho Equities Head

Stronger Dollar Will Benefit Small and Mid-Cap Stocks, Says Mizuho Equities Head

'Mad Money' Lightning Round: I Can't Recommend Gilead

'Mad Money' Lightning Round: I Can't Recommend Gilead

Jim Cramer's 'Mad Money' Recap: Markets Make This Economy, Not the Fed

Jim Cramer's 'Mad Money' Recap: Markets Make This Economy, Not the Fed

Analysts on CNBC Discuss Stocks With Potential to Gain 50% in the Next Year

Analysts on CNBC Discuss Stocks With Potential to Gain 50% in the Next Year

Today's Top Performers In Transportation

Today's Top Performers In Transportation