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Genesee & Wyoming Reports Results for the First Quarter of 2012

GREENWICH, Conn.--(BUSINESS WIRE)--May. 1, 2012-- Genesee & Wyoming Inc. (GWI) (NYSE: GWR) reported net income in the first quarter of 2012 of $22.2 million, compared with net income of $22.1 million in the first quarter of 2011. GWI's diluted earnings per share (EPS) in the first quarter of 2012 were $0.52 with 43.1 million weighted average shares outstanding, compared with diluted EPS of $0.52 with 42.5 million weighted average shares outstanding in the first quarter of 2011.

GWI’s effective tax rate was 35.6% in the first quarter of 2012, as compared to 27.7% in the first quarter of 2011. The higher tax rate in the first quarter of the current year was driven primarily by the expiration of the Short Line Tax Credit on December 31, 2011.

Comments from Jack Hellmann, our Chief Executive Officer

Jack Hellmann, President and CEO commented, “Our financial results for the first quarter of 2012 were consistent with our expectations. While revenues increased 8% to $207 million, our net income was unchanged for three main reasons: the expiration of the U.S. short line tax credit; weak coal shipments in the United States; and a 60-day outage on a portion of our main line in Australia due to the washout of our Edith River Bridge. For our North American & European Operations, despite a 20% drop in coal revenues, our first quarter revenues still increased 9% and our operating income increased 16%.”

“As we look ahead to the remainder of 2012, we expect improving business trends. In North America, our non-coal traffic continues to grow and our newly acquired Arizona Eastern Railway and Hilton & Albany Railroad are performing well. Although our U.S. coal traffic is weak, primarily due to warm winter weather and low natural gas prices, we expect some improvement in the second quarter as shipments resume at two power plants. The fact that our North American & European Operations operating ratio improved 1.3 percentage points to 78.3% in the first quarter of 2012 despite the decline in our coal traffic also means that we are well positioned to benefit from any future improvement in shipments.”

“In Australia, the Edith River Bridge has reopened and the entirety of our operations are running well, supported by the delivery of seven new high horsepower locomotives. In addition, we plan to begin serving a new iron ore mine in South Australia in the fourth quarter of this year.”

“Finally, we continue to evaluate multiple acquisition and investment opportunities in both North America and Australia and have significant financial capacity to execute on the right transactions.”

Results from Continuing Operations

In the first quarter of 2012, GWI's total operating revenues increased $15.5 million, or 8.1%, to $207.4 million, compared with $191.9 million in the first quarter of 2011. The increase included $6.7 million in revenues from new operations and an $8.8 million, or 4.6%, increase in same railroad operating revenues. Same railroad operating revenues were negatively impacted by an estimated $7 million from the Edith River Bridge closure and by approximately $5 million from lower coal and coal-related haulage traffic. During the first quarter of 2012, the net appreciation of foreign currencies increased same railroad operating revenues by $2.3 million. Excluding the net impact from foreign currency, GWI’s same railroad operating revenues increased $6.5 million, or 3.4%.

Same railroad freight revenues in the first quarter of 2012 increased by $5.4 million, or 4.1%, to $138.2 million, compared with $132.8 million in the first quarter of 2011. Excluding a $1.9 million increase from the net impact of foreign currency appreciation, GWI’s same railroad freight revenues increased by $3.6 million, or 2.7%.

GWI's traffic in the first quarter of 2012 was 222,178 carloads, a decrease of 22,378 carloads, or 9.2%, compared with the first quarter of 2011. Traffic in the first quarter of 2012 included 4,785 carloads from new operations. Same railroad traffic decreased 27,163 carloads, or 11.1%, in the first quarter of 2012. The same railroad traffic decrease was principally due to decreases of 22,205 carloads of coal traffic and 8,638 carloads of other commodity traffic, primarily related to coal haulage, partially offset by an increase of 3,188 carloads of metals traffic. All remaining traffic increased by a net 492 carloads.

