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Genesee & Wyoming Reports Results for the Second Quarter of 2013

DARIEN, Conn.--(BUSINESS WIRE)--Aug. 1, 2013-- Genesee & Wyoming Inc. (G&W) (NYSE: GWR)

Second Quarter Highlights

  • Reported diluted earnings per share (EPS) of $1.14 as well as adjusted EPS of $1.14, a 35.7% increase in reported EPS, a 70.1% increase in adjusted EPS, and a 50.7% increase in adjusted EPS normalizing for the impact of the 2013 short line tax credit. (1)
  • Total operating revenues increased 84.3% to $400.7 million.
  • Combined Company same railroad adjusted operating revenues increased 10.0%. (2)
    • To provide comparative context for 2013 consolidated revenues and traffic volumes, G&W is providing “Combined Company” comparisons as though the RailAmerica railroads were owned by G&W during 2012. In doing so, G&W has reclassified RailAmerica’s 2012 information to conform with G&W’s presentation.
    • Same railroad operating revenues and traffic exclude the revenues and traffic of railroads that were not owned or operated by either G&W or RailAmerica for the full comparable periods.
  • Adjusted income from operations increased 103.2% to $107.6 million; Reported operating income of $107.4 million. (3)
  • Adjusted operating ratio improved 250 basis points to 73.2% (adjusted primarily to exclude RailAmerica integration costs and net gain on the sale of assets); Reported operating ratio of 73.2% (74.1% North American & European Operations; 69.7% Australian Operations). (3)

Jack Hellmann, President and CEO of G&W commented, “The second quarter of 2013 was the second reporting period in which G&W’s consolidated results included the former RailAmerica railroads. We are pleased to report continued strength in our financial results, with adjusted earnings per share up more than 50%. Our Combined Company same railroad adjusted revenues increased 10% in the second quarter of 2013, led by iron ore in Australia, petroleum products in North America and improving steam coal shipments in the United States. In addition, each of our eleven operating regions effectively managed its costs. As a result, in North America, our adjusted operating ratio improved 2.1 percentage points to 74% and in Australia our adjusted operating ratio improved 4.8 percentage points to 70%.” (3)

“As we enter the second half of 2013, we are focused on commercial development across our broad national footprint, further reducing our costs as well as ensuring the successful start-up of new iron ore projects in both Australia and Canada. With our integrated operations performing well, our balance sheet deleveraging and $400 million of revolver capacity, we also continue to evaluate multiple investment opportunities.”

Financial Results

G&W reported net income in the second quarter of 2013 of $65.1 million, compared with net income of $36.4 million in the second quarter of 2012. Excluding the net impact of certain significant items discussed below, G&W's adjusted net income in the second quarter of 2013 was $65.1 million, compared with adjusted net income of $28.7 million in the second quarter of 2012. (1)

G&W's reported diluted EPS in the second quarter of 2013 were $1.14 with 56.7 million weighted average common shares outstanding, compared with diluted EPS of $0.84 with 43.2 million weighted average common shares outstanding in the second quarter of 2012. Excluding the net impact of significant items discussed below, G&W's adjusted diluted EPS in the second quarter of 2013 were $1.14 with 56.7 million weighted average common shares outstanding, compared with adjusted diluted EPS of $0.67 with 43.2 million weighted average shares outstanding in the second quarter of 2012. (1)

G&W’s effective tax rate was 27.9% in the second quarter of 2013, as compared with 33.6% in the second quarter of 2012. The lower tax rate in the second quarter of 2013 was driven primarily by the extension of the Short Line Tax Credit on January 2, 2013, which had previously expired on December 31, 2011.

In the second quarter of 2013 and 2012, G&W's results included certain significant items that are set forth in the following table ($ in millions, except per share amounts).

                             

Income/

(Loss)

Before Taxes

Impact

After-Tax

Net Income/

(Loss) Impact

Diluted

Earnings/

(Loss) Per

Common

Share Impact

Q2 2013

RailAmerica acquisition/integration costs $ (1.2 ) $ (0.7 ) $ (0.01 )
Net gain on sale of assets $ 1.0 $ 0.7 $ 0.01

 

Q2 2012

Net gain on sale of assets $ 6.2 $ 5.2 $ 0.12
Gain on insurance recoveries $ 5.2 $ 3.6 $ 0.08
Business/Corporate development expenses $ (1.9 ) $ (1.2 ) $ (0.03 )
 

Explanation of Significant Items

In the second quarter of 2013, G&W incurred RailAmerica acquisition/integration costs of $1.2 million, primarily associated with employee severance arrangements. In the second quarter of 2013, net gain on the sale of assets was $1.0 million, compared with $6.2 million in the second quarter of 2012. Also in the second quarter of 2012, G&W benefited from insurance recoveries of $5.2 million, primarily related to a business interruption claim associated with lost profits incurred in the first quarter of 2012 as a result of the Edith River Bridge derailment.

Results from Continuing Operations

In the second quarter of 2013, G&W’s total operating revenues increased $183.3 million, or 84.3%, to $400.7 million, compared with $217.4 million in the second quarter of 2012. The increase included $167.4 million in revenues from new operations, partially offset by a $1.5 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar. Excluding the net impact from foreign currency depreciation, G&W’s same railroad operating revenues, which exclude former RailAmerica railroads, increased $17.4 million, or 8.0%.

G&W’s same railroad freight revenues in the second quarter of 2013 were $173.3 million, compared with $154.2 million in the second quarter of 2012. Excluding $1.2 million from the impact of foreign currency depreciation, G&W’s same railroad freight revenues increased by $20.3 million, or 13.2%.

G&W’s same railroad non-freight revenues in the second quarter of 2013 were $60.1 million, compared with $63.2 million in the second quarter of 2012. Excluding a $0.3 million decrease from the net impact of foreign currency depreciation, G&W’s same railroad non-freight revenues decreased by $2.8 million, or 4.5%, primarily due to a $4.2 million decrease in third-party fuel sales, partially offset by increased switching revenues in Australia. G&W sold its third-party fuel operation in South Australia in the third quarter of 2012.

