Genesee & Wyoming Reports Results for the First Quarter of 2009
GREENWICH, Conn., April 29, 2009/PRNewswire-FirstCall/ — Genesee & Wyoming Inc. (GWI) (NYSE: GWR) reported net income in the first quarter of 2009 of $13.9 million, compared with net income of $10.4 million in the first quarter of 2008. GWI's diluted earnings per share (EPS) in the first quarter of 2009 were $0.38 with 36.4 million weighted average shares outstanding, compared with diluted EPS of $0.29 with 36.0 million weighted average shares outstanding in the first quarter of 2008.
GWI’s income from continuing operations in the first quarter of 2009 was $14.0 million, or $0.38 per diluted share, compared with income from continuing operations of $11.2 million, or $0.31 per diluted share, in the first quarter of 2008.
GWI’s results in the first quarter benefited $0.05 per diluted share from the positive impact of the U.S. short line tax credit, which is in effect through 2009. Primarily as a result of the tax credit, GWI’s effective income tax rate on its continuing operations decreased from 37.7% in the first quarter of 2008 to 27.0% in the first quarter of 2009.
Continuing Operations
In the first quarter of 2009, GWI's revenues decreased $2.2 million, or 1.6%, to $138.5 million, compared with $140.7 million in the first quarter of 2008. Same railroad revenues decreased $23.4 million, or 16.6%, partially offset by revenues of $21.2 million from acquisitions. The decrease in same railroad revenues included an $8.4 million decrease due to the depreciation of the Australian and Canadian dollars and a $5.5 million decrease due to a decline in third-party fuel sales. Excluding currency effects and fuel sales, GWI’s same railroad revenues declined $9.5 million, or 6.8%.
Freight revenues in the first quarter of 2009 increased by $1.4 million, or 1.6%, to $89.2 million, compared with $87.7 million in the first quarter of 2008. Our acquisitions provided $16.0 million in freight revenues, partially offset by a decrease of $14.6 million in same railroad freight revenues. Same railroad freight revenues were reduced by $4.7 million due to the depreciation of the Australian and Canadian dollars. Excluding currency effects GWI’s same railroad freight revenues decreased by $9.9 million, or 11.3%.
GWI’s traffic in the first quarter of 2009 increased 25,012 carloads, or 13.2%, compared with the first quarter of 2008. Same railroad traffic decreased by 15,759 carloads, or 8.3%. The decrease was principally due to declines of 7,292 carloads of pulp and paper traffic, 6,494 carloads of metals traffic and 3,616 carloads of lumber and forest products traffic. These decreases were partially offset by a 6,353 carload increase in farm and food products traffic primarily in Australia. All other same railroad traffic decreased by a net 4,710 carloads.
Average freight revenues per carload declined 10.2% in the first quarter of 2009. Same railroad average revenues per carload declined 9.1%. Same railroad average revenues per
carload were negatively impacted by three factors: changes in commodity mix, the depreciation of the Canadian and Australian dollars and lower fuel surcharges, which reduced average revenues per carload by 5.4%, 5.2%, and 3.1%, respectively. Excluding these three factors, same railroad average revenues per carload increased 4.6%. In the United States and Canada, excluding currency effects, changes in commodity mix and changes in fuel surcharges, same railroad average revenues per carload increased 5.0%.
GWI’s non-freight revenues in the first quarter of 2009 decreased $3.7 million, or 6.9%, compared with the first quarter of 2008. Same railroad non-freight revenues decreased $8.8 million, or 16.6%, partially offset by $5.1 million in non-freight revenues from acquisitions. The same railroad non-freight revenues decrease was composed of $3.7 million due to the depreciation of the Australian and Canadian dollars and $5.5 million due to a decline in third-party fuel sales. Excluding currency effects and fuel sales, GWI’s same railroad non-freight revenues increased $0.4 million.