Average same railroad freight revenues per carload increased 17.1% in the first quarter of 2012. The net appreciation of the Australian and Canadian dollars versus the U.S. dollar, higher fuel surcharges and changes in commodity mix increased average revenues per carload by 1.7%, 1.7% and 3.8%, respectively. Other than these factors, same railroad average freight revenues per carload increased 9.9%. Average freight revenues per carload were impacted by changes in the mix of customers within certain commodity groups, primarily coal, metals and other commodities.

GWI’s same railroad non-freight revenues in the first quarter of 2012 increased by $3.4 million, or 5.7%, to $62.5 million compared with $59.1 million in the first quarter of 2011. Excluding a $0.5 million increase from the net impact from foreign currency appreciation, GWI’s same railroad non-freight revenues increased by $2.9 million, or 5.0%, primarily due to higher railcar switching revenues in Europe, Australia and Canada.

GWI's operating income in the first quarter of 2012 was $41.3 million, an increase of $2.1 million, compared with $39.2 million in the first quarter of 2011. The estimated impact of the Edith River Bridge outage in the Northern Territory of Australia was a net reduction in operating income of $5 million in the first quarter of 2012. The decline in coal and coal haulage traffic reduced operating income in the first quarter of 2012 by approximately $3 million.

Free Cash Flow from Continuing Operations (1)

(in millions)     Three Months Ended

March 31,

  2012     2011
Net cash provided by operating activities $ 27.7 $ 7.3

Net cash used in investing activities, excluding new Australian equipment investments

(16.5

)

(7.6

)

 

 

 

Net cash paid for acquisitions 0.8 0.4
Cash paid for acquisition-related expenses (a)   -     13.0  

Free cash flow before new Australian equipment investments

12.0

13.1

 

 

 

New Australian equipment investments   (24.5 )   -  
Free cash flow (1) $ (12.5 ) $ 13.1  
 
   

(a)

 

The 2011 period included the payment of Australian stamp duty related to the acquisition of FreightLink in Australia, which was accrued as of December 31, 2010, but paid in 2011.

 

GWI’s free cash outflow from continuing operations for the three months ended March 31, 2012 was $12.5 million. GWI’s continuing operations generated free cash flow of $13.1 million for the three months ended March 31, 2011. The net use of cash due to the repairs and other incremental costs associated with the Edith River derailment in Australia was approximately $3.0 million in the three months ended March 31, 2012.

Conference Call and Webcast Details

As previously announced, GWI's conference call to discuss financial results for the first quarter will be held Tuesday, May 1, 2012, at 11 a.m. EDT. The dial-in number for the teleconference is (800) 230-1059; outside U.S., call (612) 234-9960, or the call may be accessed live over the Internet (listen only) under the "Investors" tab of GWI's website (http://www.gwrr.com), by selecting "First Quarter Earnings Conference Call Webcast." Management will be referring to a slide presentation that will also be available under the “Investors” tab of GWI’s website prior to the conference call. An audio replay of the conference call will be accessible via the “Investors” tab of GWI's website starting at 1 p.m. EDT on May 1, 2012, until the following quarter’s earnings press release. Telephone replay is available for 30 days beginning at 1 p.m. EDT on May 1 by dialing (800) 475-6701 (or outside U.S., dial 320-365-3844). The access code is 222298.

About Genesee & Wyoming Inc.

GWI owns and operates short line and regional freight railroads and provides railcar switching services in the United States, Australia, Canada, the Netherlands and Belgium. In addition, we operate the Tarcoola to Darwin rail line, which links the Port of Darwin with the Australian interstate rail network in South Australia. Operations currently include 65 railroads organized in 10 regions, with more than 7,600 miles of owned and leased track and approximately 1,400 additional miles under track access arrangements. We provide rail service at 17 ports in North America and Europe and perform contract coal loading and railcar switching for industrial customers.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains forward-looking statements regarding future events and the future performance of Genesee & Wyoming Inc. that are based on current expectations, estimates and projections about our industry, management's beliefs, and assumptions made by management. Words such as "anticipates," "intends," "plans," "believes," “will,” "seeks," "expects," "estimates," variations of these words and similar expressions are intended to identify these forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions, including the following risks applicable to all of our operations: risks related to the acquisition and integration of railroads; economic, political and industry conditions; customer demand, retention and contract continuation; legislative and regulatory developments, including changes in environmental and other laws and regulations to which we are subject; increased competition in relevant markets; funding needs and financing sources; unpredictability of fuel costs; susceptibility to various legal claims and lawsuits; strikes or work stoppages; severe weather conditions and other natural occurrences; susceptibility to the risks of doing business in foreign countries; and others including but not limited to, those noted in our 2011 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q under “Risk Factors.” Therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Forward-looking statements speak only as of the date of this press release or as of the date they were made. GWI disclaims any intention to update the current expectations or forward-looking statements contained in this press release.

