(Dow Jones Newswires circulated the following story by Kathy Shwiff on June 16, 2009.)
NEW YORK — Genesee & Wyoming Inc. (GWR) said its subsidiary Huron Central Railway Inc. will end operations because a drop in traffic means the railroad is “not economically viable to operate for the long term.”
Shares fell 4.6% to $25.38 in after-hours trading as the company also said it plans to sell four million shares, with an option for underwriters to purchase up to an additional 600,000 shares to cover overallotments.
The offering would dilute current shares outstanding by about 11%.
Citigroup, JPMorgan and Deutsche Bank Securities are joint book-running managers of the offering.
The company said 45 jobs will be eliminated when Huron Central closes. The unit has operated the 173-mile railroad from Sudbury, Ontario, to Sault Ste. Marie, Ontario, under a lease agreement with Canadian Pacific Railway Ltd. (CP) since 1997. It will end operations between McKerrow, Ontario, and Sault Ste. Marie on Aug. 15, and continue to operate the eastern segment of the railroad from Sudbury to McKerrow and Espanola, Ontario, until Oct. 31.
In the year ended Dec. 31, the unit handled about 16,000 carloads, generated $7.4 million in revenue and had a $2.1 million operating loss, which lowered Genesee & Wyoming’s per-share earnings by about 4 cents.
Genesee & Wyoming plans to post a second-quarter charge of up to 15 cents a share to write down assets of about $7.1 million and costs ranging from $400,000 to $1.9 million to close the railroad. The costs will be partially offset by about $3.7 million in cash tax benefits.
In April, Genesee & Wyoming reported a 34% increase in first-quarter profit on a tax credit as revenue slid 1.6%. The company benefited from recent acquisitions.