GWI's operating income in the first quarter of 2009 increased 22.5% to $26.1 million, compared with $21.3 million in the first quarter of 2008. The operating ratio was 81.1% in the first quarter of 2009, compared with an operating ratio of 84.9% in the first quarter of 2008. Excluding currency effects and changes in the cost of third-party fuel sales, GWI’s same railroad operating expenses declined by $10.7 million, or 9.0%, in the first quarter of 2009 compared to the first quarter of 2008.
Comments from the Chief Executive Officer
John C. Hellmann, President and CEO of GWI, commented “GWI’s net income for the first quarter of 2009 was generally consistent with our expectations. The severe contraction of North American industrial production reduced our shipments of economically sensitive commodities such as steel, paper and lumber by 34%, 24% and 20%, respectively, on a same railroad basis. While these volume declines were significant, we have been able to offset a significant portion of the revenue losses with cost reductions, as illustrated by our operating ratio improving to 81.1% in the first quarter of 2009 compared with 84.9% in the same period last year.”
“Several areas of GWI’s business have been less affected by the recession, including our grain shipments in Australia, our coal shipments in the United States and our contract revenues such as industrial switching. Even in these relatively stable categories, however, we remain focused on cutting costs and maximizing cash flow for the remainder of 2009. Until we have greater clarity on the timing of any global economic recovery, we will continue to be aggressive in the management of our cost structure and patient in targeting new acquisition opportunities.”
Free Cash Flow from Continuing Operations (1)
($ in millions) | Three Months Ended | |||||||
March 31, | ||||||||
2009 | 2008 | |||||||
Net cash provided by operating activities | $ | 25.5 | $ | 8.1 | ||||
Net cash used in investing activities | (19.1 | ) | (7.0 | ) | ||||
Net cash paid for acquisitions (a) | 5.8 | 3.6 | ||||||
Free cash flow (1) | $ | 12.2 | $ | 4.7 |
(a) | The 2009 period includes: 1) $4.8 million in net cash paid for final working capital adjustments related to the acquisition of the Ohio Central Railroad System (OCR) and 2) $1.0 million (or €0.8 million) in net cash paid in contingent consideration related to the Rotterdam Rail Feeding B.V. (RRF) acquisition. The 2008 period includes $3.6 million in net cash paid for the acquisition of Maryland Midland Railway, Inc. (Maryland Midland). |
GWI’s continuing operations generated free cash flow of $12.2 million and $4.7 million for the first quarter of 2009 and 2008, respectively. For the first quarter of 2009, changes in working capital reduced net cash flow from operating activities by $3.5 million. For the first quarter of 2008, changes in working capital reduced net cash flow from operating activities by $15.1 million.
Net cash used in investing activities for the first quarter of 2009 included $20.7 million in purchases of property and equipment, partially offset by $3.8 million in cash received from grants from outside parties and $3.6 million from sales of assets. Net cash used in investing activities for the first quarter of 2008 included $15.7 million in purchases of property and equipment, partially offset by $10.4 million in cash received from grants from outside parties and $1.9 million from sales of assets.
Conference Call and Webcast Details
As previously announced, GWI's conference call to discuss financial results for the first quarter will be held Wednesday, April 29, 2009 at 11:00 a.m. (Eastern Time). The dial-in number for the teleconference is (800) 288-8967; outside U.S., call (612) 332-0632, 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 "First Quarter Earnings Audio Webcast." An audio replay of the conference call will be accessible via the “Investors” tab of GWI's website starting at 1:00 p.m. Wednesday, April 29, 2009.
About Genesee & Wyoming Inc.
GWI owns and operates short line and regional freight railroads in the United States, Canada, Australia and the Netherlands and owns a minority interest in a railroad in Bolivia. Operations currently include 63 railroads organized in nine regions, with more than 6,800 miles of owned and leased track and approximately 3,100 additional miles under track access arrangements. GWI provides rail service at 16 ports in North America and Europe and performs 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 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) 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.
SOURCE Genesee & Wyoming Inc.