(1) Free cash flow is a non-GAAP financial measure and is not intended to replace net cash provided by operating activities, its most directly comparable GAAP measure. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to net cash provided by operating activities, is included in the tables attached to this press release.

       
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended
March 31,
2012 2011
 
OPERATING REVENUES $ 207,436 $ 191,911
 
OPERATING EXPENSES   166,122     152,708  
INCOME FROM OPERATIONS 41,314 39,203
 
INTEREST INCOME 867 775
INTEREST EXPENSE (8,616 ) (9,939 )
OTHER INCOME, NET   984     568  
 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 34,549 30,607
 
PROVISION FOR INCOME TAXES   12,305     8,485  
 
INCOME FROM CONTINUING OPERATIONS 22,244 22,122
 
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX   (3 )   -  
 
NET INCOME $ 22,241   $ 22,122  
 
BASIC EARNINGS PER SHARE:
BASIC EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 0.55 $ 0.56
BASIC LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -  
BASIC EARNINGS PER COMMON SHARE $ 0.55   $ 0.56  
 
WEIGHTED AVERAGE SHARES - BASIC   40,360     39,484  
 
DILUTED EARNINGS PER SHARE:
DILUTED EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 0.52 $ 0.52
DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -  
DILUTED EARNINGS PER COMMON SHARE $ 0.52   $ 0.52  
 
WEIGHTED AVERAGE SHARES - DILUTED   43,081     42,545  
 

       
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2012 AND DECEMBER 31, 2011
(in thousands)
(unaudited)
 
March 31, December 31,
ASSETS 2012 2011
 
CURRENT ASSETS:
Cash and cash equivalents $ 28,738 $ 27,269
Accounts receivable, net 163,151 165,768
Materials and supplies 16,011 14,445
Prepaid expenses and other 15,844 13,332
Deferred income tax assets, net   19,231   19,385
Total current assets   242,975   240,199
 
PROPERTY AND EQUIPMENT, net 1,680,034 1,643,589
GOODWILL 160,964 160,277
INTANGIBLE ASSETS, net 229,029 230,628
DEFERRED INCOME TAX ASSETS, net 2,389 2,342
OTHER ASSETS, net   17,984   17,122
Total assets $ 2,333,375 $ 2,294,157
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
Current portion of long-term debt $ 59,340 $ 57,168
Accounts payable 121,549 134,081
Accrued expenses 58,446 69,097
Deferred income tax liabilities, net   104   925

Total current liabilities

  239,439   261,271
 
LONG-TERM DEBT, less current portion 577,692 569,026
DEFERRED INCOME TAX LIABILITIES, net 295,922 285,780
DEFERRED ITEMS - grants from outside parties 203,001 198,824
OTHER LONG-TERM LIABILITIES 19,676 18,622
 
TOTAL STOCKHOLDERS' EQUITY   997,645   960,634
Total liabilities and stockholders' equity $ 2,333,375 $ 2,294,157
 

       
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(in thousands)
(unaudited)
 
