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Genesee & Wyoming Reports Results for the Third Quarter of 2013

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

Third Quarter Highlights

  • Reported diluted earnings per common share (EPS) of $1.16; adjusted diluted EPS of $1.19, a 65.3% increase in adjusted diluted EPS and a 48.6% increase in adjusted diluted EPS normalizing for the impact of the 2013 short line tax credit. (1)
  • Total operating revenues increased 80.2% to $401.4 million.
  • Combined Company adjusted operating revenues, excluding revenues from fuel sales to third parties and the net impact from foreign currency depreciation, increased 10.7%. (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.
  • Adjusted income from operations increased 89.2% to $105.2 million; Reported income from operations increased 92.4% to $101.7 million. (3)
  • Adjusted operating ratio improved 120 basis points to 73.8% (excluding the depreciation and amortization expense adjustment related to the six months ended June 30, 2013 resulting from the finalization of G&W's allocation of fair values to RailAmerica's assets and liabilities, RailAmerica integration costs, expense related to the 2011 Edith River derailment, gain on insurance recoveries associated with the Edith River derailment and net gain on the sale of assets); Reported operating ratio increased 160 basis points to 74.7% (75.9% North American & European Operations; 70.0% Australian Operations). (3)

Jack Hellmann, President and CEO of G&W commented, "The third quarter of 2013 was the third reporting period in which G&W’s consolidated results included the former RailAmerica railroads. The combined business continued to perform well with Combined Company adjusted operating revenues up 11%, corporate overhead cost synergies now fully achieved, and G&W's adjusted diluted earnings per share up 49% in the third quarter.”

“During the third quarter, we began hiring and training new crews at several of the former RailAmerica railroads to support our traffic growth, which was up 6.8% in the third quarter on a Combined Company basis. We also elected to incur one-time expenses to upgrade facilities, equipment and track at many of these same railroads to meet G&W safety and operating standards. As a result of these costs, and the finalization of our purchase accounting for RailAmerica, our adjusted operating ratio of 73.8% was around 1.3 percentage points higher than our third quarter target. Meanwhile, in Australia, our operations continued to perform well with a third quarter operating ratio of 70.0%, in line with expectations.”

“As we enter the fourth quarter, our business remains strong and we are actively working on new business development opportunities in both North America and Australia. In addition, the acquisition market is active in multiple geographies and we will continue to pursue the right opportunities at the appropriate valuations.”

Financial Results

G&W reported net income in the third quarter of 2013 of $66.2 million, compared with a net loss of $19.6 million in the third quarter of 2012. Excluding the net impact of certain significant items discussed below, G&W's adjusted net income in the third quarter of 2013 was $68.4 million, compared with adjusted net income of $32.0 million in the third quarter of 2012. (1)

G&W's reported diluted EPS in the third quarter of 2013 were $1.16 with 56.7 million weighted average shares outstanding, compared with diluted loss per common share in the third quarter of 2012 of $0.47 with 41.7 million weighted average shares outstanding. Excluding the net impact of significant items discussed below, G&W's adjusted diluted EPS in the third quarter of 2013 were $1.19 with 56.7 million weighted average shares outstanding, compared with adjusted diluted EPS in the third quarter of 2012 of $0.72 with 44.2 million weighted average shares outstanding. (1)

G&W's effective tax rate was 25.1% in the third quarter of 2013. The lower tax rate in the third 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 third 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

(Loss)/Income

Impact

Diluted

Earnings/(Loss)

Per Common

Share Impact

Three Months Ended September 30, 2013

Adjustment to D&A expense for final allocation of

fair values to RA's assets and liabilities (6 mos.)

$ (2.0 ) $ (1.3 ) $ (0.02 )
RailAmerica integration costs $ (2.0 ) $ (1.3 ) $ (0.02 )
Edith River derailment expense $ (1.6 ) $ (1.1 ) $ (0.02 )
Edith River insurance recovery $ 1.5 $ 1.0 $ 0.02
Net gain on sale of assets $ 0.7 $ 0.5 $ 0.01
 

Three Months Ended September 30, 2012

Contingent forward sale contract mark-to-market

expense

$ (50.1 ) $ (50.1 ) $ (1.16 )
RailAmerica acquisition-related costs $ (5.2 ) $ (3.1 ) $ (0.07 )
Other business/corporate development costs $ (0.6 ) $ (0.4 ) $ (0.01 )
Net gain on sale of assets $ 3.0 $ 2.0 $ 0.05
 

Explanation of Significant Items

In the third quarter of 2013, G&W finalized its allocation of fair values to RailAmerica's assets and liabilities, which resulted in additional annualized depreciation and amortization expense of approximately $4.0 million, of which $3.0 million was recorded in the third quarter of 2013. Of the $3.0 million recorded in the third quarter of 2013, $2.0 million does not relate to the current period, and, accordingly, it has been included as an adjustment to our third quarter results. G&W's third quarter 2013 results also included RailAmerica integration costs of $2.0 million, primarily associated with employee severance arrangements, $1.6 million expense associated with the 2011 Edith River derailment, partially offset by a $1.5 million insurance recovery related to the Edith River derailment and net gain on sale of assets of $0.7 million. In the third quarter of 2012, G&W recorded a one-time non-cash $50.1 million mark-to-market loss and corresponding liability on the forward sale contract with Carlyle Partners V, L.P. (together with its affiliates, Carlyle), RailAmerica acquisition-related costs of $5.2 million and other business/corporate development costs of $0.6 million, partially offset by net gain on sale of assets of $3.0 million.