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 MONTHS ENDED MARCH 31, 2009 AND 2008
(In thousands, except per share amounts)
(unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2009 | 2008 | |||||||
OPERATING REVENUES | $ | 138,458 | $ | 140,681 | ||||
OPERATING EXPENSES | 112,358 | 119,375 | ||||||
INCOME FROM OPERATIONS | 26,100 | 21,306 | ||||||
INTEREST INCOME | 182 | 585 | ||||||
INTEREST EXPENSE | (7,180 | ) | (3,909 | ) | ||||
OTHER INCOME, NET | 42 | 98 | ||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES | 19,144 | 18,080 | ||||||
PROVISION FOR INCOME TAXES | 5,163 | 6,819 | ||||||
INCOME FROM CONTINUING OPERATIONS, NET OF TAX | 13,981 | 11,261 | ||||||
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX | (33 | ) | (839 | ) | ||||
NET INCOME | 13,948 | 10,422 | ||||||
LESS: NET INCOME ATTRIBUTABLE TO THE NONCONTROLLING INTEREST | (1 | ) | (25 | ) | ||||
NET INCOME ATTRIBUTABLE TO GENESEE & WYOMING INC. | $ | 13,947 | $ | 10,397 | ||||
BASIC EARNINGS PER SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS: | ||||||||
BASIC EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS | $ | 0.42 | $ | 0.36 | ||||
BASIC LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS | - | (0.03 | ) | |||||
BASIC EARNINGS PER COMMON SHARE | $ | 0.42 | $ | 0.33 | ||||
WEIGHTED AVERAGE SHARES - BASIC | 33,467 | 31,498 | ||||||
DILUTED EARNINGS PER SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS: | ||||||||
DILUTED EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS | $ | 0.38 | $ | 0.31 | ||||
DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS | - | (0.02 | ) | |||||
DILUTED EARNINGS PER COMMON SHARE | $ | 0.38 | $ | 0.29 | ||||
WEIGHTED AVERAGE SHARES - DILUTED | 36,370 | 36,033 |
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2009 AND DECEMBER 31, 2008
(In thousands)
(unaudited)
March 31, | December 31, | |||||||
2009 | 2008 | |||||||
ASSETS | ||||||||
CURRENT ASSETS: | ||||||||
Cash and cash equivalents | $ | 31,134 | $ | 31,693 | ||||
Accounts receivable, net | 109,127 | 120,874 | ||||||
Materials and supplies | 7,272 | 7,708 | ||||||
Prepaid expenses and other | 12,019 | 12,270 | ||||||
Current assets of discontinued operations | 1,530 | 1,676 | ||||||
Deferred income tax assets, net | 18,101 | 18,101 | ||||||
Total current assets | 179,183 | 192,322 | ||||||
PROPERTY AND EQUIPMENT, net | 995,735 | 998,995 | ||||||
INVESTMENT IN UNCONSOLIDATED AFFILIATES | 4,987 | 4,986 | ||||||
GOODWILL | 151,624 | 150,958 | ||||||
INTANGIBLE ASSETS, net | 222,072 | 223,442 | ||||||
DEFERRED INCOME TAX ASSETS, net | 16,540 | 16,578 | ||||||
Total assets | $ | 1,570,141 | $ | 1,587,281 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
CURRENT LIABILITIES: | ||||||||
Current portion of long-term debt | $ | 27,007 | $ | 26,034 | ||||
Accounts payable | 107,404 | 124,162 | ||||||
Accrued expenses | 35,274 | 37,903 | ||||||
Current liabilities of discontinued operations | 980 | 1,121 | ||||||
Deferred income tax liabilities, net | 2 | 192 | ||||||
Total current liabilities | 170,667 | 189,412 | ||||||
LONG-TERM DEBT, less current portion | 525,788 | 535,231 | ||||||
DEFERRED INCOME TAX LIABILITIES, net | 239,157 | 234,979 | ||||||
DEFERRED ITEMS - grants from outside parties | 113,934 | 113,302 | ||||||
OTHER LONG-TERM LIABILITIES | 27,073 | 34,943 | ||||||
TOTAL STOCKHOLDERS' EQUITY | 493,522 | 479,414 | ||||||