Three Months Ended
March 31,
2012 2011
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 22,241 $ 22,122
Adjustments to reconcile net income to net cash provided
by operating activities:
Loss from discontinued operations, net of tax 3 -
Depreciation and amortization 17,633 15,861
Compensation cost related to equity awards 2,290 2,148
Excess tax benefits from share-based compensation (1,746 ) (900 )
Deferred income taxes 9,977 3,311
Net gain on sale of assets (1,230 ) (1,010 )
Insurance proceeds received 12,521 -
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable, net (2,526 ) (13,837 )
Materials and supplies (1,418 ) (656 )
Prepaid expenses and other (2,496 ) (1,535 )
Accounts payable and accrued expenses (27,491 ) (20,039 )
Other assets and liabilities, net   (9 )   1,819  
Net cash provided by operating activities from continuing operations 27,749 7,284
Net cash used in discontinued operations   (3 )   (4 )
Net cash provided by operating activities   27,746     7,280  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, gross (50,318 ) (15,725 )
Proceeds from outside parties 8,437 7,514
Cash paid for acquisitions, net of cash acquired (837 ) (440 )
Proceeds from disposition of property and equipment   1,626     1,031  
Net cash used in investing activities from continuing operations   (41,092 )   (7,620 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital leases (56,461 ) (55,981 )
Proceeds from issuance of long-term debt 64,716 52,967
Proceeds from employee stock purchases 6,210 4,006
Treasury stock purchases (1,757 ) (1,029 )
Excess tax benefits from share-based compensation   1,746     900  
Net cash provided by financing activities from continuing operations   14,454     863  
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   361     (897 )
 
CHANGE IN CASH BALANCES INCLUDED IN CURRENT ASSETS OF DISCONTINUED OPERATIONS   -     1  
 
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 1,469 (373 )
CASH AND CASH EQUIVALENTS, beginning of period   27,269     27,417  
CASH AND CASH EQUIVALENTS, end of period $ 28,738   $ 27,044  
 

           
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
   
Three Months Ended
March 31,
2012 2011
% of % of
Amount Revenue Amount Revenue

Revenues:

Freight $ 144,584 69.7 % $ 132,805 69.2 %
Non-freight   62,852   30.3 %   59,106   30.8 %
 
Total revenues $ 207,436   100.0 % $ 191,911   100.0 %
 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 65,757 31.7 % $ 58,082 30.3 %
Equipment rents 9,817 4.8 % 10,544 5.4 %
Purchased services 18,031 8.7 % 17,442 9.1 %
Depreciation and amortization 17,633 8.5 % 15,861 8.3 %
Diesel fuel used in operations 21,998 10.6 % 21,421 11.2 %
Diesel fuel sold to third parties 4,990 2.4 % 4,079 2.1 %
Casualties and insurance 5,547 2.7 % 5,438 2.8 %
Materials 6,107 2.9 % 6,583 3.4 %
Net gain on sale of assets (1,230 ) (0.6 %) ( 1,010 ) (0.5 %)
Other expenses   17,472   8.4 %   14,268   7.5 %
 
Total operating expenses $ 166,122   80.1 % $ 152,708   79.6 %
 

Functional Classification

Transportation $ 68,164 32.9 % $ 61,971 32.3 %
Maintenance of ways and structures 21,293 10.3 % 17,863 9.3 %
Maintenance of equipment 22,701 10.9 % 23,507 12.2 %
Diesel fuel sold to third parties 4,990 2.4 % 4,079 2.1 %
General and administrative 32,571 15.7 % 30,437 15.8 %
Net gain on sale of assets (1,230 ) (0.6 %) ( 1,010 ) (0.5 %)
Depreciation and amortization   17,633   8.5 %   15,861   8.3 %
 
Total operating expenses $ 166,122   80.1 % $ 152,708   79.6 %

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                       

 

North American & European

 

Three Months Ended March 31, 2012

Operations

 

Australian Operations

Total Operations

 

% of Total % of Total

% of Total

Revenues:

Amount Revenues Amount Revenues Amount

Revenues

Freight $ 102,048 70.8 % $ 42,536 67.1 % $ 144,584 69.7 %
Non-freight (excluding fuel sales) 42,025 29.2 % 15,541 24.5 % 57,566 27.8 %
Fuel sales to third parties   -   0.0 %   5,286   8.3 %   5,286   2.5 %