In the second quarter of 2013, Combined Company same railroad operating revenues increased $32.1 million, or 8.8%, to $398.4 million, excluding a $1.7 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar. Excluding $1.3 million from the impact of foreign currency depreciation, the Combined Company same railroad freight revenues increased by $33.3 million, or 12.6%, to $297.7 million in the second quarter of 2013. Excluding a $0.4 million decrease from the net impact of foreign currency depreciation and a $4.2 million decrease in third-party fuel sales primarily due to the sale of our third-party fuel operation, Combined Company same railroad adjusted non-freight revenues increased by $3.0 million, or 2.9%, to $100.7 million in the second quarter of 2013. (2)

G&W's traffic in the second quarter of 2013 was 480,979 carloads. On a Combined Company basis, traffic increased 34,296 carloads, or 7.7%, compared with traffic in the second quarter of 2012. Excluding 5,291 total carloads from Marquette Rail LLC, which RailAmerica acquired on May 1, 2012, and the Columbus & Chattahoochee Railroad, Inc., which G&W commenced operations on July 1, 2012, Combined Company same-railroad traffic increased 29,005 carloads, or 6.5%, compared with the second quarter of 2012. The traffic increase was principally due to increases of 10,455 carloads of petroleum products traffic (primarily crude oil and liquid petroleum gases in the Pacific, Southern, Mountain West and Canada regions), 7,832 carloads of coal & coke traffic (primarily in the Midwest, Central and Northeast regions, offset by lower shipments in the Ohio Valley Region) and 3,801 carloads of metallic ores traffic (primarily the Australia Region). All remaining traffic increased by a net 6,917 carloads.

G&W's income from operations in the second quarter of 2013 was $107.4 million, compared with $62.5 million in the second quarter of 2012. G&W’s operating ratio in the second quarter of 2013 was 73.2%, compared with an operating ratio of 71.3% in the second quarter of 2012. Income from operations in the second quarter of 2013 included $1.2 million of RailAmerica acquisition and integration costs, offset by a $1.0 million net gain on the sale of assets. In the second quarter of 2012, income from operations included a $6.2 million gain on the sale of assets and $5.2 million from insurance recoveries, primarily related to the Edith River Bridge derailment, partially offset by $1.9 million of business/corporate development expenses. Excluding these items, G&W’s adjusted income from operations increased $54.7 million, or 103.2%, to $107.6 million. G&W’s adjusted operating ratio improved 250 basis points to 73.2% in the second quarter of 2013, compared with 75.7% in the second quarter of 2012. (3)

Free Cash Flow from Continuing Operations (4)

(in millions)             Six Months Ended

June 30,

    2013             2012  
Net cash provided by operating activities $ 152.7 $ 90.9
Net cash used in investing activities, excluding
new business investments (78.0 ) (26.4 )
Net cash used for acquisitions (a)   9.6     0.8  
Free cash flow before new business investments 84.3 65.3
New business investments   (25.1 )   (54.5 )
Free cash flow (4) $ 59.2   $ 10.7  

a) The 2013 period included $9.6 million in cash paid for expenses related to the integration of RailAmerica.

G&W’s free cash flow from continuing operations for the six months ended June 30, 2013 and 2012 was $59.2 million and $10.7 million, respectively. (4)

Conference Call and Webcast Details

As previously announced, G&W's conference call to discuss financial results for the second quarter will be held on Thursday, August 1, 2013, at 11:00 am EDT. The dial-in number for the teleconference in the U.S. is (877) 209-9922; outside the U.S. is (612) 332-1210, or the call may be accessed live over the Internet (listen only) at www.gwrr.com/investors, by selecting "Second Quarter Earnings Conference Call Webcast." Management will be referring to a slide presentation that will also be available at gwrr.com/investors. The webcast will be archived at www.gwrr.com/investors, until the following quarter’s earnings press release. Telephone replay is available for 30 days beginning at 1:00 p.m. EDT on August 1 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 277583.

About G&W

G&W owns and operates short line and regional freight railroads in the United States, Australia, Canada, the Netherlands and Belgium. In addition, G&W operates the 1,400-mile Tarcoola to Darwin rail line, which links the Port of Darwin with the Australian interstate rail network in South Australia. Operations currently include 111 railroads organized in 11 regions, with nearly 15,000 miles of owned and leased track, 4,600 employees and over 2,000 customers. We provide rail service at 36 ports in North America, Australia 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," "could," "should," "seeks," "expects," "estimates," "trends," "outlook," 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 that are difficult to forecast, including the following: risks related to the operation of our railroads; integration of acquisitions; economic, political and industry conditions (including employee strikes or work stoppages); customer demand and changes in our operations, 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, including our ability to obtain government funding for capital projects; international complexities of operations, currency fluctuations, finance, tax and decentralized management; challenges of managing rapid growth including retention and development of senior leadership; unpredictability of fuel costs; susceptibility to various legal claims and lawsuits; increase in, or volatility associated with, expenses related to estimated claims, self-insured retention amounts, and insurance coverage limits; consummation of new business opportunities; exposure to the credit risk of customers and counterparties; severe weather conditions and other natural occurrences, which could result in shutdowns, derailments or other substantial disruption of operations; susceptibility to the risks of doing business in foreign countries; our success integrating RailAmerica railroads into our operations and our ability to realize the expected synergies associated with the acquisition of RailAmerica; and others including, but not limited to, those noted in our 2012 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. G&W does not undertake, and expressly disclaims, any duty to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

1. Adjusted net income and adjusted diluted earnings per common share are non-GAAP financial measures and are not intended to replace the net income and diluted earnings per common share calculated on a basis consistent with GAAP. 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 income and diluted earnings per common share calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

