(Source: Genesee & Wyoming press release, October 31, 2014)
DARIEN, Conn. — Genesee & Wyoming Inc. (GWI) announced third-quarter operating revenue on October 31, 2014.
Third Quarter 2014 Highlights
• Total operating revenues increased 7.8% to $432.5 million.
• Adjusted income from operations increased 16.7% to $122.6 million; Reported income from operations increased 21.0% to $123.1 million. (1)
• Adjusted operating ratio improved 2.1 percentage points to 71.7%; Reported operating ratio of 71.5% (71.4% North American & European Operations; 72.3% Australian Operations). (1)
• Adjusted income before income taxes (pre-tax income) increased 19.1% to $109.3 million; Reported income before income taxes increased 24.1% to $109.8 million. (1)
• Adjusted diluted earnings per common share (EPS) were $1.21, a 16.3% increase; Reported diluted EPS were $1.27, a 9.5% increase. (1)
Jack Hellmann, President and CEO of G&W, commented, “We are pleased with our results for the third quarter of 2014, as revenue increased approximately 8%, our adjusted operating ratio improved 2.1 percentage points to 71.7%, and our adjusted pre-tax income increased approximately 19%. In North America, our business was strong in the third quarter, with 7% growth in same railroad freight revenue, led by frac sand, salt, steel and agricultural products. Meanwhile, the newly established Rapid City, Pierre & Eastern Railroad (RCP&E) performed well, as we benefited from the record harvest in South Dakota and improved the railroad’s fluidity with connecting carriers.” (1)
“In Australia, our business was slightly weaker in the third quarter, with revenue in Australian dollars down approximately 2%, as intermodal and agricultural shipments weakened and track access income declined due to the previously announced closure of an iron ore mine.”
“Looking ahead, we remain optimistic about the strength of our North American business, which represents 80% of total revenues, and cautious about weakness in our Australian business, which represents 20% of total revenues, due to lower iron ore shipments resulting from a significant decline in iron ore prices. Meanwhile, we continue to actively evaluate several acquisition and investment opportunities in North America and internationally.”
Financial Results
G&W reported net income in the third quarter of 2014 of $72.9 million, compared with net income of $66.2 million in the third quarter of 2013. Excluding the net impact of certain significant items discussed below, G&W’s adjusted net income in the third quarter of 2014 was $69.3 million, compared with adjusted net income of $59.8 million in the third quarter of 2013. (1)
G&W’s reported diluted EPS in the third quarter of 2014 were $1.27 with 57.0 million weighted average shares outstanding, compared with reported diluted EPS in the third quarter of 2013 of $1.16 with 56.7 million weighted average shares outstanding. G&W’s adjusted diluted EPS in the third quarter of 2014 were $1.21 with 57.0 million weighted average shares outstanding, compared with adjusted diluted EPS in the third quarter of 2013 of $1.04 with 56.7 million weighted average shares outstanding. (1)
G&W’s effective income tax rate was 33.6% in the third quarter of 2014, compared with 25.1% in the third quarter of 2013. G&W’s effective income tax rate in the third quarter of 2014 included a $3.9 million tax benefit as a result of receiving IRS consent to change tax accounting methods retroactively for companies acquired as a result of the RailAmerica, Inc. (RailAmerica) acquisition. Excluding the RailAmerica-related tax benefit, G&W’s adjusted effective income tax rate was 37.2% in the third quarter of 2014. (1) The higher adjusted income tax rate in the third quarter of 2014, compared with the third quarter of 2013, was driven primarily by the expiration of the United States short line tax credit on December 31, 2013. G&W’s effective income tax rates also include adjustments to reflect differences between book income tax expense and final tax returns filed in September of each year related to the previous fiscal year.
In the third quarter of 2014 and 2013, G&W’s results included certain items affecting comparability between the periods. These items are set forth in the a table available at the link above.
Third Quarter Results
In the third quarter of 2014, G&W’s total operating revenues increased $31.2 million, or 7.8%, to $432.5 million, compared with $401.4 million in the third quarter of 2013. The increase included $19.0 million in revenues from RCP&E. These revenue increases were partially offset by a $0.7 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 RCP&E, increased $12.9 million, or 3.2%.
G&W’s same railroad freight revenues in the third quarter of 2014 were $313.9 million, compared with $298.9 million in the third quarter of 2013. Excluding a $0.4 million decrease from the net impact of foreign currency depreciation, G&W’s same railroad freight revenues increased by $15.4 million, or 5.1%.
G&W’s same railroad non-freight revenues in the third quarter of 2014 were $99.6 million, compared with $102.5 million in the third quarter of 2013. Excluding a $0.3 million decrease from the net impact of foreign currency depreciation, G&W’s same railroad non-freight revenues decreased by $2.5 million, or 2.5%, primarily due to less construction revenues as compared to the prior year.
G&W’s traffic in the third quarter of 2014 increased 37,077 carloads, or 7.7%, to 519,900 carloads. Excluding 15,644 carloads from the RCP&E, same railroad traffic in the third quarter of 2014 increased 21,433 carloads, or 4.4%. The same railroad traffic increase was principally due to increases of 8,991 carloads of minerals and stone traffic (primarily in the Ohio Valley and Central regions), 3,851 carloads of traffic from G&W’s other commodity group (primarily overhead Class I shipments), 2,580 carloads of metals traffic (primarily in the Ohio Valley Region), 2,376 carloads of coal and coke traffic (primarily in the Ohio Valley and Central regions) and 2,165 carloads of lumber and forest products traffic (primarily in the Pacific and Southern regions), partially offset by a 2,562 carload decrease in intermodal traffic (due to a 1,460 carload decrease in shipments primarily in the Australia and Canada regions and a 1,102 decrease due to a classification change affecting traffic for a customer in North America that was previously reported in the intermodal commodity group in the third quarter of 2013 and has been reported based on the underlying commodity shipped since December 2013). All remaining traffic increased by a net 4,032 carloads.
G&W’s income from operations in the third quarter of 2014 was $123.1 million, compared with $101.7 million in the third quarter of 2013. G&W’s operating ratio in the third quarter of 2014 was 71.5%, compared with an operating ratio of 74.7% in the third quarter of 2013. Income from operations in the third quarter of 2014 included business development and related costs of $0.7 million, partially offset by net gain on sale of assets of $1.2 million. Income from operations in the third quarter of 2013 included $2.0 million of depreciation and amortization expense not related to the current period resulting from the finalization of G&W’s assignment of fair values to the assets and liabilities we assumed from RailAmerica and $2.0 million of RailAmerica integration costs, partially offset by net gain on sale of assets of $0.7 million. Excluding these items, G&W’s adjusted income from operations increased $17.6 million, or 16.7%, to $122.6 million in the third quarter of 2014, and G&W’s adjusted operating ratio improved 2.1 percentage points to 71.7% in the third quarter of 2014, compared with 73.8% in the third quarter of 2013. (1)
See link above for more details financial reporting and related information.