GREENWICH, Conn. — Genesee & Wyoming Inc. (GWI) reported financial results for its third quarter ended September 30, 2002. Net income for the third quarter of 2002 was $7.0 million compared with net income of $4.5 million in the third quarter of 2001. GWI’s diluted earnings per share in the third quarter of 2002 was $0.40 with 17.6 million shares outstanding compared with $0.35 per share in the third quarter of 2001 with 12.9 million shares outstanding. Excluding the results of its discontinued logistics subsidiary, which ceased operations September 30, 2001, GWI’s net income for the third quarter of 2001 was $5.4 million with diluted earnings per share of $0.42.
In the third quarter of 2002, GWI’s revenue increased 26.0% to $53.0 million compared with $42.0 million in the third quarter of 2001. Of this $11.0 million increase in revenue, $6.1 million was from the acquisition of Emons Transportation, $3.8 million was from the acquisition of South Buffalo Railway, and $1.8 million was from the acquisition of Utah Railway. Same railroad revenue decreased $750,000 in the third quarter of 2002.
GWI’s operating income was $7.4 million in the third quarter of 2002 compared with $5.1 million in the third quarter of 2001, as its operating ratio was 86.1% in the 2002 quarter versus 87.9% in the 2001 quarter. As previously reported, GWI’s Mexican operations were struck by Hurricane Isidore in the third quarter of 2002, resulting in lost revenue and track washouts. Excluding Mexico’s operating results, GWI’s operating ratio was 84.1% in the third quarter of 2002. This compares with an operating ratio of 84.8% in the third quarter of 2001, excluding the results of the discontinued logistics subsidiary.
In Australia, revenue in the third quarter of 2002 from GWI’s 50% owned subsidiary, the Australian Railroad Group (ARG), increased 13.8% to US$53.2 million compared with US$46.7 million in the third quarter of 2001. Significant revenue increases included US$3.8 million from the construction of the Alice Springs to Darwin rail line, US$1.6 million from grain shipments, and US$1.5 million from iron ore shipments.
ARG’s operating income in the third quarter of 2002 was US$13.1 million, compared with US$13.1 million in the third quarter of 2001. ARG’s operating ratio in the third quarter of 2002 was 75.4%, compared with 71.9% in the third quarter of 2001. The deterioration in the operating ratio was primarily the result of defects in rolling stock that resulted in over US$1.5 million of track damage in the third quarter of 2002. GWI’s equity income from ARG in the third quarter of 2002 was US$2.7 million, compared with US$2.7 million in the third quarter of 2001.
Equity income from GWI’s 22.9% indirect ownership of a Bolivian railroad, Empresa Ferroviaria Oriental, S.A., was US$0.5 million in the third quarter of 2002 compared with US$0.2 million in the third quarter of 2001. Bolivian results were led by strong shipments of steel pipe and soya-related products.
For the nine months ended September 30, 2002, GWI reported net income of $19.8 million, of which $11.6 million (58.3%) was from North America, $7.2 million (36.5%) was from Australia and $1.0 million (5.2%) was from South America. This compares with $16.2 million of net income in the nine months ended September 30, 2001, or $13.6 million excluding a purchase price adjustment for the sale of 50% of its interest in the Asia Pacific Transport Consortium (APTC). GWI’s diluted earnings per share were $1.13 in the first nine months of 2002 (with 17.6 million shares outstanding) compared with $1.28 in the first nine months of 2001 (with 12.7 million shares outstanding), or $1.07 excluding the purchase price adjustment.
Mortimer B. Fuller III, Chairman and Chief Executive Officer of GWI, commented, “The third quarter of 2002 was an unusual one. The strengths of the quarter — coal shipments in Illinois, good cost control in New York- Pennsylvania, record results in Bolivia — were negatively impacted by incidents-principally Hurricane Isidore in Mexico and derailments in Australia due to wagon mechanical defects. The underlying strength of our growing company was to absorb costs related to these events and still produce acceptable results.”
Mr. Fuller continued, “We continue to be optimistic about the twelve month outlook for GWI in North America thanks to our recent acquisitions in Utah and Oregon. In addition, our acquisition capacity should increase significantly as we anticipate closing on our new $250 million senior credit facility within a few days. Despite our current expectations for a weaker grain harvest in both South Australia and Western Australia in 2003, which will be partially offset by carry-over tonnage from last season’s harvest, we still expect healthy growth in earnings per share next year.”
GWI is a leading operator of short line and regional freight railroads in the United States, Canada, Mexico, Australia and Bolivia, and provides freight car switching and related services to industrial companies that have extensive railroad facilities within their complexes. The Company operates in five countries on three continents over 8,000 miles of owned and leased track. It also operates over an additional 3,000 miles under track access arrangements.