2. To provide comparative context for 2013 consolidated revenues and traffic volumes, G&W is providing “Combined Company” comparisons for those items as though the RailAmerica railroads were owned by G&W during 2012. In doing so, G&W has amended RailAmerica’s 2012 information to conform with G&W’s reporting methodology. Combined Company revenues include both RailAmerica and G&W operating revenues for the second quarter of 2012. Combined Company same railroad revenues exclude operating revenues from Marquette Rail LLC, which RailAmerica acquired on May 1, 2012, and Columbus & Chattahoochee Railroad, Inc., which G&W commenced operations on July 1, 2012. Combined Company same railroad adjusted revenues exclude revenues from fuel sales to third parties and the net impact from foreign currency depreciation. The Combined Company same railroad adjusted revenues that exclude the items described above is a non-GAAP financial measure and is not intended to replace same railroad operating revenues, 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 operating revenues calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

3. Adjusted income from operations and adjusted operating ratios are non-GAAP financial measures and are not intended to replace income from operations and operating ratios calculated using total operating expenses and total revenues, calculated on a basis consistent with GAAP. 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 income from operations and operating ratios calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

4. 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 AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(in thousands, except per share amounts)
(unaudited)
                                       
Three Months Ended Six Months Ended
June 30, June 30,
  2013     2012     2013     2012  
 
OPERATING REVENUES $ 400,741 $ 217,419 $ 775,949 $ 424,855
 
OPERATING EXPENSES   293,324     154,946     592,332     321,068  
INCOME FROM OPERATIONS 107,417 62,473 183,617 103,787
 
INTEREST INCOME 950 964 1,993 1,831
INTEREST EXPENSE (17,203 ) (8,622 ) (37,323 ) (17,238 )
OTHER(LOSS)/INCOME, NET   (879 )   15     (197 )   999  
 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 90,285 54,830 148,090 89,379
 
PROVISION FOR INCOME TAXES   (25,226 )   (18,443 )   (294 )   (30,748 )
 
INCOME FROM CONTINUING OPERATIONS 65,059 36,387 147,796 58,631
 
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX   (9 )   (24 )   (18 )   (27 )
 
NET INCOME 65,050 36,363 147,778 58,604
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST 280 - 446 -
LESS: SERIES A-1 PREFERRED STOCK DIVIDEND   -     -     2,139     -  
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 64,770   $ 36,363   $ 145,193   $ 58,604  
 

BASIC EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING

INC. COMMON STOCKHOLDERS:

 

BASIC EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 1.19 $ 0.90 $ 2.75 $ 1.45
BASIC LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -     -     -  
BASIC EARNINGS PER COMMON SHARE $ 1.19   $ 0.90   $ 2.75   $ 1.45  
 
WEIGHTED AVERAGE SHARES - BASIC   54,434     40,614     52,891     40,487  
 

DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING

INC. COMMON STOCKHOLDERS:

 

DILUTED EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS $ 1.14 $ 0.84 $ 2.60 $ 1.36
DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS   -     -     -     -  
DILUTED EARNINGS PER COMMON SHARE $ 1.14   $ 0.84   $ 2.60   $ 1.36  
 
WEIGHTED AVERAGE SHARES - DILUTED   56,676     43,153     56,633     43,116  
 

                     
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2013 AND DECEMBER 31, 2012
(in thousands)
(unaudited)
 
June 30, December 31,
ASSETS 2013 2012
 
CURRENT ASSETS:
Cash and cash equivalents $ 18,537 $ 64,772
Accounts receivable, net 309,314 262,949
Materials and supplies 31,601 32,389
Prepaid expenses and other 52,219 33,586
Deferred income tax assets, net  

64,672

  71,556
Total current assets  

476,343

  465,252
 
PROPERTY AND EQUIPMENT, net 3,359,546 3,396,295
GOODWILL 637,150 634,953
INTANGIBLE ASSETS, net 654,919 670,206
DEFERRED INCOME TAX ASSETS, net 3,492 2,396
OTHER ASSETS, net   78,949   57,013
Total assets $

5,210,399

$ 5,226,115
 
LIABILITIES AND EQUITY
 
CURRENT LIABILITIES:
Current portion of long-term debt $ 96,788 $ 87,569
Accounts payable 212,435 232,121
Accrued expenses 96,665 93,971
Deferred income tax liabilities, net   1,097   3,083
Total current liabilities   406,985   416,744
 
LONG-TERM DEBT, less current portion 1,640,791 1,770,566
DEFERRED INCOME TAX LIABILITIES, net

843,896

862,734
DEFERRED ITEMS - grants from outside parties 241,768 228,579
OTHER LONG-TERM LIABILITIES 49,601 47,506
SERIES A-1 PREFERRED STOCK - 399,524
 
TOTAL EQUITY   2,027,358   1,500,462
Total liabilities and equity $

5,210,399

$ 5,226,115
 

                 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(in thousands)
(unaudited)
 
Six Months Ended
June 30,
  2013     2012  
 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 147,778 $ 58,604
Adjustments to reconcile net income to net cash provided
by operating activities:
Loss from discontinued operations, net of tax 18 27
Depreciation and amortization 68,384 35,967
Compensation cost related to equity awards 10,749 3,948
Excess tax benefits from share-based compensation (5,666 ) (2,687 )
Deferred income taxes (18,802 ) 21,608
Net gain on sale of assets (2,716 ) (7,429 )
Gain on insurance recoveries - (5,186 )
Insurance proceeds received 10,353 21,373
Changes in assets and liabilities which (used) provided cash, net of effect of acquisitions:
Accounts receivable, net (45,254 ) 3,617
Materials and supplies (1,842 ) (1,870 )
Prepaid expenses and other (2,111 ) (2,331 )
Accounts payable and accrued expenses (13,412 ) (35,365 )
Other assets and liabilities, net   5,242     579  