Total revenues

144,073 100.0 % 63,363 100.0 % 207,436 100.0 %
 
Operating expenses:
Labor and benefits 51,090 35.5 %

14,667

23.0 % 65,757 31.7 %
Equipment rents 6,726 4.7 % 3,091 4.9 % 9,817 4.7 %
Purchased services 6,259 4.3 % 11,772 18.6 % 18,031 8.7 %
Depreciation and amortization 12,318 8.5 % 5,315 8.4 % 17,633 8.5 %
Diesel fuel used in operations 15,209 10.6 % 6,789 10.7 % 21,998 10.6 %
Diesel fuel sold to third parties - 0.0 % 4,990 7.9 % 4,990 2.4 %
Casualties and insurance 3,412 2.4 % 2,135 3.4 % 5,547 2.7 %
Materials 5,884 4.1 % 223 0.4 % 6,107 2.9 %
Net gain on sale of assets (1,111 ) (0.8 %) (119 ) (0.2 %) (1,230 ) (0.6 %)
Other expenses   12,973   9.0 %   4,499   7.1 %   17,472   8.4 %
Total operating expenses   112,760   78.3 %   53,362   84.2 %   166,122   80.1 %
 
Income from Operations $ 31,313   $ 10,001   $ 41,314  
 
Carloads 174,256 47,922 222,178
 
Net expenditures for additions to property & equipment $ 12,804 $ 31,322 $ 44,126
 

 

North American & European

Three Months Ended March 31, 2011

Operations   Australian Operations Total Operations

 

% of Total % of Total

% of Total

Revenues:

Amount Revenues   Amount Revenues   Amount

Revenues

Freight $ 90,729 68.6 % $ 42,076 70.6 % $ 132,805 69.2 %
Non-freight (excluding fuel sales) 41,578 31.4 % 13,109 22.0 % 54,687 28.5 %
Fuel sales to third parties   -   0.0 %   4,419   7.4 %   4,419   2.3 %
Total revenues 132,307 100.0 % 59,604 100.0 % 191,911 100.0 %
 
Operating expenses:
Labor and benefits 46,459 35.2 % 11,623 19.5 % 58,082 30.4 %
Equipment rents 6,493 4.9 % 4,051 6.8 % 10,544 5.5 %
Purchased services 6,365 4.8 % 11,077 18.6 % 17,442 9.1 %
Depreciation and amortization 11,346 8.6 % 4,515 7.6 % 15,861 8.3 %
Diesel fuel used in operations 14,977 11.3 % 6,444 10.8 % 21,421 11.2 %
Diesel fuel sold to third parties - 0.0 % 4,079 6.8 % 4,079 2.1 %
Casualties and insurance 3,323 2.5 % 2,115 3.5 % 5,438 2.8 %
Materials 6,262 4.7 % 321 0.5 % 6,583 3.4 %
Net gain on sale of assets (1,008 ) (0.8 %) (2 ) (0.0 %) (1,010 ) (0.5 %)
Other expenses   11,155   8.4 %   3,113   5.2 %   14,268   7.4 %
Total operating expenses   105,372   79.6 %   47,336   79.4 %   152,708   79.6 %
 
Income from Operations $ 26,935   $ 12,268   $ 39,203  
 
Carloads 194,230 50,326 244,556
 
Net expenditures for additions to property & equipment $ 7,069 $ 1,142 $ 8,211
 

                       
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
         
Three Months Ended March 31, 2012
 
North American & European Operations Australian Operations Total Operations
Freight Average Revenues Freight Average Revenues Freight Average Revenues
Commodity Group Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
 
Intermodal* $ 92 720 $ 128 $ 18,610 12,736 $ 1,461 $ 18,702 13,456 $ 1,390
Coal & Coke 15,062 31,999 471 - - - 15,062 31,999 471
Farm & Food Products 8,270 16,059 515 11,122 16,668 667 19,392 32,727 593
Pulp & Paper 15,959 24,776 644 - - - 15,959 24,776 644
Metallic Ores** 2,225 2,529 880 9,590 4,558 2,104 11,815 7,087 1,667
Metals 16,756 26,671 628 - - - 16,756 26,671 628
Minerals & Stone 8,257 16,280 507 2,472 13,836 179 10,729 30,116 356
Chemicals & Plastics 14,240 17,046 835 - - - 14,240 17,046 835
Lumber & Forest Products 7,827 15,838 494 - - - 7,827 15,838 494
Petroleum Products 6,836 7,907 865 742 124 5,984 7,578 8,031 944
Autos & Auto Parts 2,060 2,406 856 - - - 2,060 2,406 856
Other 4,464 12,025 371 - - - 4,464 12,025 371
           
