(The following story by Leo King appeared on The Examiner website on June 18, 2009.)
JACKSONVILLE, Fla. — Jacksonville-based RailAmerica, Inc.’s (RA) CEO, John Giles, said recently that the firm has lost 22 percent in business because of the national economic downturn. RA’s premier railroad is the Florida East Coast Railway, also based in Jacksonville. The carrier operates some 350 miles between Jacksonville and Miami.
In a company newsletter, Rail Inter-Change, Giles wrote that difficult decisions were made this year.
He stated, “It was my hope that this ‘financial 911’ would be sufficiently brief that we could run trains, maintain assets and conduct business in a way that let us maintain RailAmerica (RA) and Florida East Coast Railway (FEC) employment levels.”
He pointed out, however, that was not to be.
“Unfortunately, the recession has turned out to be deep and protracted. The result is a challenging and uncertain economic world, where even business icons such as General Motors and Chrysler have been pushed over the brink.”
Giles explained, in terms closer to home, “In 2008 we moved 9 percent fewer loads than in 2007, but by trimming expenses, raising prices and finding new business, we posted great results. By comparison, thus far in 2009 we have handled 22 percent fewer loads than we did in 2008.”
RailAmerica, Inc., owns North American short line and regional railroads. The company owns 42 railroads and operates in 26 states and three Canadian provinces with more than 8,000 miles of track. The firm is owned by hedge fund Fortress Investment Group (FIG) of New York. It has offices worldwide.
Reuters reported yesterday that Fortress Investment Group (FIG.N) disclosed on Wednesday that a group of banks amended a credit agreement, allowing one of the world’s largest private equity and hedge fund firms to repurchase outstanding loans.
Fortress, which hosts its annual shareholder meeting today, said a group of banks led by Bank of America Corp (BAC.N) and Citigroup Inc (C.N) on June 11 also amended terms under which Fortress can invest in its own funds.
Money put into a fund created after June 11 and that is more than 1.5 percent of a fund’s pooled capital, may not be taken out of the firm’s cash flow, according to a filing with the Securities and Exchange Commission.
Fortress, on the New York Stock Exchange, opens today at $3.63, a change of +0.04 or +1.11 percent. from yesterday’s opening. Volume on Wednesday was 43,950. Its 52 week low was 77 cents and the 52 week high was $13.95.
Giles told his railroaders, “Times like these challenge any household or enterprise. Having 22 percent less business is like having your five-day workweek cut to less than four days; suddenly there isn’t as much take-home pay. With less money in the company’s “paycheck,” we’ve been forced to eliminate every non-essential expense and strive for even greater productivity.
We’ve put off buying things we’d like to have (like an upgraded computer system) and are instead spending only on things we need (safety improvements). Failure to respond quickly puts a household or a company at serious risk.”
He added, “Very few things are more important to us than our jobs and the ability to provide for our families and ourselves. The economic crisis has forced us to make unpleasant decisions of late, the hardest being to tell colleagues that we simply don’t have enough work for them, and that what we hope is a temporary furlough is the only recourse.”
On and optimistic note, he said, “Please know this: We will emerge from this downturn, though we don’t know when. Once activity levels normalize, railroads will still be the preferred freight-transportation solution, and thanks to your hard work, RA will be even more firmly established as the preeminent owner and operator of North American regional and short-line railroads.”
Giles was appointed RailAmerica’s CEO in February 2007. In November 2007, he was named as FEC Ry. Board of Managers chairman. He formerly was president and CEO of Great Lakes Transportation, LLC between 2001 and 2005, at which time the company was acquired by Canadian National Railway.
He began in the industry in 1969 as a locomotive fireman with a CSX Transportation predecessor. He holds a B.A. in Business from Marian College and a MSBA from Indiana Univ.