Net cash provided by operating activities from continuing operations

152,721 90,855
Net cash used in operating activities from discontinued operations   (18 )   (27 )
Net cash provided by operating activities   152,703     90,828  
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (112,334 ) (106,538 )
Grant proceeds from outside parties 6,008 18,281
Cash paid for acquisitions, net of cash acquired - (837 )
Proceeds from disposition of property and equipment   3,198     8,141  
Net cash used in investing activities from continuing operations   (103,128 )   (80,953 )
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital leases (267,961 ) (131,390 )
Proceeds from issuance of long-term debt 168,998 133,118
Debt amendment costs (1,880 ) -
Proceeds from employee stock purchases 9,177 10,742
Treasury stock purchases (7,735 ) (1,763 )
Dividends paid on Series A-1 Preferred Stock (2,139 ) -
Excess tax benefits from share-based compensation   5,666     2,687  
Net cash (used in) provided by financing activities from continuing operations   (95,874 )   13,394  
 
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS   64     (319 )
 
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (46,235 ) 22,950
CASH AND CASH EQUIVALENTS, beginning of period   64,772     27,269  
CASH AND CASH EQUIVALENTS, end of period $ 18,537   $ 50,219  
 

                         
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
           
Three Months Ended
June 30,
2013 2012
% of % of
Amount Revenue Amount Revenue

Revenues:

Freight $ 299,849 74.8 % $ 154,176 70.9 %
Non-freight   100,892   25.2 %   63,243   29.1 %
 
Total revenues $ 400,741   100.0 % $ 217,419   100.0 %
 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 109,781 27.4 % $ 61,366 28.3 %
Equipment rents 18,993 4.8 % 8,967 4.1 %
Purchased services 30,151 7.5 % 19,313 8.9 %
Depreciation and amortization 34,161 8.5 % 18,334 8.4 %
Diesel fuel used in operations 34,694 8.7 % 21,134 9.8 %
Diesel fuel sold to third parties 93 0.0 % 4,111 1.9 %
Casualties and insurance 10,043 2.5 % 5,943 2.7 %
Materials 23,235 5.8 % 6,783 3.1 %
Trackage rights 10,445 2.6 % 6,401 3.0 %
Net gain on sale of assets ( 1,009 ) (0.3 %) ( 6,199 ) (2.9 %)
Gain on insurance recoveries - 0.0 % ( 5,186 ) (2.4 %)
Other expenses 21,774 5.5 % 13,979 6.4 %
RailAmerica integration costs   963   0.2 %   -   0.0 %
 
Total operating expenses $ 293,324   73.2 % $ 154,946   71.3 %
 

Functional Classification

Transportation $ 108,826 27.2 % $ 66,228 30.5 %
Maintenance of ways and structures 41,961 10.5 % 22,511 10.4 %
Maintenance of equipment 41,275 10.3 % 22,759 10.5 %
Diesel fuel sold to third parties 93 0.0 % 4,111 1.9 %
General and administrative 54,366 13.6 % 32,388 14.9 %
Construction costs 12,688 3.2 % - 0.0 %
RailAmerica integration costs 963 0.2 % - 0.0 %
Net gain on sale of assets ( 1,009 ) (0.3 %) ( 6,199 ) (2.9 %)
Gain on insurance recoveries - 0.0 % ( 5,186 ) (2.4 %)
Depreciation and amortization   34,161   8.5 %   18,334   8.4 %
 
Total operating expenses $ 293,324   73.2 % $ 154,946   71.3 %
 

                       

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
             
Three Months Ended June 30, 2013

North American & European

Operations

Australian Operations Total Operations

Revenues:

Amount

% of Total

Revenues

Amount

% of Total

Revenues

Amount

% of Total

Revenues

Freight $ 232,996 73.5 % $ 66,853 80.0 % $ 299,849 74.8 %
Non-freight (excluding fuel sales) 84,220 26.5 % 16,573 19.9 % 100,793 25.2 %
Fuel sales to third parties   -   0.0 %   99   0.1 %   99   0.0 %
Total revenues 317,216 100.0 % 83,525 100.0 % 400,741 100.0 %
 
Operating expenses
Labor and benefits 92,088 29.0 % 17,693 21.2 % 109,781 27.4 %
Equipment rents 16,375 5.2 % 2,618 3.1 % 18,993 4.8 %
Purchased services 16,791 5.3 % 13,360 16.0 % 30,151 7.5 %
Depreciation and amortization 27,388 8.6 % 6,773 8.1 % 34,161 8.5 %
Diesel fuel used in operations 26,953 8.5 % 7,741 9.2 % 34,694 8.7 %
Diesel fuel sold to third parties - 0.0 % 93 0.1 % 93 0.0 %
Casualties and insurance 7,774 2.5 % 2,269 2.7 % 10,043 2.5 %
Materials 22,602 7.1 % 633 0.8 % 23,235 5.8 %
Trackage rights 4,954 1.5 % 5,491 6.6 % 10,445 2.7 %
Net gain on sale of assets (661 ) (0.2 %) (348 ) (0.4 %) (1,009 ) (0.3 %)
Gain on insurance recoveries - 0.0 % - 0.0 % - 0.0 %
Other expenses 19,867 6.3 % 1,907 2.3 % 21,774 5.4 %
RailAmerica integration costs   963   0.3 %   -   0.0 %   963   0.2 %
Total operating expenses   235,094   74.1 %   58,230   69.7 %   293,324   73.2 %
 
Income from Operations $ 82,122   $ 25,295   $ 107,417  
 
Carloads 417,106 63,873 480,979
 
Net expenditures for additions to property & equipment $ 59,215 $ 13,558 $ 72,773
 
Three Months Ended June 30, 2012

North American & European

Operations

Australian Operations Total Operations

Revenues:

Amount

% of Total

Revenues

Amount

% of Total

Revenues

Amount

% of Total

Revenues

Freight $ 101,996 70.3 % $ 52,180 72.1 % $ 154,176 70.9 %
Non-freight (excluding fuel sales) 43,059 29.7 % 15,846 21.9 % 58,905 27.1 %
Fuel sales to third parties   -   0.0 %   4,338   6.0 %   4,338   2.0 %
Total revenues 145,055 100.0 % 72,364 100.0 % 217,419 100.0 %
 
