BOCA RATON, Fla. — RailAmerica, Inc., the world’s largest short line and regional railroad operator, provided a recap of its accomplishments in 2001 and an update to its projections for 2001 and 2002.
2001 Recap
Commenting on the achievements of the Company in 2001, Gary O. Marino, Chairman, President and CEO of RailAmerica, said, “RailAmerica accomplished a number of strategic objectives that we believe improved shareholder value significantly during 2001. Our primary goal for the year was to further enhance our capital structure. Through our asset rationalization plan and our issuance of common stock, the Company’s debt to equity ratio has been reduced from 4.4 to 1 after the RailTex acquisition in February 2000 to approximately 1.7 to 1 at year-end 2001. We were successful in broadening our base of shareholders with the addition of high quality institutional investors while increasing our equity by more than $100 million in 2001 through issuance of common stock, the conversion of substantially all of the Company’s redeemable convertible preferred stock and exercise of other convertible securities into common stock. Equity was further increased by $48 million as a result of the issuance of common stock in connection with two major acquisitions in January 2002. Additionally, our debt was reduced by approximately $55 million in 2001 through the use of proceeds from the sale of certain assets, including non-core railroads, intellectual property and real estate, through the sale/leaseback of equipment and internally generated cash flow.
“We believe that the progress we made on our capital structure was recognized by the financial community. During 2001, RailAmerica’s stock price increased 83% — a substantial improvement in a year which saw a general economic slowdown and a significant retreat in the equity markets. Our move to the New York Stock Exchange on the first day of trading in 2002 should allow our investors to receive superior market execution as well as offer increased visibility for RailAmerica. In 2001, our stock was added to the Russell 2000 Index and the Company was moved up in the list of leading small companies by Forbes magazine.”
Said Marino, “Our operations team made substantial progress on the Company’s strategic growth initiatives in the face of a weak industrial sector, as demonstrated by our industry-leading carload growth figures. For 2001, our ‘same railroad’ carloads were up 4%, whereas the overall North American railroad industry carloads declined 2%. During the past year, we announced new transportation contracts that enhanced traffic on both our North American and international properties, including new shipments of coal at our Indiana railroad, steel at our South Carolina railroad and copper products at our Chilean railroad. Some of these top-line improvements, however, were masked by the negative impact of the depressed Australian and Canadian dollar exchange rates. Through the first nine months of 2001, currency translation reduced our earnings per share by nine cents more than it did in 2000. Cost reduction measures allowed us to reduce our railroad operating ratios not only year-over-year, but sequentially during the first three quarters of 2001. Our operating ratio ranks among the best in the entire rail industry. Success on these initiatives was led by our outstanding management team and staff.”
2002 Strategy / Earnings Projection Update
The Company stated that its 2002 strategy is to continue to pursue accretive acquisitions worldwide, grow internally through carload, revenue and margin improvements, and periodically sell non-strategic or under-performing railroads and assets. The sale of certain railroad assets that had been forecast for the fourth quarter of 2001 was delayed and these sales are now expected to close in 2002. As a result of the delay in closing these asset sales, the Company’s 2001 EPS expectations are being reduced from the previously anticipated $1.00 per diluted share to approximately $.70-.75 per diluted share. In accordance with past practice, the Company said that it will announce earnings for the fourth quarter and year ended December 31, 2001 in mid-March 2002.
Mr. Marino continued, “The sale of one railroad and portions of two others during 2001 was less than we had forecast. We believe that earnings projections for fiscal 2002, including only the delayed 2001 asset sales and the financial results of the ParkSierra and StatesRail acquisitions, should be in line with current analyst expectations of approximately $1.30 per diluted share, despite a share base of 35 million shares, 38% higher than last year’s average shares outstanding. Total consolidated revenues should approach $500 million in 2002. Additionally, we expect to make further progress on reducing our long-term debt through the application of expected net free cash flow from our operations. The liquidity of our Company has never been greater. We currently have our full $50 million revolving line of credit available for our use. This facility, plus cash on hand of more than $20 million, is more than ample to address our foreseeable cash needs.
“Finally, we continue to see an attractive worldwide acquisition market and are pursuing additional rail acquisitions both domestically and abroad. Our recently completed StatesRail and ParkSierra transactions demonstrate the types of high quality acquisitions that are available to us in the marketplace. In addition, we hope to improve our ‘same railroad’ carload growth in 2002 based upon expectations that traffic levels for the industry will recover by mid-year. In light of our proven track record of producing substantial increases in revenues, EBITDA and earnings per share, all of which have shown exceptional growth in our history, and the competitive advantages that come with our size in the industry, we believe that we are well- positioned to execute our business plan and continue to enhance shareholder value in 2002.”
RailAmerica, Inc. (www.railamerica.com), the world’s largest short line and regional railroad operator, owns 50 short line and regional railroads operating approximately 13,200 route miles in the United States, Canada, Australia and Chile. In North America, the Company’s railroads operate in 28 states, five Canadian provinces and the Northwest territory. Internationally, the Company operates an additional 4,300 route miles under track access arrangements in Australia and Argentina. In October 2001, RailAmerica was ranked 85th on Forbes magazine’s list of the 200 Best Small Companies in America; in July 2001, the Company was named to the Russell 2000® Index.