Totals $ 102,048 174,256 $ 586 $ 42,536 47,922 $ 888 $ 144,584 222,178 $ 651
 
* Represents intermodal units
** Includes carloads and intermodal units
 
Three Months Ended March 31, 2011
 
North American & European Operations   Australian Operations Total Operations
Freight Average Revenues Freight Average Revenues Freight Average Revenues
Commodity Group Revenues Carloads Per Carload Revenues Carloads Per Carload Revenues Carloads Per Carload
 
Intermodal* $ 98 846 $ 116 $ 17,833 12,872 1,385 $ 17,931 13,718 $ 1,307
Coal & Coke 18,871 54,204 348 - - - 18,871 54,204 348
Farm & Food Products 6,850 14,280 480 9,804 16,602 591 16,654 30,882 539
Pulp & Paper 14,779 24,309 608 - - - 14,779 24,309 608
Metallic Ores 1,525 2,778 549 10,665 4,191 2,545 12,190 6,969 1,749
Metals 11,337 22,540 503 - - - 11,337 22,540 503
Minerals & Stone 6,294 14,149 445 3,372 16,578 203 9,666 30,727 315
Chemicals & Plastics 10,464 14,349 729 - - - 10,464 14,349 729
Lumber & Forest Products 7,389 15,575 474 - - - 7,389 15,575 474
Petroleum Products 6,048 7,705 785 402 83 4,843 6,450 7,788 828
Autos & Auto Parts 2,146 2,890 743 - - - 2,146 2,890 743
Other 4,928 20,605 239 - - - 4,928 20,605 239
                 
Totals $ 90,729   194,230 $ 467 $ 42,076   50,326 $ 836 $ 132,805   244,556 $ 543
 
* Represents intermodal units

Reconciliation of non-GAAP Financial Measures

This earnings release contains references to free cash flow, which is a "non-GAAP financial measure" as this term is defined in Regulation G of the Securities Exchange Act of 1934. In accordance with Regulation G, GWI has reconciled this non-GAAP financial measure to its most directly comparable U.S. GAAP measure.

Free Cash Flow Description and Discussion

Management views Free Cash Flow as an important financial measure of how well GWI is managing its assets. Subject to the limitations discussed below, Free Cash Flow is a useful indicator of cash flow that may be available for discretionary use by GWI. Free Cash Flow is defined as Net Cash Provided by Operating Activities from Continuing Operations less Net Cash Used in Investing Activities from Continuing Operations, excluding the cost of acquisitions and the cash paid for acquisition-related expenses. Key limitations of the Free Cash Flow measure include the assumptions that GWI will be able to refinance its existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt. Free Cash Flow is not intended to represent, and should not be considered more meaningful than, or as an alternative to, measures of cash flow determined in accordance with GAAP. Free Cash Flow may be different from similarly-titled non-GAAP financial measures used by other companies.

The following table sets forth a reconciliation of GWI's Net Cash Provided by Operating Activities from Continuing Operations to GWI's Free Cash Flow ($ in millions):

   
Three Months Ended

March 31,

2012     2011
Net cash provided by operating activities from continuing operations $ 27.7 $ 7.3
Net cash used in investing activities from continuing operations (a) (41.1 ) (7.6 )
Net cash paid for acquisitions 0.8 0.4
Cash paid for acquisition-related expenses (b)   -     13.0  
Free cash flow $ (12.5 ) $ 13.1  
 

(a)

 

The 2012 period includes $24.5 million in Australian equipment investments.

(b)

The 2011 period includes Australian stamp duty expenses accrued as of December 31, 2010, but paid in 2011.

Source: Genesee & Wyoming Inc.

GWI Corporate Communications
Michael Williams, 1-203-629-3722
mwilliams@gwrr.com