Operating expenses
Labor and benefits 47,281 32.6 % 14,085 19.5 % 61,366 28.3 %
Equipment rents 6,302 4.3 % 2,665 3.7 % 8,967 4.1 %
Purchased services 6,471 4.5 % 12,842 17.7 % 19,313 8.9 %
Depreciation and amortization 12,541 8.7 % 5,793 8.0 % 18,334 8.4 %
Diesel fuel used in operations 13,017 9.0 % 8,117 11.2 % 21,134 9.8 %
Diesel fuel sold to third parties - 0.0 % 4,111 5.7 % 4,111 1.9 %
Casualties and insurance 3,950 2.7 % 1,993 2.8 % 5,943 2.7 %
Materials 6,268 4.3 % 515 0.7 % 6,783 3.1 %
Trackage rights 3,602 2.5 % 2,799 3.8 % 6,401 3.0 %
Net gain on sale of assets (6,184 ) (4.3 %) (15 ) (0.0 %) (6,199 ) (2.9 %)
Gain on insurance recoveries - 0.0 % (5,186 ) (7.2 %) (5,186 ) (2.4 %)
Other expenses   11,909   8.2 %   2,070   2.9 %   13,979   6.4 %
Total operating expenses   105,157   72.5 %   49,789   68.8 %   154,946   71.3 %
 
Income from Operations $ 39,898   $ 22,575   $ 62,473  
 
Carloads 176,597 55,718 232,315
 
Net expenditures for additions to property & equipment $ 13,934 $ 32,442 $ 46,376
 

                                     
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(in thousands, except average revenues per carload)
(unaudited)
                       
Three Months Ended June 30, 2013
 
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
 
Agricultural Products $ 21,901 42,765 $ 512 $ 11,337 18,722 $ 606 $ 33,238 61,487 $ 541
Metallic Ores ** 4,130 5,044 819 27,672 12,335 2,243 31,802 17,379 1,830
Chemicals & Plastics 33,269 42,331 786 - - - 33,269 42,331 786
Metals 33,101 44,815 739 - - - 33,101 44,815 739
Pulp & Paper 27,275 41,372 659 - - - 27,275 41,372 659
Coal & Coke 26,731 80,345 333 - - - 26,731 80,345 333
Minerals & Stone 23,442 44,276 529 2,989 16,443 182 26,431 60,719 435
Intermodal* 163 1,536 106 24,408 16,294 1,498 24,571 17,830 1,378
Lumber & Forest Products 20,435 34,506 592 - - - 20,435 34,506 592
Petroleum Products 15,980 28,211 566 447 79 5,658 16,427 28,290 581
Food or Kindred Products 7,696 13,098 588 - - - 7,696 13,098 588
Waste 5,886 11,104 530 - - - 5,886 11,104 530
Autos & Auto Parts 7,329 10,018 732 - - - 7,329 10,018 732
Other 5,658 17,685 320 - - - 5,658 17,685 320
           
Totals $ 232,996

417,106

$ 559 $ 66,853 63,873 $ 1,047 $ 299,849 480,979 $ 623
 

* Represents intermodal units

** Includes carload and intermodal units

 
Three Months Ended June 30, 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
 
Agricultural Products $ 4,805 10,274 $ 468 $ 11,491 16,308 $ 705 $ 16,296 26,582 $ 613
Metallic Ores ** 2,721 2,883 944 13,770 8,265 1,666 16,491 11,148 1,479
Chemicals & Plastics 13,880 17,198 807 - - - 13,880 17,198 807
Metals 15,474 23,923 647 - - - 15,474 23,923 647
Pulp & Paper 15,850 23,540 673 - - - 15,850 23,540 673
Coal & Coke 16,457 39,686 415 - - - 16,457 39,686 415
Minerals & Stone 10,297 19,579 526 3,343 15,959 209 13,640 35,538 384
Intermodal* 170 1,624 105 22,917 15,086 1,519 23,087 16,710 1,382
Lumber & Forest Products 8,687 17,699 491 - - - 8,687 17,699 491
Petroleum Products 5,220 5,982 873 659 100 6,590 5,879 6,082 967
Food or Kindred Products 1,242 2,564 484 - - - 1,242 2,564 484
Waste 3,171 4,968 638 - - - 3,171 4,968 638
Autos & Auto Parts 2,115 2,546 831 - - - 2,115 2,546 831
Other 1,907 4,131 462 - - - 1,907 4,131 462
           
Totals $ 101,996 176,597 $ 578 $ 52,180 55,718 $ 937 $ 154,176 232,315 $ 664
 

* Represents intermodal units

** Includes carload and intermodal units
 

                   
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                 
Six Months Ended
June 30,
2013 2012
% of % of
Amount Revenue Amount Revenue

Revenues:

Freight $ 580,953 74.9 % $ 298,760 70.3 %
Non-freight   194,996   25.1 %   126,095   29.7 %
 
Total revenues $ 775,949   100.0 % $ 424,855   100.0 %
 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 219,087 28.3 % $ 127,123 29.9 %
Equipment rents 37,701 4.9 % 18,784 4.4 %
Purchased services 59,147 7.6 % 37,350 8.8 %
Depreciation and amortization 68,384 8.8 % 35,967 8.5 %
Diesel fuel used in operations 73,879 9.5 % 43,132 10.2 %
Diesel fuel sold to third parties 351 0.0 % 9,101 2.1 %
Casualties and insurance 17,994 2.3 % 11,490 2.7 %
Materials 42,564 5.5 % 12,890 3.0 %
Trackage rights 19,365 2.5 % 12,074 2.8 %
Net gain on sale of assets ( 2,716 ) (0.4 %) ( 7,429 ) (1.7 %)
Gain on insurance recoveries - 0.0 % ( 5,186 ) (1.2 %)
Other expenses 42,846 5.5 % 25,772 6.1 %
RailAmerica integration costs   13,730   1.8 %   -   0.0 %
 