Total liabilities and stockholders' equity | $ | 1,570,141 | $ | 1,587,281 |
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
(In thousands)
(unaudited)
Three Months Ended March 31, | ||||||||
2009 | 2008 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 13,948 | $ | 10,422 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Loss from discontinued operations, net of tax | 33 | 839 | ||||||
Depreciation and amortization | 11,506 | 9,199 | ||||||
Compensation cost related to equity awards | 1,564 | 1,338 | ||||||
Excess tax benefits from share-based compensation | (10 | ) | (845 | ) | ||||
Deferred income taxes | 2,240 | 2,826 | ||||||
Net gain on sale of assets | (239 | ) | (550 | ) | ||||
Changes in assets and liabilities which provided (used) cash, net of effect of acquisitions: | ||||||||
Accounts receivable, net | 5,253 | (2,994 | ) | |||||
Materials and supplies | 368 | (268 | ) | |||||
Prepaid expenses and other | 175 | 594 | ||||||
Accounts payable and accrued expenses | (9,264 | ) | (12,716 | ) | ||||
Other assets and liabilities, net | (42 | ) | 256 | |||||
Net cash provided by operating activities from continuing operations | 25,532 | 8,101 | ||||||
Net cash used in operating activities from discontinued operations | (411 | ) | (776 | ) | ||||
Net cash provided by operating activities | 25,121 | 7,325 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of property and equipment | (20,701 | ) | (15,664 | ) | ||||
Grant proceeds from outside parties | 3,771 | 10,360 | ||||||
Cash paid for acquisitions, net | (5,780 | ) | (3,613 | ) | ||||
Proceeds from disposition of property and equipment | 3,631 | 1,897 | ||||||
Net cash used in investing activities from continuing operations | (19,079 | ) | (7,020 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Principal payments on long-term borrowings, including capital leases | (76,671 | ) | (30,058 | ) | ||||
Proceeds from issuance of long-term debt | 69,000 | 17,500 | ||||||
Net proceeds from employee stock purchases | 660 | 2,353 | ||||||
Excess tax benefits from share-based compensation | 10 | 845 | ||||||
Net cash used in financing activities from continuing operations | (7,001 | ) | (9,360 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 242 | 1,067 | ||||||
CHANGE IN CASH BALANCES INCLUDED IN CURRENT ASSETS OF DISCONTINUED OPERATIONS | 158 | 41 | ||||||
DECREASE IN CASH AND CASH EQUIVALENTS | (559 | ) | (7,947 | ) | ||||
CASH AND CASH EQUIVALENTS, beginning of period | 31,693 | 46,684 | ||||||
CASH AND CASH EQUIVALENTS, end of period | $ | 31,134 | $ | 38,737 |
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended | ||||||||||||||||
March 31, | ||||||||||||||||
2009 | 2008 | |||||||||||||||
% of | % of | |||||||||||||||
Amount | Revenue | Amount | Revenue | |||||||||||||
Revenues: | ||||||||||||||||
Freight | $ | 89,166 | 64.4 | % | $ | 87,728 | 62.4 | % | ||||||||
Non-freight | 49,292 | 35.6 | % | 52,953 | 37.6 | % | ||||||||||
Total revenues | $ | 138,458 | 100.0 | % | $ | 140,681 | 100.0 | % | ||||||||
Operating Expense Comparison: | ||||||||||||||||
Natural Classification | ||||||||||||||||
Labor and benefits | $ | 49,964 | 36.1 | % | $ | 46,117 | 32.8 | % | ||||||||
Equipment rents | 7,890 | 5.7 | % | 8,381 | 6.0 | % | ||||||||||
Purchased services | 9,311 | 6.7 | % | 10,837 | 7.7 | % | ||||||||||
Depreciation and amortization | 11,506 | 8.3 | % | 9,199 | 6.5 | % | ||||||||||