Results from Continuing Operations

In the third quarter of 2013, G&W's total operating revenues increased $178.6 million, or 80.2%, to $401.4 million, compared with $222.7 million in the third quarter of 2012. The increase included $160.5 million in revenues from new operations, partially offset by an $8.8 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 $27.0 million, or 12.1%.

G&W's same railroad freight revenues in the third quarter of 2013 were $179.0 million, compared with $160.6 million in the third quarter of 2012. Excluding $6.7 million from the impact of foreign currency depreciation, G&W's same railroad freight revenues increased by $25.1 million, or 15.6%.

G&W's same railroad non-freight revenues in the third quarter of 2013 were $61.9 million, compared with $62.1 million in the third quarter of 2012. Excluding a $2.1 million decrease from the net impact of foreign currency depreciation, G&W's same railroad non-freight revenues increased by $1.8 million, or 3.0%, primarily due to increased switching revenues, partially offset by a $1.3 million decrease in third-party fuel sales. G&W sold its third-party fuel operation in South Australia in the third quarter of 2012.

In the third quarter of 2013, Combined Company adjusted operating revenues increased $38.9 million, or 10.7%, to $401.4 million. This increase excludes a $9.5 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar and a $1.3 million decrease in third-party fuel sales. Excluding $7.1 million from the impact of foreign currency depreciation, the Combined Company adjusted freight revenues increased by $34.5 million, or 13.1%, to $298.9 million in the third quarter of 2013. Excluding a $2.4 million decrease from the net impact of foreign currency depreciation and a $1.3 million decrease in third-party fuel sales primarily due to the sale of our third-party fuel operation, Combined Company adjusted non-freight revenues increased by $4.4 million, or 4.5%, to $102.5 million in the third quarter of 2013. (2)

G&W's traffic in the third quarter of 2013 was 482,823 carloads. On a Combined Company basis, traffic increased 30,630 carloads, or 6.8%, compared with traffic in the third quarter of 2012. The traffic increase was principally due to increases of 5,944 carloads of metals traffic (primarily in the Southern and Northeast regions), 5,303 carloads of metallic ores traffic (primarily in the Australian Region), 4,825 carloads of petroleum products traffic (primarily the Pacific and Southern regions), 3,645 carloads of agricultural products traffic (primarily in the Australian Region) and 3,237 carloads of other traffic (primarily in the Central Region), partially offset by a decrease of 3,947 carloads of coal and coke traffic (primarily in the Mountain West Region). All remaining traffic increased by a net 11,623 carloads.

G&W's income from operations in the third quarter of 2013 was $101.7 million, compared with $52.9 million in the third quarter of 2012. G&W's operating ratio in the third quarter of 2013 was 74.7%, compared with an operating ratio of 76.3% in the third quarter of 2012. Income from operations in the third quarter of 2013 included $2.0 million of depreciation and amortization expense not related to the current period resulting from the finalization of G&W's allocation of fair values to RailAmerica's assets and liabilities, $2.0 million of RailAmerica integration costs and $1.6 million of expense associated with the 2011 Edith River derailment, partially offset by a $1.5 million insurance recovery related to the Edith River derailment and a $0.7 million net gain on the sale of assets. In the third quarter of 2012, income from operations included $5.2 million of RailAmerica acquisition-related costs and $0.6 million of other business/corporate development costs partially offset by a $3.0 million gain on the sale of assets. Excluding these items, G&W's adjusted income from operations increased $49.6 million, or 89.2%, to $105.2 million. G&W's adjusted operating ratio improved 120 basis points to 73.8% in the third quarter of 2013, compared with 75.0% in the third quarter of 2012. (3)

Free Cash Flow from Continuing Operations (4)

          Nine Months Ended
2013           2012
Net cash provided by operating activities $ 278.7 $ 169.5
Net cash used in investing activities, excluding new business investments (110.8 ) (52.1 )
Net cash used for acquisitions 11.3   0.8  
Free cash flow before new business investments 179.2 118.3
New business investments (31.8 ) (80.3 )
Free cash flow (4) $ 147.4   $ 38.0  

G&W's free cash flow from continuing operations for the nine months ended September 30, 2013 and 2012 was $147.4 million and $38.0 million, respectively. (4)

Conference Call and Webcast Details

As previously announced, G&W's conference call to discuss financial results for the third quarter will be held on Friday, November 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 "Third Quarter Earnings Conference Call Webcast." Management will be referring to a slide presentation that will also be available at gwrr.com/investors at approximately 10:00 am EDT on November 1, 2013. 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 November 1 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 277584.

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 35 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/(loss) and diluted earnings/(loss) 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/(loss) and diluted earnings/(loss) 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 operating 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 operating revenues include both RailAmerica and G&W operating revenues for the third quarter of 2012. Combined Company adjusted operating revenues exclude revenues from fuel sales to third parties and the net impact from foreign currency depreciation. The Combined Company adjusted operating revenues described above is a non-GAAP financial measure and is not intended to replace 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
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands, except per share amounts)
(unaudited)
                             
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
OPERATING REVENUES $ 401,388 $ 222,745 $ 1,177,337 $ 647,600
OPERATING EXPENSES 299,647   169,870   891,979   490,938  
INCOME FROM OPERATIONS 101,741 52,875 285,358 156,662
INTEREST INCOME 992 928 2,985 2,759
INTEREST EXPENSE (16,029 ) (8,814 ) (53,352 ) (26,052 )

