(Source: Genesee & Wyoming press release, February 8, 2012)
GREENWICH, Conn. — Genesee & Wyoming Inc. (GWI) reported net income in the fourth quarter of 2011 of $33.3 million, compared with net income of $19.9 million in the fourth quarter of 2010. GWI’s diluted earnings per share (EPS) in the fourth quarter of 2011 were $0.77 with 42.9 million weighted average shares outstanding, compared with diluted EPS of $0.47 with 42.3 million weighted average shares outstanding in the fourth quarter of 2010.
GWI’s income from operations (operating income) in the fourth quarter of 2011 and for the 12 months ended December 31, 2011 was $45.4 million and $191.8 million respectively, with an operating ratio of 78.4% and 76.9% respectively.
Comments from the Chief Executive Officer
Jack Hellmann, President and CEO of GWI commented, “Our fourth quarter revenues increased 24% to $210 million and our adjusted operating income increased 22% to $45 million, with an adjusted operating ratio of 78.6% (1). Our diluted earnings per share of $0.77 were a Company-record for the fourth quarter. Nevertheless, our operating results in both North America and Australia were lower than our expectations. In North America, our results were affected by the extended outage of a transmission line to a major power plant, a lag in diesel fuel cost recovery and higher transportation expense. In Australia, our fourth quarter results were affected by the derailment resulting from the washout of a main line bridge over the Edith River by Cyclone Grant on December 27th, as well as higher operating expense in the Adelaide to Darwin corridor.”
“Our 2011 results were good. First, we completed the year with a reportable injury index of 0.53 per 200,000 man hours, which made our consolidated results the safest in the railroad industry for the third consecutive year. Second, our revenue increased 32% to $829 million, our adjusted operating income increased 35% to $191 million and our adjusted operating ratio was 77.0%, all Company records (1). Finally, our reported earnings per share increased more than 40%.”
“Looking ahead, we anticipate that our business will build over the course of 2012. During the first quarter of 2012, we expect our Australian operations to continue to be negatively impacted by the Edith River bridge closure until its scheduled reopening in mid-February and our North American operations to be adversely affected by lower steam coal shipments in the U.S. due to warm winter weather. Offsetting these items, we expect favorable 2012 contributions from the newly acquired Arizona Eastern Railway, the final delivery of new high horsepower locomotives for our Australian intermodal service in the second quarter, as well as the start-up of a new Australian iron ore contract in the fourth quarter of 2012. We believe that this ramp-up in our core business combined with several potential new investments in the natural resources sector in North America and Australia positions us well for the second half of 2012 and beyond.”
Results from Continuing Operations
In the fourth quarter of 2011, GWI’s total operating revenues increased $40.7 million, or 24.0%, to $210.4 million, compared with $169.7 million in the fourth quarter of 2010. The increase included $27.5 million in revenues from acquisitions and a $13.2 million, or 7.8%, increase in same railroad operating revenues. During the fourth quarter of 2011, the net appreciation of foreign currencies increased same railroad operating revenues by $0.8 million. Other than the $0.8 million net impact from foreign currency, GWI’s same railroad operating revenues increased $12.5 million, or 7.3%.
Same railroad freight revenues in the fourth quarter of 2011 increased by $11.1 million, or 10.4%, to $117.8 million, compared with $106.7 million in the fourth quarter of 2010. Other than a $0.4 million increase from the net impact of foreign currency appreciation, GWI’s same railroad freight revenues increased by $10.7 million, or 10.0%.
GWI’s traffic in the fourth quarter of 2011 was 246,794 carloads, an increase of 21,824 carloads, or 9.7%, compared with the fourth quarter of 2010. The increase in carloads included 19,030 carloads from acquisitions and an increase of 2,794 carloads, or 1.2%, from same railroad traffic in the fourth quarter of 2011. The same railroad traffic increase was principally due to increases of 6,257 carloads of metals traffic, 3,112 carloads of minerals and stone traffic, 2,149 carloads of farm and food products traffic, partially offset by a decline of 5,626 carloads of coal and coke traffic and 2,497 carloads of other commodity traffic. All remaining traffic decreased by a net 601 carloads.
Average same railroad freight revenues per carload increased 9.1% in the fourth quarter of 2011. The net appreciation of the Australian and Canadian dollars versus the U.S. dollar, higher fuel surcharges and changes in commodity mix increased average revenues per carload by 0.5%, 2.3% and 0.6%, respectively. Other than these factors, same railroad average freight revenues per carload increased 5.7%. Average freight revenues per carload were impacted by changes in the mix of customers within certain commodity groups, primarily coal and metals.
GWI’s same railroad non-freight revenues in the fourth quarter of 2011 increased by $2.1 million, or 3.3%, to $65.1 million compared with $63.0 million in the fourth quarter of 2010. Other than a $0.3 million increase from the net impact from foreign currency, GWI’s same railroad non-freight revenues increased by $1.8 million, or 2.8%, primarily due to higher railcar switching revenues in the U.S. and Canada.
GWI’s operating income in the fourth quarter of 2011 was $45.4 million, an increase of $21.5 million, compared with $23.9 million in the fourth quarter of 2010. The operating ratio was 78.4% in the fourth quarter of 2011 compared with an operating ratio of 85.9% in the fourth quarter of 2010. In the fourth quarter of 2011, operating income benefited $3.0 million from net gain/(loss) on the sale and impairment of assets, partially offset by Edith River derailment costs of $1.8 million and business/corporate development costs of $0.8 million. In the fourth quarter of 2010, operating income was reduced $24.0 million as a result of FreightLink acquisition-related expenses, partially offset by an $8.7 million gain from a legal settlement associated with a past acquisition and $2.2 million in gains on the sale of assets. Excluding these items, GWI’s adjusted operating ratio was 78.6% in the fourth quarter of 2011, compared with an adjusted operating ratio of 78.2% in the fourth quarter of 2010. (1)
GWI’s effective tax rate was 16.0% in the fourth quarter of 2011, which included acquisition-related tax benefits of approximately $1.9 million. The fourth quarter 2011 tax rate also reflects the benefit of a valuation allowance reduction of $0.9 million and a benefit of $1.2 million related to the cumulative effect of adjusting the first nine months of 2011 to the full year 2011 effective tax rate. GWI’s effective tax rate in the fourth quarter of 2010 was a negative 22.4%, driven primarily by the retroactive impact of the Short Line Tax Credit for the first nine months of 2010 of $7.8 million. The Short Line Tax Credit was extended during the fourth quarter of 2010 for the period from January 1, 2010, through December 31, 2011.