(Source: Genesee & Wyoming press release, February 11, 2013)
DARIEN, Conn. — Genesee & Wyoming Inc. released fourth quarter 2013 financial information on February 11, 2014.
Fourth Quarter Highlights
• Reported diluted earnings per common share (EPS) of $1.03; adjusted diluted EPS of $1.07, a 35.4% increase in adjusted diluted EPS and a 19.0% increase in adjusted diluted EPS normalizing for the impact of the 2013 short line tax credit. (1)
• Total operating revenues increased 72.3% to $391.7 million.
• Combined Company adjusted operating revenues, excluding the net impact from foreign currency depreciation and fuel sales to third parties, increased 8.2%. (2)
• To provide comparative context for 2013 consolidated revenues and traffic volumes, G&W is providing “Combined Company” comparisons as though the RailAmerica railroads were controlled by G&W during 2012. In doing so, G&W has reclassified RailAmerica’s 2012 information to conform with G&W’s presentation.
• Adjusted income from operations increased 65.6% to $95.7 million; Reported income from operations increased 181.7% to $94.8 million. (3)
• Adjusted operating ratio increased 100 basis points to 75.6% (excluding RailAmerica integration and acquisition-related costs, business development and financing costs and net gain on sale of assets); Reported operating ratio of 75.8% (77.2% North American & European Operations; 70.4% Australian Operations). (3)
Jack Hellmann, President and CEO of G&W, commented, “The overall trajectory of our business continues to be positive, with adjusted diluted EPS increasing 19% in the fourth quarter of 2013. However, G&W’s fourth quarter financial results were weaker than we expected. While carload levels were consistent with our expectations, with the exception of delayed movements in Australian grain, our operating income was lower than projected for three main reasons. First, the strengthening of the U.S. dollar reduced our income translation from Australia and Canada. Second, we experienced two costly derailments in the quarter, one in Alabama in November and another in the Northern Territory of Australia in December. Third, our diesel fuel consumption was unusually high due to extremely cold temperatures in the United States and Canada.” (1)
“For the year, our 2013 results were uniformly strong. Our safety results led the rail industry for the 5th consecutive year, we successfully integrated the $2 billion acquisition of RailAmerica, we generated record free cash flow, and our adjusted diluted earnings per share increased 50%.” (1)(4)
“We expect our positive momentum to continue in 2014, although the year is starting slowly due to extreme winter weather in North America. Our Australian business continues to perform well, we have completed necessary management changes following the RailAmerica acquisition and we have enhanced our North American commercial capabilities. With the expiration of the short line tax credit on December 31, 2013, the easiest way to visualize our business outlook for 2014 is growth in pre-tax income of approximately 20%, compared with our 2013 adjusted pre-tax income. Also, we expect additional earnings growth to be contributed by our recently announced acquisition of the western end of the Dakota Minnesota & Eastern railroad from Canadian Pacific, pending approval by the U.S. Surface Transportation Board.” (1)
Financial Results
G&W reported net income in the fourth quarter of 2013 of $58.1 million, compared with net income of $13.4 million in the fourth quarter of 2012. Excluding the net impact of certain significant items discussed below, G&W’s adjusted net income in the fourth quarter of 2013 was $60.6 million, compared with adjusted net income of $44.2 million in the fourth quarter of 2012. (1)
G&W’s reported diluted EPS in the fourth quarter of 2013 were $1.03 with 56.8 million weighted average shares outstanding, compared with diluted EPS in the fourth quarter of 2012 of $0.18 with 50.6 million weighted average shares outstanding. Excluding the net impact of significant items discussed below, G&W’s adjusted diluted EPS in the fourth quarter of 2013 were $1.07 with 56.8 million weighted average shares outstanding, compared with adjusted diluted EPS in the fourth quarter of 2012 of $0.79 with 56.6 million weighted average shares outstanding. (1)
G&W’s effective income tax rate was 29.0% in the fourth quarter of 2013, or an adjusted effective income tax rate of 26.8% after giving effect for the significant items discussed below. (1) The lower income tax rate in the fourth quarter of 2013, compared with the fourth quarter of 2012, was driven primarily by the extension of the United States Short Line Tax Credit on January 2, 2013, which had previously expired on December 31, 2011.
In the fourth quarter of 2013 and 2012, G&W’s results included certain significant items that are set forth in a table ($ in millions, except per share amounts) on the G&W website (see link above).
Explanation of Significant Items
In the fourth quarter of 2013, G&W’s results included RailAmerica integration and acquisition-related costs of $1.0 million, $1.2 million of business development and financing costs, primarily related to the recently announced pending acquisition of the western end of the Dakota Minnesota & Eastern railroad from Canadian Pacific (which we expect to be operated by our new railroad, Rapid City Pierre and Eastern (RCP&E)), net gain on sale of assets of $1.3 million and a valuation allowance on foreign tax credits (FTC) generated in prior years of $2.0 million (after-tax). In the fourth quarter of 2012, G&W incurred $23.5 million of RailAmerica integration and acquisition-related costs, primarily associated with closing costs and severance benefits for RailAmerica senior executives and $16.7 million of business development and financing costs, primarily associated with the financing of the RailAmerica acquisition. In the fourth quarter of 2012, G&W also recorded $1.4 million in net gains on the Edith River Bridge-related insurance recoveries and the sale of assets and incurred $1.1 million of expense associated with the termination of a contract with a track maintenance service provider in Australia. In addition, RailAmerica’s reported equity earnings included $3.5 million (after-tax) of expense associated with the integration, primarily related to severance obligations.
