BOCA RATON, Fla. — RailAmerica, Inc., the world’s largest short line and regional railroad operator, reported record financial results for the year and fourth quarter ended December 31, 2001.
Year-end 2001
Income from continuing operations for the year ended December 31, 2001 increased 80% to $17.3 million, or $.72 per diluted share, on 25.4 million weighted average shares, from $9.6 million, or $.49 per diluted share, on 18.3 million diluted shares in 2000. These results are based on the operations of 39 railroads in 2001, as compared with 44 railroads for most of 2000 and reflect a 39% increase in weighted average shares outstanding. Income from continuing operations for 2001 includes benefits from changes in the corporate tax rates in Canada of $3.1 million ($.12 per diluted share), a change in law resulting in a reduction of certain environmental liabilities of $1.2 million after-tax ($.05 per diluted share) and the sale of the fixed assets of the Dakota Rail railroad for an after-tax gain of approximately $2.4 million ($.09 per diluted share). These items were offset by the negative impact of interest rate swap costs of $3.5 million after-tax ($.14 per diluted share). In addition, 2001 income from continuing operations would have been higher by $2.0 million, or $.08 per diluted share, on a “constant currency” basis. In 2000, income from continuing operations includes net costs of $4.6 million after-tax ($.25 per diluted share) for certain special items. Net income for 2001 was $17.0 million, or $.71 per diluted share, versus $11.7 million, or $.60 per diluted share, in 2000.
Operating revenues for the year 2001 rose 3% to $369.6 million, from $357.5 million in 2000. Total “same railroad” carloads in 2001 increased 4% to 1,214,554. For the year, operating income improved 4% to $74.7 million, while EBITDA (earnings before interest, taxes, depreciation & amortization) rose 5% to $102.3 million. North American “same railroad” freight carloads for the year increased 4% to 885,579, while the North American railroad operating ratio improved 3.4 percentage points to 75.6%. International carloads rose 5% to 328,975 in 2001, while the international railroad operating ratio improved 2.0 percentage points to 79.6%.
On a “constant currency”, “same railroad” basis (adjusting for the decline in the Australian and Canadian currencies relative to the U.S. dollar averaging 11% and 4%, respectively, and for railroads sold during 2000), 2001 revenues were up 10% to $384.9 million, versus $349.8 million in 2000. As compared with 2000, North American “constant currency”, “same railroad” revenues for fiscal 2001 rose 11% to $248.1 million. International revenues, on a “constant currency” basis, were up 9% to $136.2 million for the year, reflecting record results at the Company’s Australian railroad in local currency.
“Our rail operations performed exceptionally well in 2001,” said Gary O. Marino, Chairman, President and CEO of RailAmerica. “The substantial improvement in our operating ratio, operating income, EBITDA and income for the year reflects the results of our carload and revenue growth, rigorous cost controls and continuous focus on safety and quality rail service. Because we operated five fewer railroads in 2001 compared to 2000, these results demonstrate the efficiencies that we were able to achieve in our core operations without acquisitions. Core earnings increased despite the economic recession during 2001. Further, as 2002 progresses, we are well-positioned to handle increased business as the economy rebounds.
“Our major goals for 2002 — continued strong internal growth, paring of non-core, non-strategic assets and completing strategic rail acquisitions — are on track. The addition in January 2002 of 11 rail lines from our acquisitions of the ParkSierra and StatesRail railroads allow us to continue to achieve synergies from our growing operations. The previously announced 2002 earnings projection of $1.30 per diluted share includes approximately 20 cents of gains from the sale of non-strategic assets. This is to distinguish from non-operating asset sales that have no EBITDA associated with them, such as non-operating real estate or other out-of-service assets. Our sale of the Dakota Rail property in December 2001, which had no traffic or EBITDA, is representative of the latter type of sale. In addition, there are a number of asset sales that are in the late stages of being completed, including those that were originally expected to close in 2001.”
Added Marino, “We remain committed to making further progress on our capital structure and financial ratios. Our debt to equity ratio net of cash at year-end 2001 is at a comfortable 1.4 times. RailAmerica is one of only a few publicly held rail companies earning its cost of capital. Our return on invested capital in 2001 was 12%, one of the highest in the rail industry, while our average cost of capital was 10%. Notwithstanding this excellent performance, we expect to improve upon those figures in the future through enhanced rail service and refinancing of our debt at the prevailing low interest rates.”
