(RailAmerica issued the following press release on March 5.)
BOCA RATON, Fla. — RailAmerica, Inc. today reported its financial results for the fourth quarter and year ended December 31, 2002. Financial highlights for the quarter and year included:
* Net income for the fourth quarter of 2002 was $4.1 million, or $.13 per share, and for the year was $24.6 million, or $.75 per share, excluding previously announced special charges
* Australia drought negatively impacts earnings per share by $.09 in fourth quarter and $.18 for full year
* Chilean results moved to discontinued operations due to announced intention to divest
* Fourth quarter North American operating ratio improves 210 basis points to 74.2%
* ParkSierra and StatesRail EBITDA exceed Company expectations
* After-tax return on invested capital at 9.3%, among industry’s best
Net income for the fourth quarter ended December 31, 2002, excluding certain charges, was $4.1 million, or $.13 per diluted share, on 32.1 million shares, compared to $5.2 million, or $.19 per diluted share, on 28.2 million shares, in 2001. The 2002 results exclude a charge of $2.3 million after-tax, or $.07 per share, related to the previously announced December restructuring and bid costs. Including this charge, net income for the 2002 quarter was $1.8 million, or $.06 per diluted share. Fourth quarter 2001 net income included special items that increased earnings by $.10 per share.
The Company’s 2002 fourth quarter results continued to be negatively impacted by a decrease in grain shipments as a result of the severe drought in Australia. Based on the decrease in shipments and historical profit margins, the Company estimates the decrease in grain shipments reduced quarterly earnings by approximately $.09 per share compared to last year’s fourth quarter. In addition, due to the Company’s previously announced intention to divest its ownership in Ferronor, its Chilean railroad, results for this segment have been moved to discontinued operations for 2001 and 2002.
Consolidated revenues, excluding the Chilean operations, for the quarter ended December 31, 2002 increased 21% to $104.2 million, from $85.8 million during the same period in 2001. Adjusted operating income for the fourth quarter was $16.3 million, compared to $16.5 million in 2001. Fourth quarter 2002 net gains on sale of assets of $3.8 million were $0.7 million less than in the prior year quarter. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was $25.5 million, versus $23.4 million in 2001. The results for 2002 have been adjusted for the aforementioned special charge. Operating income and EBITDA for the fourth quarter of 2002, including the special charge, were $12.6 million and $21.8 million, respectively.
North American revenues for the fourth quarter of 2002 increased 36% to $83.5 million, from $61.2 million in 2001, reflecting the contribution of the ParkSierra and StatesRail railroads acquired in January 2002 and a 2% increase in “same railroad” revenues. The North American operating ratio for the quarter improved 210 basis points to 74.2%, from 76.3% in 2001. Australia revenues for the fourth quarter were $20.6 million, 18% lower than the $24.9 million in 2001. Grain revenues were $5.2 million lower in the fourth quarter, which resulted in a quarterly operating ratio of 127.4%, versus 89.2% in 2001. As noted in prior guidance from the Company, this deterioration in grain revenue and operating ratio in 2002 was due to the severe drought impacting agricultural shipments at Freight Australia.
For the year ended December 31, 2002, net income was $2.2 million, or $.07 per diluted share, on 32.6 million diluted shares. Excluding special charges in 2002 for the refinancing, restructuring and bid costs of $22.4 million, after-tax, net income for 2002 was $24.6 million, or $.75 per share. This compares with net income of $17.0 million, or $.71 per diluted share, on 25.4 million shares in 2001. Operating revenues for 2002 rose 23% to $428.2 million, from $347.5 million in 2001. Adjusted operating income and EBITDA were $79.2 million and $112.4 million, respectively, in 2002 compared to $71.2 million and $95.6 million, respectively, in 2001. Including the special charges, operating income and EBITDA for 2002 were $70.5 million and $103.7 million, respectively.
Commenting on the quarter, Gary O. Marino, Chairman, President and CEO of RailAmerica, said, “We cannot emphasize enough that our fourth quarter 2002 operational performance was adversely affected by the severe drought conditions across the Australian continent. In 2002, our Australian railroad saw grain tonnage shipped drop more than 25% from the prior year, causing an $11.4 million decline in our high margin grain revenue, based on historical profit margins. For the year, we estimate that our consolidated earnings were negatively impacted by approximately $.18 per share due to the reduced grain shipments.”
Continued Marino, “Conversely, our North American business unit achieved its best year ever. As a result of our ParkSierra and StatesRail acquisitions, we posted record annual revenues and EBITDA. The outstanding performance of our ParkSierra and StatesRail railroads exceeded our pre- acquisition expectations in several financial measures, including revenue, EBITDA and return on invested capital. In North America, through stringent cost controls and superior safety results, we improved our operating ratio to 74.8% for the year, from 75.5% last year.
“Looking ahead, despite the current geopolitical climate, we are realizing growth in select North American commodity groups such as chemicals, petroleum and lumber & forest products that should lead to ‘same railroad’ revenue growth in the 4-6% range in 2003. Our operating ratio in North America is one of the best in the industry and expense control is a constant focus. In Australia, as previously disclosed, the effect of the drought is expected to continue to affect revenues during 2003. We anticipate that Freight Australia will ship approximately 2 million tons of grain in 2003, down from 5 million tons in 2001. Accordingly, we implemented new cost reduction measures at Freight Australia to mitigate the impact of the drought. Notwithstanding the reduction in grain and assuming no prolonged negative impact from higher fuel costs, we remain comfortable with our previous 2003 earnings guidance of $.80 – $.85 per share, including the results of Chile. However, we do expect that the previously announced transportation contracts that Freight Australia has entered into over the past six months, along with potential new business and an anticipated rebound of grain, offer significant upside opportunities for RailAmerica in 2004.”
Michael J. Howe, RailAmerica’s Senior Vice President & CFO, said, “Overall, we made significant progress last year in improving RailAmerica’s fundamentals, including strengthening our balance sheet and improving liquidity. The new financing of our senior debt in May 2002 significantly lowered our cost of debt, improved liquidity, enhanced free cash flow and resulted in an improved credit rating. The ParkSierra and StatesRail acquisitions, completed with approximately two-thirds equity, resulted in a de-levering of the balance sheet. We will continue to focus on generating free cash flow, earning in excess of our cost of capital, managing risk, controlling costs and improving our capital structure. In 2002, our after-tax return on invested capital was 9.3%, compared to our weighted average cost of capital of 7.0%. For 2003, we have hedged 35% of our projected North American fuel consumption and all of our variable-rate debt, including a blended average rate of 4.2% on our senior debt.
“Our primary financial goal, as we announced earlier this year, is to reduce our net debt-to-capital ratio to 50% by year-end 2004 through our $100 million asset rationalization plan. Our $29 million of cash on hand at year-end 2002, coupled with our $100 million unused revolving credit facility, provides substantial liquidity to meet future business needs, including continued repurchase of the Company’s common stock in the open market under its existing stock repurchase plan, and possible selective, accretive acquisitions.”
RailAmerica, Inc. is the world’s largest short line and regional railroad operator with 49 railroads operating over 12,800 miles in the United States, Canada, Australia and Chile. In Australia and Argentina, an additional 4,300 miles are operated under track access arrangements. The Company is a member of the Russell 2000(R) Index. www.railamerica.com.