CONTINGENT FORWARD SALE CONTRACT MARK-

TO-MARKET EXPENSE

(50,106 ) (50,106 )
OTHER INCOME, NET 1,786   853   1,589   1,852  

INCOME/(LOSS) FROM CONTINUING OPERATIONS

BEFORE INCOME TAXES

88,490 (4,264 ) 236,580 85,115
PROVISION FOR INCOME TAXES (22,240 ) (15,303 ) (22,534 ) (46,051 )
INCOME/(LOSS) FROM CONTINUING OPERATIONS 66,250 (19,567 ) 214,046 39,064
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX (25 )   (43 ) (27 )
NET INCOME/(LOSS) 66,225 (19,567 ) 214,003 39,037
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST 538 984
LESS: SERIES A-1 PREFERRED STOCK DIVIDEND     2,139    
NET INCOME/(LOSS) AVAILABLE TO COMMON STOCKHOLDERS $ 65,687   $ (19,567 ) $ 210,880   $ 39,037  

BASIC EARNINGS/(LOSS) PER COMMON SHARE

ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS:

BASIC EARNINGS/(LOSS) PER COMMON SHARE FROM CONTINUING OPERATIONS $ 1.20 $ (0.47 ) $ 3.94 $ 0.96
BASIC LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS        
BASIC EARNINGS/(LOSS) PER COMMON SHARE $ 1.20   $ (0.47 ) $ 3.94   $ 0.95  
WEIGHTED AVERAGE SHARES - BASIC 54,626   41,682   53,475   40,888  

DILUTED EARNINGS/(LOSS) PER COMMON SHARE ATTRIBUTABLE TO

GENESEE & WYOMING INC. COMMON STOCKHOLDERS:

DILUTED EARNINGS/(LOSS) PER COMMON SHARE FROM

CONTINUING OPERATIONS

$ 1.16 $ (0.47 ) $ 3.76 $ 0.90
DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS        
DILUTED EARNINGS/(LOSS) PER COMMON SHARE $ 1.16   $ (0.47 ) $ 3.76   $ 0.90  
WEIGHTED AVERAGE SHARES - DILUTED 56,738   41,682   56,637   43,471  
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2013 AND DECEMBER 31, 2012
(in thousands)
(unaudited)
                 
September 30, December 31,
2013 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 31,954 $ 64,772
Accounts receivable, net 313,282 262,949
Materials and supplies 31,256 32,389
Prepaid expenses and other 63,690 33,586
Deferred income tax assets, net 72,037   71,556
Total current assets 512,219   465,252
PROPERTY AND EQUIPMENT, net 3,424,680 3,396,295
GOODWILL 635,531 634,953
INTANGIBLE ASSETS, net 620,750 670,206
DEFERRED INCOME TAX ASSETS, net 2,494 2,396
OTHER ASSETS, net 77,052   57,013
Total assets $ 5,272,726   $ 5,226,115
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 81,128 $ 87,569
Accounts payable 220,518 232,121
Accrued expenses 115,313 93,971
Deferred income tax liabilities, net 1,077   3,083
Total current liabilities 418,036   416,744
LONG-TERM DEBT, less current portion 1,586,188 1,770,566
DEFERRED INCOME TAX LIABILITIES, net 850,576 862,734
DEFERRED ITEMS - grants from outside parties 256,987 228,579
OTHER LONG-TERM LIABILITIES 56,947 47,506
SERIES A-1 PREFERRED STOCK 399,524
TOTAL EQUITY 2,103,992   1,500,462
Total liabilities and equity $ 5,272,726   $ 5,226,115
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2013 AND 2012
(in thousands)
(unaudited)
        Nine Months Ended
September 30,
2013           2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 214,003 $ 39,037
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations, net of tax 43 27
Depreciation and amortization 105,718 54,947
Compensation cost related to equity awards 13,620 5,763
Excess tax benefits from share-based compensation (7,487 ) (2,842 )
Deferred income taxes 622 29,735
Net gain on sale of assets (3,419 ) (10,447 )
Gain on insurance recoveries (1,465 ) (5,186 )
Insurance proceeds received 10,353 21,479
Contingent forward sale contract mark-to-market expense 50,106
Changes in assets and liabilities which (used) provided cash, net of effect of acquisitions:
Accounts receivable, net (42,607 ) (2,110 )
Materials and supplies (1,105 ) (1,063 )
Prepaid expenses and other (9,910 ) (3,081 )
Accounts payable and accrued expenses (8,178 ) (10,232 )
Other assets and liabilities, net 8,538   3,405  
Net cash provided by operating activities from continuing operations 278,726 169,538
Net cash used in operating activities from discontinued operations (43 ) (27 )
Net cash provided by operating activities 278,683   169,511  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (170,435 ) (170,529 )
Grant proceeds from outside parties 23,878 24,929
Cash paid for acquisitions, net of cash acquired (837 )
Insurance proceeds for the replacement of assets 370
Proceeds from disposition of property and equipment 3,954   13,673  
Net cash used in investing activities from continuing operations (142,603 ) (132,394 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital leases (388,018 ) (215,439 )
Proceeds from issuance of long-term debt 215,443 196,480
Debt amendment costs (1,880 )
Net proceeds from Class A common stock issuance 234,361
Net proceeds from TEU issuance 222,856
Proceeds from employee stock purchases 11,026 12,088
Treasury stock purchases (10,941 ) (1,770 )
Dividends paid on Series A-1 Preferred Stock (2,139 )
Excess tax benefits from share-based compensation 7,487   2,842  
Net cash (used in) provided by financing activities from continuing operations (169,022 ) 451,418  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 124   227  
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (32,818 ) 488,762
CASH AND CASH EQUIVALENTS, beginning of period 64,772   27,269  
CASH AND CASH EQUIVALENTS, end of period $ 31,954   $ 516,031  
 