Total operating expenses $ 592,332   76.3 % $ 321,068   75.6 %
 

Functional Classification

Transportation $ 219,152 28.3 % $ 134,392 31.6 %
Maintenance of ways and structures 80,277 10.4 % 43,804 10.3 %
Maintenance of equipment 81,538 10.5 % 45,460 10.7 %
Diesel fuel sold to third parties 351 0.0 % 9,101 2.1 %
General and administrative 111,126 14.3 % 64,959 15.3 %
Construction costs 20,490 2.6 % - 0.0 %
RailAmerica integration costs 13,730 1.8 % - 0.0 %
Net gain on sale of assets ( 2,716 ) (0.4 %) ( 7,429 ) (1.7 %)
Gain on insurance recoveries - 0.0 % ( 5,186 ) (1.2 %)
Depreciation and amortization   68,384   8.8 %   35,967   8.5 %
 
Total operating expenses $ 592,332   76.3 % $ 321,068   75.6 %
 

                       
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
             
Six Months Ended June 30, 2013

North American & European

Operations

Australian Operations Total Operations

Revenues:

Amount

% of Total

Revenues

Amount

% of Total

Revenues

Amount

% of Total

Revenues

Freight $ 453,842 73.6 % $ 127,111 79.6 % $ 580,953 74.9 %
Non-freight (excluding fuel sales) 162,469 26.4 % 32,158 20.2 % 194,627 25.1 %
Fuel sales to third parties   -   0.0 %   369   0.2 %   369   0.0 %
Total revenues 616,311 100.0 % 159,638 100.0 % 775,949 100.0 %
 
Operating expenses
Labor and benefits 184,785 30.0 % 34,302 21.4 % 219,087 28.3 %
Equipment rents 32,468 5.3 % 5,233 3.3 % 37,701 4.9 %
Purchased services 33,497 5.5 % 25,650 16.1 % 59,147 7.6 %
Depreciation and amortization 54,799 8.9 % 13,585 8.5 % 68,384 8.8 %
Diesel fuel used in operations 58,561 9.5 % 15,318 9.6 % 73,879 9.5 %
Diesel fuel sold to third parties - 0.0 % 351 0.2 % 351 0.0 %
Casualties and insurance 13,575 2.2 % 4,419 2.8 % 17,994 2.3 %
Materials 41,371 6.7 % 1,193 0.7 % 42,564 5.5 %
Trackage rights 9,724 1.5 % 9,641 6.0 % 19,365 2.5 %
Net gain on sale of assets (2,368 ) (0.4 %) (348 ) (0.2 %) (2,716 ) (0.4 %)
Other expenses 39,253 6.4 % 3,593 2.3 % 42,846 5.5 %
RailAmerica integration costs   13,730   2.2 %   -   0.0 %   13,730   1.8 %
Total operating expenses   479,395   77.8 %   112,937   70.7 %   592,332   76.3 %
 
Income from Operations $ 136,916   $ 46,701   $ 183,617  
 
Carloads 812,077 119,206 931,283
 
Net expenditures for additions to property & equipment $ 73,926 $ 32,400 $ 106,326
 
Six Months Ended June 30, 2012

North American & European

Operations

Australian Operations Total Operations

Revenues:

Amount

% of Total

Revenues

Amount

% of Total

Revenues

Amount

% of Total

Revenues

Freight $ 204,044 70.6 % $ 94,716 69.8 % $ 298,760 70.3 %
Non-freight (excluding fuel sales) 85,084 29.4 % 31,387 23.1 % 116,471 27.4 %
Fuel sales to third parties   -   0.0 %   9,624   7.1 %   9,624   2.3 %
Total revenues 289,128 100.0 % 135,727 100.0 % 424,855 100.0 %
 
Operating expenses
Labor and benefits 98,371 34.0 % 28,752 21.2 % 127,123 29.9 %
Equipment rents 13,028 4.5 % 5,756 4.2 % 18,784 4.4 %
Purchased services 12,736 4.4 % 24,614 18.1 % 37,350 8.8 %
Depreciation and amortization 24,859 8.6 % 11,108 8.2 % 35,967 8.5 %
Diesel fuel used in operations 28,226 9.8 % 14,906 11.0 % 43,132 10.2 %
Diesel fuel sold to third parties - 0.0 % 9,101 6.7 % 9,101 2.1 %
Casualties and insurance 7,362 2.5 % 4,128 3.0 % 11,490 2.7 %
Materials 12,152 4.2 % 738 0.5 % 12,890 3.0 %
Trackage rights 6,677 2.3 % 5,397 4.0 % 12,074 2.8 %
Net gain on sale of assets (7,295 ) (2.5 %) (134 ) (0.1 %) (7,429 ) (1.7 %)
Gain on insurance recoveries - 0.0 % (5,186 ) (3.8 %) (5,186 ) (1.2 %)
Other expenses   21,801   7.5 %   3,971   2.9 %   25,772   6.1 %
Total operating expenses   217,917   75.3 %   103,151   75.9 %   321,068   75.6 %
 
Income from Operations $ 71,211   $ 32,576   $ 103,787  
 
Carloads 350,853 103,640 454,493
 
Net expenditures for additions to property & equipment $ 26,738 $ 61,519 $ 88,257
 

                                     
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(in thousands, except average revenues per carload)
(unaudited)
                     

Six Months Ended June 30, 2013

 
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
 
Agricultural Products $ 45,757 90,534 $ 505 $ 22,507 34,394 $ 654 $ 68,264 124,928 $ 546
Metallic Ores ** 8,168 10,118 807 50,913 22,073 2,307 59,081 32,191 1,835
Chemicals & Plastics 65,349 83,239 785 - - - 65,349 83,239 785
Metals 62,347 86,438 721 - - - 62,347 86,438 721
Pulp & Paper 53,736 82,150 654 - - - 53,736 82,150 654
Coal & Coke 53,223 155,905 341 - - - 53,223 155,905 341
Minerals & Stone 42,670 79,015 540 6,080 31,929 190 48,750 110,944 439
Intermodal* 355 3,337 106 46,661 30,669 1,521 47,016 34,006 1,383
Lumber & Forest Products 40,181 68,131 590 - - - 40,181 68,131 590
Petroleum Products 32,641 55,362 590 950 141 6,738 33,591 55,503 605
Food or Kindred Products 15,521 26,692 581 - - - 15,521 26,692 581
Waste 10,901 20,119 542 - - - 10,901 20,119 542
Autos & Auto Parts 13,183 17,974 733 - - - 13,183 17,974 733
Other 9,810 33,063 297 - - - 9,810 33,063 297
           
