(RailAmerica issued the following news release on July 27.)
BOCA RATON, Fla. — RailAmerica, Inc. today reported second quarter 2006 earnings from continuing operations of $5.4 million, or $0.14 per diluted share, compared to $9.0 million, or $0.24 per diluted share, for the second quarter of 2005. The 2006 results include expenses of $3.0 million, or $0.04 per share, relating to the Company’s recently announced reorganization, including $1.7 million in employee severance costs.
Net income for the three months ended June 30, 2006, which includes discontinued operations, was $7.8 million, or $0.20 per share, compared to $9.3 million, or $0.24 per share in the three months ended June 30, 2005. The 2006 income from discontinued operations includes a pre-tax gain of $2.5 million ($2.4 million net of tax) on the disposition of the Company’s E & N Railway on June 30. Additionally, a change in Canadian tax laws resulted in a continuing operations tax benefit of $1.7 million, or $0.04 per share, in the second quarter of 2006.
Revenue for the second quarter of 2006 increased $13.4 million, or 13%, to $116.8 million, from $103.4 million in the second quarter of 2005. On a “same railroad” basis, revenue for the second quarter of 2006 increased $7.0 million, or 7%, from the second quarter of 2005, while “same railroad” carloads declined 4%. Operating income for the second quarter of 2006 decreased 37%, to $9.2 million, from $14.5 million in the second quarter of 2005. The operating ratio for the second quarter of 2006 was 92.2% compared to 86.0% in the 2005 second quarter.
For the six months ended June 30, 2006, the Company reported earnings from continuing operations of $12.0 million, or $0.31 per diluted share, compared to earnings from continuing operations of $13.9 million, or $0.36 per diluted share for the six months ended June 30, 2005. Net income for the six months ended June 30, 2006, which includes discontinued operations, was $22.9 million, or $0.59 per share, compared to $15.5 million, or $0.40 per share in the six months ended June 30, 2005. The 2006 results include the recognition of a $13.4 million pre-tax gain ($8.3 million net of tax) for the expiration of the warranty period related to the sale of Freight Australia and a resulting adjustment to the reserves in discontinued operations.
Revenue for the six months ended June 30, 2006, increased $26.7 million, or 13%, to $231.2 million, from $204.5 million in 2005. On a “same railroad” basis, revenue for the six months ended June 30, 2006 increased $14.2 million, or 7%, while “same railroad” carloads declined 2%, from the six months ended June 30, 2005. Operating income for the six months ended June 30, 2006 was $23.4 million, compared to $24.4 million for the six months ended June 30, 2005.
Michael Howe, RailAmerica’s Chief Financial Officer, said, “Our financial results in the second quarter were impacted by several isolated factors, including a work stoppage at a paper facility in Nova Scotia, the Native Indian blockade in Southern Ontario, costs related to our reorganization, an accrual for a final contingent obligation to our former CEO and the costs of disposing of industrial waste in a Canadian landfill from a derailment in Alabama. Additionally, our revenue was affected by a decline in shipments of lumber, attributable to a slowdown in housing starts.”
Charles Swinburn, RailAmerica’s Chief Executive Officer, said, “While our financial results lagged last year’s results, we made significant progress during the second quarter toward achieving our improvement objectives for the next several years. We carried out our reorganization and have begun the process of consolidating our customer service, dispatching and revenue functions. Those steps will make our company more efficient and effective going forward. Additionally, our marketing initiatives to increase traffic on our existing railroads have begun to significantly payoff. I am very pleased to say that Honda has recently announced its’ intention to build an automobile assembly plant on one of our railroads in Indiana. Our marketing people worked hard with the state of Indiana to assist Honda in their decision. This plant should generate as many as 13,000 additional rail carloads annually for us, beginning in mid to late 2008. To the best of our knowledge, this is the only new automobile assembly plant to be located on a short line anywhere in the country in recent years. Other marketing and sales initiatives have resulted in significant commercial gains on our Ohio railroads, where two shippers have agreed to ship in excess of 8,000 carloads per year, commencing this month.”
RailAmerica, Inc. (NYSE:RRA) is a leading short line and regional rail service provider with 42 railroads operating approximately 7,800 miles in the United States and Canada. The Company is a member of the Russell 2000(R) Index. Its website may be found at http://www.railamerica.com.