 

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

                                   

Three Months Ended September 30,

2013

2012

Amount % of Revenue Amount % of Revenue

Revenues:

Freight $ 298,911 74.5 % $ 160,639 72.1 %
Non-freight 102,477   25.5 % 62,106   27.9 %
Total revenues $ 401,388   100.0 % $ 222,745   100.0 %
 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 110,609 27.7 % $ 64,022 28.8 %
Equipment rents 20,457 5.1 % 9,289 4.2 %
Purchased services 32,614 8.1 % 20,981 9.4 %
Depreciation and amortization 37,334 9.3 % 18,980 8.5 %
Diesel fuel used in operations 35,660 8.9 % 21,511 9.7 %
Diesel fuel sold to third parties 11 % 1,359 0.6 %
Casualties and insurance 10,439 2.6 % 6,237 2.8 %
Materials 19,364 4.8 % 6,241 2.8 %
Trackage rights 13,430 3.3 % 7,391 3.3 %
Net gain on sale of assets (703 ) (0.2 )% (3,018 ) (1.4 )%
Gain on insurance recoveries (1,465 ) (0.4 )% %
Other expenses 19,887 5.0 % 11,676 5.3 %
RailAmerica acquisition-related costs % 5,201 2.3 %
RailAmerica integration costs 2,010   0.5 %   %
Total operating expenses $ 299,647   74.7 % $ 169,870   76.3 %
 

Functional Classification

Transportation $ 112,356 28.0 % $ 68,979 31.0 %
Maintenance of ways and structures 43,250 10.8 % 22,292 10.0 %
Maintenance of equipment 42,049 10.5 % 23,151 10.4 %
Diesel fuel sold to third parties 11 % 1,359 0.6 %
General and administrative 53,948 13.5 % 32,926 14.9 %
Construction costs 10,857 2.7 % %
RailAmerica acquisition-related costs % 5,201 2.3 %
RailAmerica integration costs 2,010 0.5 % %
Net gain on sale of assets (703 ) (0.2 )% (3,018 ) (1.4 )%
Gain on insurance recoveries (1,465 ) (0.4 )% %
Depreciation and amortization 37,334   9.3 % 18,980   8.5 %
Total operating expenses $ 299,647   74.7 % $ 169,870   76.3 %
 

 

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

                                     
Three Months Ended September 30, 2013

North American &

European Operations

Australian Operations

Total Operations

Amount % of Revenue Amount % of Revenue Amount % of Revenue

Revenues:

Freight $ 233,285 73.1 % $ 65,626 79.7 % $ 298,911 74.5 %
Non-freight 85,794 26.9 % 16,672 20.3 % 102,466 25.5 %
Fuel sales to third parties   % 11   % 11   %
Total revenues 319,079   100.0 % 82,309   100.0 % 401,388   100.0 %

Operating expenses

Labor and benefits 94,310 29.6 % 16,299 19.8 % 110,609 27.7 %
Equipment rents 17,706 5.5 % 2,751 3.4 % 20,457 5.1 %
Purchased services 19,322 6.1 % 13,292 16.2 % 32,614 8.1 %
Depreciation and amortization 30,704 9.6 % 6,630 8.1 % 37,334 9.3 %
Diesel fuel used in operations 27,720 8.7 % 7,940 9.7 % 35,660 8.9 %
Diesel fuel sold to third parties % 11 % 11 %
Casualties and insurance 6,671 2.1 % 3,768 4.6 % 10,439 2.6 %
Materials 18,830 5.9 % 534 0.6 % 19,364 4.8 %
Trackage rights 7,383 2.3 % 6,047 7.3 % 13,430 3.3 %
Net gain on sale of assets (661 ) (0.2 )% (42 ) (0.1 )% (703 ) (0.2 )%
Gain on insurance recoveries % (1,465 ) (1.8 )% (1,465 ) (0.4 )%
Other expenses 18,060 5.7 % 1,827 2.2 % 19,887 5.0 %
RailAmerica integration costs 2,010   0.6 %   % 2,010   0.5 %
Total operating expenses 242,055   75.9 % 57,592   70.0 % 299,647   74.7 %
Income from operations $ 77,024   $ 24,717   $ 101,741  
Carloads 422,770 60,053 482,823

Net expenditures for additions to property &

equipment

$ 31,277 $ 8,954 $ 40,231
Three Months Ended September 30, 2012

North American &

European Operations

Australian Operations

Total Operations

Amount % of Revenue Amount % of Revenue Amount % of Revenue

Revenues:

Freight $ 107,567 71.6 % $ 53,072 73.3 % $ 160,639 72.1 %
Non-freight 42,756 28.4 % 18,011 24.9 % 60,767 27.3 %
Fuel sales to third parties   % 1,339   1.8 % 1,339   0.6 %
Total revenues 150,323   100.0 % 72,422   100.0 % 222,745   100.0 %