Totals $ 453,842

812,077

$ 559 $ 127,111 119,206 $ 1,066 $ 580,953 931,283 $ 624
 
* Represents intermodal units
** Includes carload and intermodal units
 
Six Months Ended June 30, 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
 
Agricultural Products $ 12,145 24,801 $ 490 $ 22,613 32,976 $ 686 $ 34,758 57,777 $ 602
Metallic Ores ** 4,946 5,412 914 23,360 12,823 1,822 28,306 18,235 1,552
Chemicals & Plastics 28,236 34,956 808 - - - 28,236 34,956 808
Metals 32,186 50,527 637 - - - 32,186 50,527 637
Pulp & Paper 31,885 48,397 659 - - - 31,885 48,397 659
Coal & Coke 31,804 74,055 429 - - - 31,804 74,055 429
Minerals & Stone 18,956 35,975 527 5,815 29,795 195 24,771 65,770 377
Intermodal* 262 2,344 112 41,527 27,822 1,493 41,789 30,166 1,385
Lumber & Forest Products 16,506 33,526 492 - - - 16,506 33,526 492
Petroleum Products 11,115 12,330 901 1,401 224 6,254 12,516 12,554 997
Food or Kindred Products 2,332 4,977 469 - - - 2,332 4,977 469
Waste 6,080 10,085 603 - - - 6,080 10,085 603
Autos & Auto Parts 4,175 4,952 843 - - - 4,175 4,952 843
Other 3,416 8,516 401 - - - 3,416 8,516 401
           
Totals $ 204,044 350,853 $ 582 $ 94,716 103,640 $ 914 $ 298,760 454,493 $ 657
 
* Represents intermodal units
** Includes carload and intermodal units
 

Reconciliation of non-GAAP Financial Measures

This earnings release contains references to adjusted net income, adjusted diluted earnings per common share, combined company same railroad operating revenues, adjusted income from operations, adjusted operating ratios and free cash flow, which are "non-GAAP financial measures" as this term is defined in Regulation G of the Securities Exchange Act of 1934. In accordance with Item 10(e) of the Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G, G&W has reconciled these non-GAAP financial measures to their most directly comparable U.S. GAAP measures.

Adjusted Net Income and Adjusted Diluted Earnings Per Common Share

Management views Net Income and Diluted Earnings Per Common Share as important measures of G&W’s operating performance. Because management believes this information is useful for investors in assessing G&W’s financial results, the Net Income and Diluted Earnings Per Common Share for the three months ended June 30, 2013 used to calculate Adjusted Net Income and Adjusted Diluted Earnings Per Common Share are presented excluding the RailAmerica acquisition and integration costs and net gain on sale of assets and are further adjusted to exclude the second quarter of 2013 short line tax credit. The Net Income and Diluted Earnings Per Share for the three months ended June 30, 2012 used to calculate Adjusted Net Income and Adjusted Diluted Earnings Per Share, are presented excluding net gain on sale of assets, gain on insurance recoveries and business/corporate development expenses. The Adjusted Net Income and Adjusted Diluted Earnings Per Common Share excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, the Net Income and Diluted Earnings Per Common Share calculated using amounts in accordance with GAAP. Adjusted Net Income and Adjusted Diluted Earnings Per Common Share amounts may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of Net Income and Diluted Earnings Per Common Share calculated using amounts determined in accordance with GAAP to the Adjusted Net Income and Adjusted Diluted Earnings Per Common Share described above (in millions, except per share amounts):

                 

Three Months Ended June 30, 2013

Net Income

Diluted

Earnings/(Loss)

Per Common

Share Impact

As reported $ 65.1 $ 1.14
Add back certain items, net of tax:
RailAmerica acquisition/integration costs 0.7 0.01
Net gain on sale of assets   (0.7 )   (0.01 )
 
Adjusted net income $ 65.1 $ 1.14
Q2 impact of 2013 short line tax credit   (7.5 )   (0.13 )
 
Adjusted net income (excluding Q2 short line tax credit) $ 57.6   $ 1.01  
 

Three Months Ended June 30, 2012

Net Income

Diluted

Earnings/(Loss)

Per Common

Share Impact

As reported $ 36.4 $ 0.84
Add back certain items, net of tax:
Net gain on sale of assets (5.2 ) (0.12 )
Gain on insurance recoveries (3.6 ) (0.08 )
Business/corporate development expenses   1.2     0.03  
 
Adjusted net income $ 28.7   $ 0.67  
 

Combined Company Same Railroad Revenues

Management views Operating Revenues as an important financial measure of G&W’s operating performance. Because management believes this information is useful for investors in assessing G&W’s financial results, compared with the same period in the prior year, the Operating Revenues for the three months ended June 30, 2013 used to calculate Combined Company Same Railroad Revenues are presented excluding operating revenues from Marquette Rail LLC (Marquette), which RailAmerica acquired on May 1, 2012, and the Columbus & Chattahoochee Railroad, Inc. (CCH), which G&W commenced operations on July 1, 2012. Combined Company Same Railroad Revenues are presented excluding revenues from fuel sales to third parties and the impact from the net depreciation of the Australia and Canadian dollars and the Euro relative to the United States dollar. The Combined Company Same Railroad Adjusted Revenues excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, Operating Revenues calculated using amounts in accordance with GAAP. Combined Company Same Railroad Revenues may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth a reconciliation of Operating Revenues to the Combined Company Same Railroad Revenues described above ($ in millions):

                           

Three Months Ended June 30, 2013

G&W

As Reported

G&W New

Operations (a)

