(Genesee & Wyoming issued the following news release on November 2.)
GREENWICH, Conn. — Genesee & Wyoming Inc. reported today that net income in the third quarter of 2004 increased 33.2% to $10.1 million, compared to net income of $7.6 million in the third quarter of 2003. GWI’s diluted earnings per share in the third quarter of 2004 increased 37.0% to $0.37 with 27.5 million shares outstanding, compared to diluted earnings per share of $0.27 with 26.8 million shares outstanding in the third quarter of 2003. (Note that prior to GWI’s adoption of Emerging Issues Task Force Bulletin Issue No. 03-06 under FASB Statement No. 128 which became effective June 30, 2004, GWI’s diluted EPS for the third quarter of 2003 were $0.29.)
In the third quarter of 2004, GWI’s North American revenue increased 25.6% to $77.2 million, compared to $61.5 million in the third quarter of 2003. Of this $15.7 million increase in revenue, $9.4 million was same-railroad growth and $6.3 million was from the acquisition of rail lines from Georgia-Pacific Corp. The 15.4% growth in same-railroad revenue was balanced across multiple commodity groups, with particular strength in coal shipments which increased by $2.2 million, or 24.1%.
GWI’s North American operating income in the third quarter of 2004 increased 43.4% to $13.2 million, compared with $9.2 million in the third quarter of 2003. The North American operating ratio improved by 2.1% to 82.9% in the third quarter of 2004, compared with an operating ratio of 85.0% in the third quarter of 2003. Operating costs in the third quarter of 2004 were adversely affected by track washouts and flood damage in GWI’s New York- Pennsylvania Region caused by the remnants of Hurricane Ivan as well as a 37.0% increase in the average price per gallon of diesel fuel compared to the same period last year.
In Australia, revenue at GWI’s 50%-owned subsidiary, Australian Railroad Group (ARG), increased 35.6% to US$83.7 million in the third quarter of 2004, compared with US$61.7 million in the third quarter of 2003. This US$22.0 million increase in revenue was composed of US$13.1 million in grain, US$2.1 million in other ores and minerals and US$6.8 million in all other revenues. In Australian dollars, ARG’s revenue increased 27.7% in the third quarter of 2004 compared with the third quarter of 2003.
ARG’s operating income in the third quarter of 2004 increased 49.8% to US$16.7 million, compared with operating income of US$11.2 million in the third quarter of 2003. ARG’s operating ratio was 80.0% in the third quarter of 2004, compared with 81.9% in the third quarter of 2003. The improvement in operating ratio was largely the result of shipping a larger grain harvest in the third quarter of 2004, partially offset by higher contract driver costs due to a locomotive engineer shortage in Australia, and a 35.1% increase in the price of diesel fuel. Equity income from ARG in the third quarter of 2004 was US$3.5 million, a 30.0% increase over equity income of US$2.7 in the third quarter of 2003. In comparing the third quarter of 2004 with the third quarter of 2003, the Australian dollar strengthened 7.1%.
For the nine months ended September 30, 2004, GWI reported net income of $30.4 million, of which $19.2 million (63.1%) was from North America, $10.7 million (35.3%) was from Australia and $0.5 million (1.6%) was from South America. This represents a 46.1% increase over $20.8 million of net income reported in the nine months ended September 30, 2003. GWI’s diluted earnings per share increased 47.3% to $1.09 in the first nine months of 2004 (with 27.4 million shares outstanding), compared with $0.74 in the first nine months of 2003 (with 26.7 million shares outstanding).
For the nine months ended September 30, 2004, GWI’s North American operations generated Free Cash Flow of $27.8 million (defined as Cash from Operations of $41.5 million less Cash used in Investing of $15.8 million less Cash used for Acquisitions of $2.1 million) compared with $24.7 million of Free Cash Flow (defined as Cash from Operations of $38.2 million less Cash used in Investing of $13.5 million less Cash used for Acquisitions of $0) in the same period of 2003. Free Cash Flow in the third quarter of 2004 included the repayment of subordinated notes of US$5.4 million from ARG and US$0.4 million from GWI’s equity investment in Bolivia. See the attached schedule for a description and discussion of Free Cash Flow.
Mortimer B. Fuller III, Chairman and Chief Executive Officer of GWI, commented, “Our U.S. and Canadian regions continue to grow extremely well, as illustrated by the 15.4% same railroad growth in the third quarter. Traffic in all of our coal-shipping regions — Illinois, Utah and New York- Pennsylvania — remained strong. The excellent business conditions not only offset significant increases in the price of diesel fuel but also enabled us to absorb the damage to our infrastructure in Pennsylvania from heavy rains. I commend the hard work and dedication of our New York-Pennsylvania employees who worked around the clock to ensure that flood damage to the railroad was minimized.”
Mr. Fuller continued, “In Australia, ARG’s third quarter earnings increased 30.0% due primarily to strong grain shipments. However, ARG’s operating margins suffered from the impact of driver shortages and the continuing rise in the cost of diesel fuel. ARG is diligently executing a plan to hire and train new locomotive drivers to mitigate these costs and is also expecting to recapture a significant portion of the fuel costs under the provisions of many of customer contracts later this year and into 2005.”
GWI also announced today that its Board has authorized the repurchase of up to 1,000,000 shares of its common stock. GWI intends to use the repurchased stock to offset dilution caused by the issuance of shares in connection with GWI’s employee and director stock plans that may occur over time. Purchases may be made in the open market or in privately negotiated transactions from time to time at management’s discretion.
As previously announced, GWI’s conference call to discuss financial results for the third quarter will be held today at 11:00AM (Eastern Time). The dial-in number for the teleconference is (888) 428-4480 or the call may be accessed live over the Internet (listen only) directly at http://phx.corporate-ir.net/phoenix.zhtml?c=64426&p=irol-irhome or via the Investors tab of Genesee & Wyoming’s website (http://www.gwrr.com). An audio replay of the conference call will be accessible via the Investors tab of Genesee & Wyoming’s website starting this afternoon.
GWI is a leading operator of short line and regional freight railroads in the United States, Canada, Mexico, Australia and Bolivia. The Company operates over 8,100 miles of owned and leased track and more than 3,000 additional miles under track access arrangements.