Operating expenses

Labor and benefits 48,880 32.5 % 15,142 20.9 % 64,022 28.8 %
Equipment rents 6,716 4.5 % 2,573 3.6 % 9,289 4.2 %
Purchased services 6,753 4.5 % 14,228 19.6 % 20,981 9.4 %
Depreciation and amortization 12,495 8.3 % 6,485 9.0 % 18,980 8.5 %
Diesel fuel used in operations 13,632 9.1 % 7,879 10.9 % 21,511 9.7 %
Diesel fuel sold to third parties % 1,359 1.9 % 1,359 0.6 %
Casualties and insurance 4,295 2.8 % 1,942 2.7 % 6,237 2.8 %
Materials 5,706 3.8 % 535 0.7 % 6,241 2.8 %
Trackage rights 4,784 3.2 % 2,607 3.5 % 7,391 3.3 %
Net gain on sale of assets (1,081 ) (0.7 )% (1,937 ) (2.7 )% (3,018 ) (1.4 )%
Other expenses 9,371 6.2 % 2,305 3.2 % 11,676 5.3 %

RailAmerica acquisition-related costs

5,201   3.5 %   % 5,201   2.3 %
Total operating expenses 116,752   77.7 % 53,118   73.3 % 169,870   76.3 %
Income from operations $ 33,571   $ 19,304   $ 52,875  
Carloads 192,168 50,615 242,783

Net expenditures for additions to property &

equipment

$ 24,023 $ 33,320 $ 57,343
 

 

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 September 30, 2013

North American &

European Operations

Australian Operations

Total Operations

Commodity Group Freight Revenues Carloads

Average Revenues

Per Carload

Freight Revenues Carloads

Average Revenues

Per Carload

Freight Revenues Carloads

Average Revenues

Per Carload

Agricultural Products $ 20,440 40,188 $ 509 $ 9,146 13,897 $ 658 29,586 54,085 $ 547
Metallic Ores ** 3,765 4,780 788 28,596 14,632 1,954 32,361 19,412 1,667
Chemicals & Plastics 32,918 40,796 807 32,918 40,796 807
Metals 33,905 46,562 728 33,905 46,562 728
Pulp & Paper 29,861 44,630 669 29,861 44,630 669
Coal & Coke 28,733 84,635 339 28,733 84,635 339
Minerals & Stone 22,835 43,923 520 2,245 14,209 158 25,080 58,132 431
Intermodal* 298 2,777 107 25,247 17,236 1,465 25,545 20,013 1,276
Lumber & Forest Products 19,654 33,143 593 19,654 33,143 593
Petroleum Products 14,783 25,566 578 392 79 4,962 15,175 25,645 592
Food or Kindred Products 7,854 13,476 583 7,854 13,476 583
Waste 6,303 12,048 523 6,303 12,048 523
Autos & Auto Parts 6,484 9,024 719 6,484 9,024 719
Other 5,452   21,222   257     5,452   21,222   257
Totals $ 233,285   422,770   $ 552 $ 65,626   60,053   $ 1,093 $ 298,911   482,823   $ 619
Three Months Ended September 30, 2012    

North American &

European Operations

     

Australian Operations

     

Total Operations

Commodity Group Freight Revenues       Carloads      

Average Revenues

Per Carload

Freight Revenues       Carloads      

Average Revenues

Per Carload

Freight Revenues

      Carloads      

Average Revenues

Per Carload

Agricultural Products $ 4,266 9,841 $ 433 $ 9,057 10,450 $ 867 13,323 20,291 $ 657
Metallic Ores ** 3,130 3,119 1,004 14,987 8,588 1,745 18,117 11,707 1,548
Chemicals & Plastics 13,550 17,114 792 13,550 17,114 792
Metals 14,532 22,077 658 14,532 22,077 658
Pulp & Paper 17,169 27,213 631 17,169 27,213 631
Coal & Coke 21,554 52,978 407 21,554 52,978 407
Minerals & Stone 9,022 18,063 499 3,069 14,780 208 12,091 32,843 368
Intermodal* 120 1,056 114 25,386 16,698 1,520 25,506 17,754 1,437
Lumber & Forest Products 9,191 18,596 494 9,191 18,596 494
Petroleum Products 5,420 6,605 821 573 99 5,788 5,993 6,704 894
Food or Kindred Products 1,470 3,007 489 1,470 3,007 489
Waste 3,713 5,612 662 3,713 5,612 662
Autos & Auto Parts 2,131 2,574 828 2,131 2,574 828
Other 2,299   4,313   533     2,299   4,313   533
Totals $ 107,567   192,168   $ 560 $ 53,072   50,615   $ 1,049 $ 160,639   242,783   $ 662

* Represents intermodal units

** Includes carload and intermodal units

 

 

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

                                   

Nine Months Ended September 30,

 

2013

2012

Amount % of Revenue Amount % of Revenue

Revenues:

Freight $ 879,864 74.8 % $ 459,399 70.9 %
Non-freight 297,473   25.2 % 188,201   29.1 %
Total revenues $ 1,177,337   100.0 % $ 647,600   100.0 %
 

Operating Expense Comparison:

Natural Classification

Labor and benefits $ 329,696 28.0 % $ 191,145 29.5 %
Equipment rents 58,158 5.0 % 28,073 4.3 %
Purchased services 91,761 7.8 % 58,331 9.0 %
Depreciation and amortization 105,718 9.0 % 54,947 8.5 %
Diesel fuel used in operations 109,539 9.3 % 64,643 10.0 %
Diesel fuel sold to third parties 362 % 10,460 1.6 %
Casualties and insurance 28,433 2.4 % 17,727 2.7 %
Materials 61,928 5.3 % 19,131 3.0 %
Trackage rights 37,057 3.1 % 21,807 3.4 %
Net gain on sale of assets (3,419 ) (0.3 )% (10,447 ) (1.6 )%
Gain on insurance recoveries (1,465 ) (0.1 )% (5,186 ) (0.8 )%
Other expenses 58,471 5.0 % 34,306 5.3 %
RailAmerica acquisition-related costs % 6,001 0.9 %
RailAmerica integration costs 15,740   1.3 %   %
Total operating expenses $ 891,979   75.8 % $ 490,938   75.8 %
 