RailAmerica

New

Operations (a)

Combined

Company

Same Railroad

Freight revenues $ 299.8 $ (1.3 ) $ (0.9 ) $ 297.7
Non-freight revenues   100.9   (0.2 )   (0.1 )   100.7
Total operating revenues $ 400.7 $ (1.5 ) $ (0.9 ) $ 398.4
     

Three Months Ended June 30, 2012

G&W

As Reported

RailAmerica

As Reported

Eliminations/

Adjustments (b)

Combined

Company

Freight revenues $ 154.2 $ 113.6 $ (2.1 ) $ 265.7
Non-freight revenues   63.2   42.5   (3.4 )   102.3
Total operating revenues $ 217.4 $ 156.1 $ (5.5 ) $ 368.0
 
(a) G&W New Ops: CCH; RA New Ops: Marquette
(b) Includes the elimination of non-freight revenues earned during the three months ended June 30, 2012 by a subsidiary of RailAmerica for work performed for subsidiaries of G&W and reclassifications of certain revenues of RailAmerica to align with G&W's accounting policies.
 

               
Three Months Ended

June 30,

Change
2013       2012 $         %
Combined Company same railroad
operating revenues $ 398.4 $ 368.0 $ 30.3
Fuel sales to third parties - (4.2 ) 4.2
FX   -   (1.7 )   1.7  
Combined Company same railroad adjusted
operating revenues $ 398.4 $ 362.1   $ 36.3   10.0 %
 
Three Months Ended

June 30,

Change
2013 2012 $ %
Combined Company same railroad
freight revenues $ 297.7 $ 265.7 $ 32.0
FX   -   (1.3 )   1.3  
Combined Company same railroad adjusted
freight revenues $ 297.7 $ 264.4   $ 33.3   12.6 %
 
Three Months Ended

June 30,

Change
2013 2012 $ %
Combined Company same railroad
non-freight revenues $ 100.7 $ 102.3 $ (1.7 )
Fuel sales to third parties - (4.2 ) 4.2
FX   -   (0.4 )   0.4  
Combined Company same railroad adjusted
non-freight revenues $ 100.7 $ 97.7   $ 3.0  

2.9

%
 

Adjusted Income from Operations and Adjusted Operating Ratios

Management views Income from Operations, calculated as Operating Revenues less Operating Expenses, and Operating Ratios, calculated as Operating Expenses divided by Operating Revenues, as important measures of G&W’s operating performance. Because management believes this information is useful for investors in assessing G&W’s financial results compared with the same period in the prior year, the Income from Operations and Operating Ratios for the three months ended June 30, 2013, used to calculate Adjusted Income from Operations and Adjusted Operating Ratios, are presented excluding RailAmerica acquisition and integration costs and net gain on sale of assets. The Income from Operations and Operating Ratios for the three months ended June 30, 2012, used to calculate Adjusted Income from Operations and Adjusted Operating Ratios, are presented excluding net gain on sale of assets, gain on insurance recoveries and business/corporate development expenses. The Adjusted Income from Operations and Adjusted Operating Ratios presented excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, the Income from Operations and Operating Ratios calculated using amounts in accordance with GAAP. Adjusted Income from Operations and Operating Ratios may be different from similarly-titled non-GAAP financial measures used by other companies.

The following table sets forth a reconciliation of Income from Operations and Operating Ratios by segment calculated using amounts determined in accordance with GAAP to the Adjusted Income from Operations and Adjusted Operating Ratios by segment described above ($ in millions):

                   

Three Months Ended June 30, 2013

North American

& European

Operations

Australian

Operations

Total

Operations

Operating revenues $ 317.2 $ 83.5 $ 400.7
Operating expenses   235.1   58.2   293.3
Operating income $ 82.1 $ 25.3 $ 107.4
Operating ratio 74.1% 69.7% 73.2%
   
Operating expenses $ 235.1 $ 58.2 $ 293.3
RailAmerica acquisition/integration costs (1.2) - (1.2)
Net gain on sale of assets   0.7   0.3   1.0
Adjusted operating expenses $ 234.6 $ 58.6 $ 293.1
 
Adjusted operating income $ 82.7 $ 24.9 $ 107.6
Adjusted operating ratio 73.9% 70.1% 73.2%
 
 

Three Months Ended June 30, 2012

North American

& European

Operations

Australian

Operations

Total

Operations

Operating revenues $ 145.1 $ 72.4 $ 217.4
Operating expenses   105.2   49.8   154.9
Operating income $ 39.9 $ 22.6 $ 62.5
Operating ratio 72.5% 68.8% 71.3%
 
Operating expenses $ 105.2 $ 49.8 $ 154.9
Net gain on sale of assets 6.2 - 6.2
Gain on insurance recoveries - 5.2 5.2
Business/corporate development expenses   (1.1)   (0.8)   (1.9)
Adjusted operating expenses $ 110.3 $ 54.2 $ 164.5
 
Adjusted operating income $ 34.8 $ 18.2 $ 52.9
Adjusted operating ratio 76.0% 74.9% 75.7%
 

Free Cash Flow

Management views Free Cash Flow as an important financial measure of how well G&W 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 G&W. 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 net cash used for acquisitions. Key limitations of the Free Cash Flow measure include the assumptions that G&W 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 Net Cash Provided by Operating Activities from Continuing Operations to Free Cash Flow ($ in millions):

       
Six Months Ended

June 30,

  2013           2012  
Net cash provided by operating activities from continuing operations $ 152.7 $ 90.9
Net cash used in investing activities from continuing operations (103.1 ) (81.0 )
Net cash used for acquisitions (a)   9.6     0.8  
Free cash flow $ 59.2   $ 10.7  
 
(a) The 2013 period included $9.6 million in cash paid for incremental expenses related to the integration
of RailAmerica.

Source: Genesee & Wyoming Inc.

Genesee & Wyoming Inc.
Michael Williams of GWI Corporate Communications
1-203-202-8900
mwilliams@gwrr.com

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Genesee & Wyoming's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.