Diesel fuel used in operations | 8,993 | 6.5 | % | 15,785 | 11.2 | % | ||||||||||
Diesel fuel sold to third parties | 3,389 | 2.4 | % | 8,567 | 6.1 | % | ||||||||||
Casualties and insurance | 3,584 | 2.6 | % | 4,234 | 3.0 | % | ||||||||||
Materials | 5,603 | 4.1 | % | 6,105 | 4.4 | % | ||||||||||
Net gain on sale of assets | (239 | ) | -0.2 | % | (550 | ) | -0.4 | % | ||||||||
Other expenses | 12,357 | 8.9 | % | 10,700 | 7.6 | % | ||||||||||
Total operating expenses | $ | 112,358 | 81.1 | % | $ | 119,375 | 84.9 | % | ||||||||
Functional Classification | ||||||||||||||||
Transportation | $ | 43,129 | 31.1 | % | $ | 47,856 | 34.0 | % | ||||||||
Maintenance of ways and structures | 13,433 | 9.7 | % | 12,968 | 9.3 | % | ||||||||||
Maintenance of equipment | 17,108 | 12.4 | % | 17,941 | 12.8 | % | ||||||||||
Diesel fuel sold to third parties | 3,389 | 2.4 | % | 8,567 | 6.1 | % | ||||||||||
General and administrative | 24,032 | 17.4 | % | 23,394 | 16.6 | % | ||||||||||
Net gain on sale of assets | (239 | ) | -0.2 | % | (550 | ) | -0.4 | % | ||||||||
Depreciation and amortization | 11,506 | 8.3 | % | 9,199 | 6.5 | % | ||||||||||
Total operating expenses | $ | 112,358 | 81.1 | % | $ | 119,375 | 84.9 | % |
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUE, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenue per carload)
(unaudited)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||
March 31, 2009 | March 31, 2008 | |||||||||||||||||||||||
Freight | Average Revenues | Freight | Average Revenues | |||||||||||||||||||||
Commodity Group | Revenues | Carloads | Per Carload | Revenues | Carloads | Per Carload | ||||||||||||||||||
Coal, Coke & Ores | $ | 21,117 | 57,946 | $ | 364 | $ | 16,746 | 45,480 | $ | 368 | ||||||||||||||
Pulp & Paper | 13,400 | 24,086 | 556 | 18,013 | 29,926 | 602 | ||||||||||||||||||
Farm & Food Products | 10,803 | 26,392 | 409 | 10,887 | 17,932 | 607 | ||||||||||||||||||
Metals | 9,467 | 19,338 | 490 | 9,519 | 19,127 | 498 | ||||||||||||||||||
Minerals & Stone | 8,507 | 31,250 | 272 | 9,214 | 31,653 | 291 | ||||||||||||||||||
Chemicals-Plastics | 8,358 | 12,808 | 653 | 7,423 | 11,377 | 652 | ||||||||||||||||||
Lumber & Forest Products | 6,616 | 14,715 | 450 | 7,972 | 18,137 | 440 | ||||||||||||||||||
Petroleum Products | 5,689 | 7,887 | 721 | 5,007 | 7,451 | 672 | ||||||||||||||||||
Autos & Auto Parts | 1,104 | 1,708 | 646 | 1,755 | 3,345 | 525 | ||||||||||||||||||
Intermodal | 52 | 174 | 299 | 124 | 259 | 478 | ||||||||||||||||||
Other | 4,053 | 18,135 | 223 | 1,068 | 4,740 | 225 | ||||||||||||||||||
Totals | $ | 89,166 | 214,439 | 416 | $ | 87,728 | 189,427 | 463 |
Reconciliation of non-GAAP Financial Measure
This earnings release contains free cash flow, which is a "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 this non-GAAP financial measure to its most directly comparable U.S. GAAP measure.
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. 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):
Three Months Ended March 31, | ||||||||
2009 | 2008 | |||||||
Net cash provided by operating activities from continuing operations | $ | 25.5 | $ | 8.1 | ||||
Net cash used in investing activities from continuing operations | (19.1 | ) | (7.0 | ) | ||||
Cash paid for acquisitions, net of cash acquired | 5.8 | 3.6 | ||||||
Free cash flow | $ | 12.2 | $ | 4.7 |