Functional Classification

Transportation $ 331,508 28.2 % $ 203,371 31.4 %
Maintenance of ways and structures 123,527 10.5 % 66,096 10.2 %
Maintenance of equipment 123,587 10.5 % 68,611 10.6 %
Diesel fuel sold to third parties 362 % 10,460 1.6 %
General and administrative 165,074 14.0 % 97,085 15.0 %
Construction costs 31,347 2.7 % %
RailAmerica acquisition-related costs % 6,001 0.9 %
RailAmerica integration costs 15,740 1.3 % %
Net gain on sale of assets (3,419 ) (0.3 )% (10,447 ) (1.6 )%
Gain on insurance recoveries (1,465 ) (0.1 )% (5,186 ) (0.8 )%
Depreciation and amortization 105,718   9.0 % 54,947   8.5 %
Total operating expenses $ 891,979   75.8 % $ 490,938   75.8 %
 

 

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

                                 
Nine Months Ended September 30, 2013

North American &

European Operations

Australian Operations

Total Operations

Amount % of Revenue Amount % of Revenue Amount % of Revenue

Revenues:

Freight $ 687,127 73.5 % $ 192,737 79.7 % $ 879,864 74.8 %
Non-freight 248,263 26.5 % 48,830 20.2 % 297,093 25.2 %
Fuel sales to third parties   % 380   0.1 % 380   %
Total revenues 935,390   100.0 % 241,947   100.0 % 1,177,337   100.0 %

Operating expenses

Labor and benefits 279,095 29.8 % 50,601 20.9 % 329,696 28.0 %
Equipment rents 50,174 5.4 % 7,984 3.3 % 58,158 5.0 %
Purchased services 52,819 5.6 % 38,942 16.1 % 91,761 7.8 %
Depreciation and amortization 85,503 9.1 % 20,215 8.4 % 105,718 9.0 %
Diesel fuel used in operations 86,281 9.2 % 23,258 9.6 % 109,539 9.3 %
Diesel fuel sold to third parties % 362 0.2 % 362 %
Casualties and insurance 20,246 2.2 % 8,187 3.4 % 28,433 2.4 %
Materials 60,201 6.4 % 1,727 0.7 % 61,928 5.3 %
Trackage rights 21,379 2.3 % 15,678 6.5 % 37,057 3.1 %
Net gain on sale of assets (3,029 ) (0.3 )% (390 ) (0.2 )% (3,419 ) (0.3 )%
Gain on insurance recoveries % (1,465 ) (0.6 )% (1,465 ) (0.1 )%
Other expenses 53,041 5.7 % 5,430 2.2 % 58,471 5.0 %
RailAmerica acquisition-related costs % % %
RailAmerica integration costs 15,740   1.7 %   % 15,740   1.3 %
Total operating expenses 721,450   77.1 % 170,529   70.5 % 891,979   75.8 %
Income from operations $ 213,940   $ 71,418   $ 285,358  
Carloads 1,234,847 179,259 1,414,106

Net expenditures for additions to property &

equipment

$ 105,203 $ 41,354 $ 146,557
 
Nine Months Ended September 30, 2012    

North American &

European Operations

     

Australian Operations

     

Total Operations

Amount       % of Revenue Amount       % of Revenue Amount       % of Revenue

Revenues:

Freight $ 311,611 70.9 % $ 147,788 71.0 % $ 459,399 70.9 %
Non-freight 127,840 29.1 % 49,398 23.7 % 177,238 27.4 %
Fuel sales to third parties   % 10,963   5.3 % 10,963   1.7 %
Total revenues 439,451   100.0 % 208,149   100.0 % 647,600   100.0 %

Operating expenses

Labor and benefits 147,251 33.5 % 43,894 21.1 % 191,145 29.5 %
Equipment rents 19,744 4.5 % 8,329 4.0 % 28,073 4.3 %
Purchased services 19,489 4.4 % 38,842 18.7 % 58,331 9.0 %
Depreciation and amortization 37,354 8.5 % 17,593 8.5 % 54,947 8.5 %
Diesel fuel used in operations 41,858 9.5 % 22,785 11.0 % 64,643 10.0 %
Diesel fuel sold to third parties % 10,460 5.0 % 10,460 1.6 %
Casualties and insurance 11,657 2.7 % 6,070 2.9 % 17,727 2.7 %
Materials 17,858 4.1 % 1,273 0.6 % 19,131 3.0 %
Trackage rights 13,803 3.1 % 8,004 3.8 % 21,807 3.4 %
Net gain on sale of assets (8,376 ) (1.9 )% (2,071 ) (1.0 )% (10,447 ) (1.6 )%
Gain on insurance recoveries % (5,186 ) (2.5 )% (5,186 ) (0.8 )%
Other expenses 28,030 6.4 % 6,276 3.0 % 34,306 5.3 %
RailAmerica acquisition-related costs 6,001   1.4 %   % 6,001   0.9 %
Total operating expenses 334,669   76.2 % 156,269   75.1 % 490,938   75.8 %
Income from operations $ 104,782   $ 51,880   $ 156,662  
Carloads 543,021 154,255 697,276