Fourth Quarter 2001
Income from continuing operations for the fourth quarter ended December 31, 2001 improved 386% to $5.2 million, or $.19 per diluted share, on 28.2 million weighted average shares, from $1.1 million, or $.05 per diluted share, on 18.9 million diluted shares in 2000. Income from continuing operations in the fourth quarter of 2001 includes the aforementioned benefits totaling approximately $4.3 million after-tax ($.15 per diluted share) and the Dakota Rail sale gain of approximately $2.4 million after-tax ($.09 per diluted share). These items were offset by the negative impact of interest rate swap costs of $1.3 million after-tax ($.05 per diluted share). In addition, fourth quarter 2001 income from continuing operations would have been higher by $0.2 million, or $.01 per diluted share, on a “constant currency” basis. In the fourth quarter of 2000, income from continuing operations includes net costs of $2.2 million after-tax ($.12 per diluted share) for certain special items. Net income for the fourth quarter of 2001 was $5.2 million, or $.19 per diluted share, versus $7.1 million, or $.36 per diluted share, in 2000. The fourth quarter 2000 net income includes a gain of $9.1 million after-tax ($.48 per diluted share) from the sale of the Company’s discontinued specialty truck trailer manufacturing operations.
The Company had fourth quarter 2001 revenues of $91.0 million, up 1% from $89.9 million in the fourth quarter of 2000. Total “same railroad” carloads increased 2% to 298,417 in the quarter. Operating income improved 14% to $18.2 million in the quarter, while EBITDA rose 30% to $25.8 million. North American “same railroad” freight carloads for the quarter increased 2% to 217,670, while the North American railroad operating ratio improved 0.6 percentage points to 76.0%. International carloads rose 1% to 80,747 in the quarter, while the international railroad operating ratio improved 4.6 percentage points to 84.7% in the 2001 quarter.
On a “constant currency”, “same railroad” basis, fourth quarter 2001 revenues were up 4% to $92.5 million, versus $88.7 million in 2000. As compared with the same period of 2000, North American “constant currency”, “same railroad” revenues for the fourth quarter of 2001 rose 6% to $61.1 million. International revenues, on a “constant currency” basis, were up 2% to $31.2 million in the quarter.
Gary Spiegel, Executive Vice President & COO – North American Rail Group, said, “We are pleased with our carload growth and operating ratio improvement in North America in 2001. We continue to outpace the industry in ‘same railroad’ carload growth, while our North American operating ratio of 75.6% for the year would rank us number two among the Class I carriers and best among our peers. Integral to these outstanding results has been our exceptional safety record and efficiencies gained from our operating structure which emphasizes the clustering of railroads in regions. In addition, the integration of the ParkSierra and StatesRail acquisitions has gone well and we expect these properties to add to significantly improved operations in 2002.”
Bennett Marks, Senior Vice President & CFO, said, “In 2001, we experienced a tough U.S. industrial sector as well as a weak dollar in Australia and Canada, but our operations team battled through this to achieve record results. The depressed Australian and Canadian dollar exchange rates reduced our 2001 earnings by eight cents per share. Most experts are anticipating that these currency values will improve modestly during 2002. Therefore, we do not expect these exchange rates will significantly impact our 2002 results as compared with 2001. As previously mentioned, we expect to generate gains on the asset sales that were not completed in 2001. However, those gains will be partially offset by a first quarter 2002 charge for costs associated with our unsuccessful bid for the National Rail/FreightCorp privatization in Australia.
“At December 31, 2001, our balance sheet is stronger than ever. Primarily through our asset rationalization plan and the sale of common stock, we were able to reduce our net debt to equity ratio to 1.4 times by year-end 2001, exceeding our goal of 2 to 1. There is substantial cash on our year-end balance sheet, as well as a positive working capital ratio of 1.3 to 1. In addition, we are in the process of completing a long-term debt refinancing which should allow us to take advantage of the prevailing lower interest rates. Finally, we expect to generate approximately $25 million of net free cash flow from operations in 2002. This should allow us to further strengthen our overall capital structure, reduce debt and generate funds for future growth.”
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.