(RailAmerica issued the following news release on July 31.)
BOCA RATON, Fla. — RailAmerica, Inc. today reported second quarter 2003 net income of $.15 per diluted share. Increased revenue and improved operating income at the Company’s North American operations were offset by a $.07 per share negative impact from lower grain shipments in drought-stricken Australia, which was approximately $.03 per share more than the Company had anticipated. In the second quarter of 2002, the Company reported a net loss of $.33 per diluted share.
Consolidated revenue for the second quarter ended June 30, 2003 increased slightly to $110.2 million, from $109.8 million in 2002. Operating income for the second quarter of 2003 was $17.0 million, compared to $20.5 million in 2002. Net income for the 2003 quarter was $4.7 million, or $.15 per diluted share, versus a net loss of $10.7 million, or $.33 per diluted share, including an $18.3 million after-tax charge incurred primarily in connection with the Company’s debt refinancing in 2002. Higher fuel prices resulted in an increased expense of $.03 per share in the quarter, compared to 2002, net of hedge impact.
In North America, strong coal and petroleum carloads, an improved traffic mix and a stronger Canadian dollar led to a $4 million, or 5%, increase in revenue and a 2% increase in the average rate per car in the second quarter of 2003, versus the same period in 2002. Second quarter 2003 “same railroad” carloads rose 2%. The North American operating ratio was virtually unchanged at 77.8% in the quarter, compared to 77.5% in 2002, despite the higher fuel costs. North American fuel prices averaged $1.01 per gallon in the quarter versus $.86 in 2002, net of hedge impact.
In Australia, revenue for the second quarter of 2003 decreased 13%, despite the 16% increase in the Australian dollar during the 2003 quarter, while carloads were 29% lower versus 2002. The drought in Australia, which has resulted in dramatically reduced grain tonnage, coupled with higher fuel costs, continued to affect Freight Australia’s operating results. In the second quarter of 2003, Freight Australia had an operating loss of $1.8 million, versus operating income of $4.7 million in 2002. Freight Australia moved just 456,000 tons of grain in the second quarter of 2003, 59% less than the 1,124,000 tons moved during the same period in 2002. The prospects for the 2003/2004 grain harvest are positive as Australian agricultural forecasts project a 2003/2004 harvest in the 22 million ton range for the continent, versus only 9 million tons harvested in drought-impacted 2002/2003. Historically, Freight Australia moves approximately 25% of the continent’s grain harvest pursuant to its existing transportation agreements with its customers.
Due to the Company’s plan to sell its interest in its Chilean railroad, results of Ferronor are included in discontinued operations. Ferronor’s revenue for the second quarter of 2003 increased 15% to $6.4 million, from $5.6 million in 2002, primarily due to its new copper ore and natural gas contracts. The Chilean sales process is continuing as planned and the Company expects to consummate a transaction by year-end.
During the quarter, the Company completed the acquisition of two North American rail lines from Class I carriers. The first was the acquisition of 288 miles of contiguous rail line in and around Mobile, Alabama from the Burlington Northern and Santa Fe Railway Company. The second was the acquisition of 154 miles of rail line in southeast Colorado from the Union Pacific Railroad. This transaction resulted in RailAmerica’s 50th railroad.
“We are particularly pleased with the performance of our North American rail operations this quarter despite the continuing challenges of higher fuel costs and a tough economy,” said Gary O. Marino, Chairman, President and CEO of RailAmerica. “In Australia, where agricultural products historically account for approximately 50% of our business, we continue to be substantially impacted by reduced grain shipments due to the drought. To partially offset Freight Australia’s concentration in Victorian grain, over the past year we have been successful in diversifying into new geographic regions and commodities with the award of a number of new long-term transportation agreements valued at over $65 million. Additionally, we have taken steps to reduce costs, where feasible, but due to the high fixed cost nature of our rail network, a certain level of expenditure is required to provide continuous service to our customers. The outlook for a grain recovery in 2004 is quite positive as there has recently been much needed rain in the agricultural region served by Freight Australia.”
Marino added: “We believe that the acquisition market in North America is improving significantly and should offer numerous opportunities for RailAmerica over the next few years. Our rail line purchases last month from Class I carriers Burlington Northern and Union Pacific illustrate this point. Accretive acquisitions, coupled with an improving business climate, should enable RailAmerica to further improve upon the strong results achieved by our core rail operations.”
Michael J. Howe, Senior Vice President and CFO, said: “Our long-term focus remains on continuing to improve our debt ratios and enhance our overall capital structure. Driven by the recovery of the Australian and Canadian currencies, shareholders’ equity rose to $337 million at June 30, 2003, from $279 million at year-end 2002, and our book value at June 30, 2003 increased to $10.55 per share. Our net debt to capital ratio was reduced to 61% this quarter, versus 64% at year-end 2002. This ratio is down significantly from a high of 81% three years ago and we are on plan to reach our year-end 2004 goal of 50% through our previously announced asset rationalization plan. Interest expense decreased $.04 per share in the quarter as a result of our May 2002 refinancing and prevailing lower interest rates.”
As previously announced, RailAmerica has scheduled a live webcast of its second quarter 2003 earnings conference call at 11:00 a.m. eastern daylight time today. To listen to the webcast, visit the Investor Relations section of RailAmerica’s website at http://www.railamerica.com. We suggest that you visit our website at least ten minutes in advance of the conference call to ensure that your computer is configured to receive the webcast. The webcast will also be archived at the RailAmerica website for 30 days.
RailAmerica, Inc. (NYSE:RRA – News) is the world’s largest short line and regional railroad operator with 50 railroads operating approximately 13,400 miles in the United States, Canada, Australia, Chile and Argentina. In Australia and Argentina, an additional 4,300 miles are operated under track access arrangements. The Company is a member of the Russell 2000® Index. Its website may be found at http://www.railamerica.com.