Net expenditures for additions to property &

equipment

$ 50,761 $ 94,839 $ 145,600
 

 

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)

                                                   

Nine Months Ended

September 30, 2013

North American &

European Operations

Australian Operations

Total Operations

Commodity Group Freight Revenues Carloads

Average

Revenues Per Carload

Freight Revenues Carloads

Average

Revenues Per Carload

Freight Revenues Carloads

Average

Revenues Per Carload

Agricultural Products $ 66,197 130,722 $ 506 $ 31,653 48,291 $ 655 97,850 179,013 $ 547
Metallic Ores ** 11,933 14,898 801 79,509 36,705 2,166 91,442 51,603 1,772
Chemicals & Plastics 98,267 124,035 792 98,267 124,035 792
Metals 96,252 133,000 724 96,252 133,000 724
Pulp & Paper 83,597 126,780 659 83,597 126,780 659
Coal & Coke 81,956 240,540 341 81,956 240,540 341
Minerals & Stone 65,505 122,938 533 8,325 46,138 180 73,830 169,076 437
Intermodal* 653 6,114 107 71,908 47,905 1,501 72,561 54,019 1,343
Lumber & Forest Products 59,835 101,274 591 59,835 101,274 591
Petroleum Products 47,424 80,928 586 1,342 220 6,100 48,766 81,148 601
Food or Kindred Products 23,375 40,168 582 23,375 40,168 582
Waste 17,204 32,167 535 17,204 32,167 535
Autos & Auto Parts 19,667 26,998 728 19,667 26,998 728
Other 15,262   54,285   281     15,262   54,285   281
Totals $ 687,127   1,234,847   $ 556 $ 192,737   179,259   $ 1,075 $ 879,864   1,414,106   $ 622

Nine Months Ended

September 30, 2012

   

North American &

European Operations

     

Australian Operations

     

Total Operations

Commodity Group

Freight

Revenues

      Carloads      

Average

Revenues Per Carload

Freight

Revenues

      Carloads      

Average

Revenues Per Carload

Freight

Revenues

      Carloads      

Average

Revenues Per Carload

Agricultural Products $ 16,411 34,642 $ 474 $ 31,670 43,426 $ 729 48,081 78,068 $ 616
Metallic Ores ** 8,076 8,531 947 38,347 21,411 1,791 46,423 29,942 1,550
Chemicals & Plastics 41,786 52,070 802 41,786 52,070 802
Metals 46,718 72,604 643 46,718 72,604 643
Pulp & Paper 49,054 75,610 649 49,054 75,610 649
Coal & Coke 53,358 127,033 420 53,358 127,033 420
Minerals & Stone 27,978 54,038 518 8,884 44,575 199 36,862 98,613 374
Intermodal* 382 3,400 112 66,913 44,520 1,503 67,295 47,920 1,404
Lumber & Forest Products 25,697 52,122 493 25,697 52,122 493
Petroleum Products 16,535 18,935 873 1,974 323 6,111 18,509 19,258 961
Food or Kindred Products 3,802 7,984 476 3,802 7,984 476
Waste 9,793 15,697 624 9,793 15,697 624
Autos & Auto Parts 6,306 7,526 838 6,306 7,526 838
Other 5,715   12,829   445     5,715   12,829   445
Totals $ 311,611   543,021   $ 574 $ 147,788   154,255   $ 958 $ 459,399   697,276   $ 659

* 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 Adjusted 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/(Loss) and Diluted Earnings/(Loss) 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 September 30, 2013 used to calculate Adjusted Net Income and Adjusted Diluted Earnings Per Common Share are presented excluding the adjustment to depreciation and amortization expense related to the six months ended June 30, 2013 for the final allocation of fair values to RailAmerica's assets and liabilities, RailAmerica integration costs, expense associated with the 2011 Edith River derailment, an insurance recovery related to the Edith River derailment and net gain on sale of assets and are further adjusted to exclude the third quarter of 2013 short line tax credit. The Net Loss and Diluted Loss Per Common Share for the three months ended September 30, 2012 used to calculate Adjusted Net Income and Adjusted Diluted Earnings Per Common Share, are presented excluding the contingent forward sale contract mark-to-market expense, RailAmerica acquisition-related costs, other business/corporate development costs and net gain on sale of assets. 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/(Loss) and Diluted Earnings/(Loss) 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/(Loss) and Diluted Earnings/(Loss) 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 September 30, 2013

Net

Income/(Loss)

Diluted Shares

Diluted

Earnings/(Loss)

Per Common

Share Impact

As reported $ 66.2 56.7 $ 1.16
Add back certain items, net of tax:

Adjustment to D&A expense for final allocation of

fair values to RA's assets and liabilities (6 mos.)

1.3 0.02
RailAmerica integration costs 1.3 0.02
Edith River derailment expense 1.1 0.02
Edith River insurance recovery (1.0 ) (0.02 )
Net gain on sale of assets (0.5 )   (0.01 )
Adjusted net income $ 68.4 56.7 $ 1.19
Q3 impact of 2013 short line tax credit (6.8 )   (0.12 )
Adjusted net income (excluding Q3 short line tax credit) $ 61.6   56.7   $ 1.07  
 
                   
Three Months Ended September 30, 2012

Net

(Loss)/Income

Diluted Shares

Diluted

(Loss)/Earnings

Per Common

Share Impact

As reported $ (19.6 ) 41.7 $ (0.47 )
Add back certain items, net of tax:

Contingent forward sale contract mark-to-market

expense

50.1 2.5 (a) 1.16
RailAmerica acquisition-related costs 3.1 0.07
Other business/corporate development costs 0.4 0.01
Net gain on sale of assets (2.0 )   (0.05 )
Adjusted net income $ 32.0   44.2   $ 0.72  
 

(a) There is no effect of Class B shares outstanding or unvested equity awards in the calculation of diluted loss per common share. Amount represents effect of Class B shares outstanding and unvested equity awards in the calculation of diluted earnings per common share.