Quarterly Results
In the fourth quarter of 2013, G&W’s total operating revenues increased $164.4 million, or 72.3%, to $391.7 million, compared with $227.3 million in the fourth quarter of 2012. The increase included $152.9 million in revenues from new operations, partially offset by a $9.4 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar. Excluding the net impact from foreign currency depreciation, G&W’s same railroad operating revenues, which exclude former RailAmerica railroads, increased $20.9 million, or 9.2%.
G&W’s same railroad freight revenues in the fourth quarter of 2013 were $178.5 million, compared with $165.4 million in the fourth quarter of 2012. Excluding a $7.7 million decrease from the impact of foreign currency depreciation, G&W’s same railroad freight revenues increased by $20.7 million, or 12.5%.
G&W’s same railroad non-freight revenues in the fourth quarter of 2013 were $60.3 million, compared with $61.9 million in the fourth quarter of 2012. Excluding a $1.8 million decrease from the net impact of foreign currency depreciation, G&W’s same railroad non-freight revenues increased by $0.2 million.
In the fourth quarter of 2013, Combined Company operating revenues increased $18.5 million, or 5.0%, to $391.7 million. Excluding a $10.3 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar and a $0.9 million decrease in third-party fuel sales, Combined Company adjusted operating revenues increased by $29.8 million, or 8.2%. Combined Company adjusted freight revenues increased by $29.6 million, or 11.0%, to $297.5 million in the fourth quarter of 2013, excluding $8.2 million from the impact of foreign currency depreciation. Combined Company adjusted non-freight revenues increased by $0.2 million, or 0.2%, to $94.2 million in the fourth quarter of 2013, excluding a $2.1 million decrease from the net impact of foreign currency depreciation and a $0.9 million decrease in third-party fuel sales. (2)
G&W’s traffic in the fourth quarter of 2013 was 471,906 carloads. On a Combined Company basis, traffic increased 32,988 carloads, or 7.5%, compared with traffic in the fourth quarter of 2012. The traffic increase was principally due to increases of 9,358 carloads of coal and coke traffic (primarily in the Central, Midwest and Ohio regions), 6,566 carloads of metallic ores traffic (primarily in the Australian Region), 4,515 carloads of agricultural products traffic (primarily in the Australian Region), 4,479 carloads of metals traffic (primarily in the Northeast and Mountain West regions) and 3,898 carloads of petroleum products traffic (primarily in the Pacific Region). All remaining traffic increased by a net 4,172 carloads.
G&W’s income from operations in the fourth quarter of 2013 was $94.8 million, compared with $33.7 million in the fourth quarter of 2012. G&W’s operating ratio in the fourth quarter of 2013 was 75.8%, compared with an operating ratio of 85.2% in the fourth quarter of 2012. Income from operations in the fourth quarter of 2013 included $1.0 million of RailAmerica integration and acquisition-related costs, $1.2 million of business development and financing costs and net gain on sale of assets of $1.3 million. Income from operations in the fourth quarter of 2012 included $23.5 million of RailAmerica integration and acquisition-related costs, primarily associated with closing costs and severance benefits, a $1.1 million contract termination payment in Australia associated with outsourced maintenance of way activities and business development and financing costs of $1.0 million, partially offset by $1.4 million of gains on insurance recoveries and sale of assets. Excluding these items, G&W’s adjusted income from operations increased $37.9 million, or 65.6%, to $95.7 million. G&W’s adjusted operating ratio increased 100 basis points to 75.6% in the fourth quarter of 2013, compared with 74.6% in the fourth quarter of 2012. (3)
Consolidated Annual Results
G&W reported net income for the year ended December 31, 2013 of $272.1 million ($318.4 million pre-tax), compared with net income of $52.4 million ($83.3 million pre-tax) for the year ended December 31, 2012. Excluding the impact of certain significant items listed below that primarily related to the RailAmerica acquisition, G&W’s adjusted net income for the year ended December 31, 2013 was $242.0 million ($332.9 million adjusted pre-tax), compared with adjusted net income of $129.7 million ($170.0 million adjusted pre-tax) for the year ended December 31, 2012. (1)
G&W’s diluted EPS for the year ended December 31, 2013 were $4.79 with 56.7 million weighted average shares outstanding, compared with diluted EPS of $1.02 with 51.3 million weighted average shares outstanding for the year ended December 31, 2012. Excluding the significant items listed below, G&W’s adjusted diluted EPS for the year ended December 31, 2013 were $4.26 with 56.7 million weighted average shares outstanding, compared with adjusted diluted EPS of $2.53 with 51.3 million weighted average shares outstanding for the year ended December 31, 2012. (1)