(RailAmerica issued the following news release on July 29.)
BOCA RATON, Fla. — RailAmerica, Inc. today reported earnings from continuing operations for the second quarter of 2004 of $406,000, or $0.01 per diluted share, compared to earnings from continuing operations of $6.7 million, or $0.20 per diluted share, for the second quarter of 2003. Excluding the $5.6 million, net of tax, or $0.16 per diluted share charge for the former CEO’s retirement, earnings from continuing operations were $6.0 million, or $0.17 per diluted share. Net income, which includes discontinued operations, was $1.6 million, or $0.05 per diluted share for the 2004 quarter compared to $4.7 million, or $0.14 per diluted share in 2003.
Consolidated revenue from continuing operations for the second quarter ended June 30, 2004 increased 12.7% to $96.2 million, from $85.4 million in 2003. As a result of the charge for the former CEO’s retirement, higher fuel and casualty expenses, operating income declined to $11.3 million for the second quarter of 2004 from $18.5 million in 2003. Excluding the charge for the former CEO’s retirement, operating income was $18.0 million for the second quarter. The North American operating ratio for the second quarter of 2004 was 80.6% compared to 77.7% for the second quarter of 2003. Higher fuel prices impacted the operating ratio by 1.7% as the average fuel price increased to $1.26 per gallon in the second quarter of 2004 compared to $1.00 per gallon in the second quarter of 2003. Asset sale gains in the second quarter contributed $1.6 million to operating income which is consistent with the prior year’s results. Due to the Company’s plan to sell the operation, the results of the Arizona and Eastern Railway have been included in discontinued operations.
Gus Pagonis, Chairman of RailAmerica, said, “Despite the significant challenges we faced during the second quarter, we are pleased with our results and the efforts of our employee team. In May, we announced an agreement to lease 276 miles from CSX Transportation, Inc. The line, known as the Chicago, Fort Wayne & Eastern Railroad (CF&E) runs from Crestline, Ohio to Tolleston, Indiana, east of Chicago. We expect to commence operations on August 1, 2004 and anticipate moving 40,000 – 45,000 carloads annually. In addition, our team continues to work on other strategic acquisition opportunities in North America. For the second half of the year, our focus will be on organic revenue growth and controlling costs as we expect to continue to be challenged by high fuel prices.”
Freight Australia, which is included in discontinued operations, reported an increase in revenue for the second quarter of 2004 of $15.6 million or 67%, to $39.0 million from $23.4 million for the second quarter of 2003. Freight Australia’s 2003 results were negatively affected by a drought in Australia. Grain tonnage hauled in the second quarter of 2004 increased 164% to 1.2 million tons from 0.5 million tons in the second quarter of 2003. Freight Australia’s operating income increased $5.0 million to $3.2 million in the second quarter of 2004 compared to a loss of $1.8 million in the second quarter of 2003.
Pagonis added, “In March, RailAmerica executed an agreement to sell 100% of its ownership in Freight Australia to Pacific National for AUD$285 million (US$202 million based on recent exchange rates). As previously announced, the transaction was subject to approval by the Australian Competition and Consumer Commission (“ACCC”) and the State of Victoria (“the State”). On July 2, 2004, the ACCC announced its approval of the sale to Pacific National; however, the State has raised a number of issues which RailAmerica and Pacific National are seeking to resolve.”
Michael J. Howe, Executive Vice President and Chief Financial Officer, said, “We are pleased by the progress we have made in strengthening our balance sheet. Our net debt-to-capital ratio at June 30, 2004 was 57.2% compared to 58.3% at December 31, 2003. Shareholders’ equity has increased to $388 million at June 30, 2004 from $372 million at December 31, 2003. Additionally, $15 million of our junior convertible bonds have converted into common stock at the conversion price of $10.00 per share resulting in a remaining balance of $7 million, as of July 28, 2004, which will either be converted or redeemed by July 31, 2004.”
Howe continued, “At the beginning of the year, we provided guidance for earnings from continuing operations of $0.75 to $0.85 per share for the year. We now anticipate that earnings will be in the range of $0.48 to $0.54 for the year, due to our pessimistic outlook on fuel, congestion and service issues by the Class I railroads, average shares outstanding projected to increase to 38 million due to the exercise of options and warrants, the results of the Arizona Eastern Railway being reclassified to discontinued operations, and the impact of the retirement of our former CEO. Excluding the results from the anticipated sale of Australia, the use of proceeds from such sale, and the impact of the retirement of our former CEO, we expect earnings to be in the range of $0.64 to $0.70.”
Pagonis concluded, “Despite our cautious outlook for the second half of the year and the challenges the industry faces, we look forward to North American growth opportunities, the commencement of operations on the CF&E and the sale of Freight Australia.”
RailAmerica, Inc. (NYSE:RRA) is a leading short line and regional rail service provider with 47 railroads operating approximately 12,000 miles in the United States, Canada, and Australia. The Company is a member of the Russell 2000(R) Index. For more information about RailAmerica, please visit our website at www.railamerica.com