Combined Company Adjusted Operating 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 Combined Company Operating 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 Adjusted Operating 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 Adjusted Operating 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 Adjusted Operating Revenues described above ($ in millions):

                                   
Three Months Ended September 30, 2012

G&W As

Reported

RailAmerica

As Reported

Eliminations/

Adjustments (a)

Combined

Company

Freight revenues $ 160.6 $ 113.0 $ (2.2 ) $ 271.5
Non-freight revenues 62.1   42.4   (2.7 ) 101.8
Total operating revenues $ 222.7   $ 155.4   $ (4.9 ) $ 373.3
 

(a) Includes the elimination of non-freight revenues earned during the three months ended September 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 September 30,

Change

2013           2012 $          

%

Combined Company operating revenues $ 401.4 $ 373.3 $ 28.1
Fuel sales to third parties (1.3 ) 1.3
FX   (9.5 ) 9.5  
Combined Company adjusted operating revenues $ 401.4   $ 362.5   $ 38.9   10.7 %

The following table sets forth a reconciliation of Operating Revenues to the Combined Company Adjusted Operating Freight Revenues described above ($ in millions):

               

Three Months Ended September 30,

Change
2013           2012 $          

%

Combined Company freight revenues $ 298.9 $ 271.5 $ 27.4
FX   (7.1 ) 7.1  
Combined Company adjusted freight revenues $ 298.9   $ 264.4   $ 34.5   13.1 %
 

The following table sets forth a reconciliation of Operating Revenues to the Combined Company Adjusted Operating Non-Freight Revenues described above ($ in millions):

               

Three Months Ended September 30,

Change
2013           2012 $          

%

Combined Company non-freight revenues $ 102.5 $ 101.8 $ 0.7
Fuel sales to third parties (1.3 ) 1.3
FX   (2.4 ) 2.4  
Combined Company adjusted non-freight revenues $ 102.5   $ 98.1   $ 4.4   4.5 %
 

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 September 30, 2013, used to calculate Adjusted Income from Operations and Adjusted Operating Ratios, are presented excluding the adjustment to depreciation and amortization expense related to the six months ended June 30, 2013 for the final allocation of fair values to RailAmerica's assets and liabilities, RailAmerica integration costs, expense associated with the 2011 Edith River derailment, an insurance recovery related to the Edith River derailment and net gain on sale of assets. The Income from Operations and Operating Ratios for the three months ended September 30, 2012, used to calculate Adjusted Income from Operations and Adjusted Operating Ratios, are presented excluding RailAmerica acquisition-related costs, other business/corporate development costs and net gain on sale of assets. 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 September 30, 2013

North

American &

European

Operations

Australian

Operations

Total

Operations

Operating revenues $ 319.1 $ 82.3 $ 401.4
Operating expenses 242.1   57.6   299.6  
Operating income $ 77.0   $ 24.7   $ 101.7  
Operating ratio 75.9 % 70.0 % 74.7 %
 
Operating expenses $ 242.1 $ 57.6 $ 299.6

Adjustment to D&A expense for final allocation of fair

values to RA's assets and liabilities (6 mos.)

(2.0 ) (2.0 )
RailAmerica integration costs (2.0 ) (2.0 )
Edith River derailment expense (1.6 ) (1.6 )
Edith River insurance recovery 1.5 1.5
Net gain on sale of assets 0.7     0.7  
Adjusted operating expenses $ 238.7   $ 57.5   $ 296.2  
 
Adjusted operating income $ 80.4   $ 24.8   $ 105.2  
Adjusted operating ratio 74.8 % 69.8 % 73.8 %
 
Three Months Ended September 30, 2012      

North

American &

European

Operations

         

Australian

Operations

         

Total

Operations

Operating revenues $ 150.3 $ 72.4 $ 222.7
Operating expenses 116.8   53.1   169.9  
Operating income $ 33.6   $ 19.3   $ 52.9  
Operating ratio 77.7 % 73.3 % 76.3 %
 
Operating expenses $ 116.8 $ 53.1 $ 169.9
RailAmerica acquisition-related costs (5.2 ) (5.2 )
Other business/corporate development costs $ (0.3 ) $ (0.2 ) $ (0.6 )
Net gain on sale of assets $ 1.1   $ 1.9   $ 3.0  
Adjusted operating expenses $ 112.3   $ 54.8   $ 167.1  
 
Adjusted operating income $ 38.0   $ 17.6   $ 55.6  
Adjusted operating ratio 74.7 % 75.7 % 75.0 %
 

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):

     
Nine Months Ended

September 30,

2013           2012
Net cash provided by operating activities from continuing operations $ 278.7 $ 169.5
Net cash used in investing activities from continuing operations (142.6 ) (132.4 )
Net cash used for acquisitions 11.3   0.8  
Free cash flow $ 147.4   $ 38.0  

Source: Genesee & Wyoming Inc.

Genesee & Wyoming Inc.
G&W Corporate Communications
Michael Williams, 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.