-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GqZxVCe6/k1lzzCO7l5cB0K6Ts0FfPHa+TUzDJngTQnUPfOXng7N+jRS8+nBP4+K g/1tbkB+Go1I0YDFYqcZOA== 0000950130-00-002909.txt : 20000516 0000950130-00-002909.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950130-00-002909 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENESEE & WYOMING INC CENTRAL INDEX KEY: 0001012620 STANDARD INDUSTRIAL CLASSIFICATION: RAILROADS, LINE-HAUL OPERATING [4011] IRS NUMBER: 060984624 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-20847 FILM NUMBER: 632569 BUSINESS ADDRESS: STREET 1: 71 LEWIS ST CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2036293722 MAIL ADDRESS: STREET 1: 71 LEWIS STREET STREET 2: 71 LEWIS STREET CITY: GREENWICH STATE: CT ZIP: 06830 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarter ended March 31, 2000 Commission File No. 0-20847 GENESEE & WYOMING INC. (Exact name of registrant as specified in its charter) Delaware 06-0984624 - ------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 71 Lewis Street, Greenwich, Connecticut 06830 - --------------------------------------- ------------------------------------- (Address of principal executive offices) (Zip Code) (203) 629-3722 - -------------- (Telephone No.) Shares of common stock outstanding as of the close of business on May 4, 2000: Class Number of Shares Outstanding - ----- ---------------------------- Class A Common Stock 3,480,394 Class B Common Stock 845,447 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] YES [ ] NO INDEX Part I - Financial Information Item 1. Financial Statements: Page ------- Consolidated Statements of Income - For the Three Month Periods Ended March 31, 2000 and 1999................................. ..... 3 Consolidated Balance Sheets - As of March 31, 2000 and December 31, 1999..................... 4 Consolidated Statements of Cash Flows - For the Three Month Periods Ended March 31, 2000 and 1999....................................... 5 Notes to Consolidated Financial Statements....... 6 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 10 - 21 Item 3. Quantitative and Qualitative Disclosures About Market Risk.................................... 21 Part II - Other Information................................ 22 Index to Exhibits.......................................... 23 - 24 Signatures................................................. 25 2 GENESEE & WYOMING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2000 1999 -------------------------------- OPERATING REVENUES $ 55,411 $ 34,172 -------------------------------- OPERATING EXPENSES: Transportation 18,721 11,317 Maintenance of ways and structures 5,956 4,160 Maintenance of equipment 10,941 6,942 General and administrative 8,309 7,020 Depreciation and amortization 3,187 2,695 -------------------------------- Total operating expenses 47,114 32,134 -------------------------------- INCOME FROM OPERATIONS 8,297 2,038 Interest expense (2,752) (1,394) Other income (expense) 1,430 (596) -------------------------------- Income before provision for income taxes 6,975 48 Provision for income taxes 2,563 379 -------------------------------- NET INCOME (LOSS) $ 4,412 $ (331) ================================ Earnings (loss) per common share - basic $ 1.02 $ (0.07) ================================ Weighted average number of shares of common stock - basic 4,328 4,933 ================================ Earnings (loss) per common share - diluted $ 1.00 $ (0.07) ================================ Weighted average number of shares of common stock - diluted 4,425 4,933 ================================ 3 GENESEE & WYOMING INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts) (Unaudited)
As of As of March 31, Dec. 31, ASSETS 2000 1999 ----------------------------- CURRENTS ASSETS: Cash and cash equivalents $ 9,352 $ 7,791 Accounts receivable, net 46,620 47,870 Materials and supplies 6,385 6,141 Prepaid expenses and other 6,621 7,689 Deferred income tax assets, net 3,255 3,087 ------------------------------ Total current assets 72,233 72,578 ------------------------------ PROPERTY AND EQUIPMENT, net 188,827 185,970 ------------------------------ SERVICE ASSURANCE AGREEMENT, net 11,877 12,065 ------------------------------ INVESTMENT IN UNCONSOLIDATED AFFILIATES 1,585 1,576 ------------------------------ OTHER ASSETS, net 26,461 29,751 ------------------------------ Total assets $ 300,983 $ 301,940 ============================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 15,580 $ 15,146 Accounts payable 41,959 52,501 Accrued expenses 11,284 9,738 ------------------------------ Total current liabilities 68,823 77,385 ------------------------------ LONG-TERM DEBT, less current portion 96,375 93,230 ------------------------------ OTHER LIABILITIES 4,013 4,231 ------------------------------ DEFERRED INCOME TAX LIABILITIES, net 15,001 13,145 ------------------------------ DEFERRED ITEMS--grants from governmental agencies 27,648 27,427 ------------------------------ DEFERRED GAIN--sale/leaseback 3,965 4,109 ------------------------------ MINORITY INTEREST 610 584 ------------------------------ STOCKHOLDERS' EQUITY: Class A common stock, $0.01 par value, one vote per share; 12,000,000 shares authorized; 4,480,100 and 4,453,368 issued and outstanding on March 31, 2000 and December 31, 1999, respectively 45 45 Class B common stock, $0.01 par value, 10 votes per share; 1,500,000 shares authorized; 845,447 and 845,539 issued and outstanding on March 31, 2000 and December 31, 1999, respectively 8 8 Additional paid-in capital 47,081 47,072 Retained earnings 51,436 47,023 Currency translation adjustment (3,019) (1,316) Less treasury stock, at cost, 1,000,000 Class A shares (11,003) (11,003) ------------------------------ Total stockholders' equity 84,548 81,829 ------------------------------ Total liabilities and stockholders' equity $ 300,983 $ 301,940 ==============================
4 GENESEE & WYOMING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Three Months Ended March 31, 2000 1999 ------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 4,412 $ (331) Adjustments to reconcile net income (loss) to net cash provided by operating activities- Depreciation and amortization 3,187 2,695 Deferred income taxes 1,720 282 Loss (gain) on disposition of property and equipment 27 (16) Minority interest expense 26 - Valuation adjustment of U.S. dollar denominated foreign debt (871) - Changes in assets and liabilities - Accounts receivable 985 6,879 Materials and supplies (312) (53) Prepaid expenses and other 1,168 12 Accounts payable and accrued expenses (8,123) (8,351) Other assets and liabilities, net (527) 825 ------------------------------- Net cash provided by operating activities 1,692 1,942 ------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (4,823) (3,231) Proceeds from disposition of property 68 38 ------------------------------- Net cash used in investing activities (4,755) (3,193) ------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term borrowings, including capital leases (10,987) (9,551) Proceeds from issuance of long-term debt 15,262 13,000 Net proceeds on governmental grants 682 225 Proceeds from employee stock purchases 9 14 Purchase of treasury stock - (1,417) ------------------------------- Net cash provided by financing activities 4,966 2,271 ------------------------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (342) (13) ------------------------------- INCREASE IN CASH AND CASH EQUIVALENTS 1,561 1,007 CASH AND CASH EQUIVALENTS, beginning of period 7,791 14,396 ------------------------------- CASH AND CASH EQUIVALENTS, end of period $ 9,352 $ 15,403 =============================== CASH PAID DURING PERIOD FOR: Interest $ 946 $ 1,202 Incomes taxes 485 1,900 ===============================
5 GENESEE & WYOMING INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION: The interim consolidated financial statements presented herein include the accounts of Genesee & Wyoming Inc. and its subsidiaries. References to "GWI" or the "Company" mean Genesee & Wyoming Inc. and, unless the context indicates otherwise, its consolidated subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. These interim consolidated financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). In the opinion of management, the unaudited financial statements for the three-month periods ended March 31, 2000 and 1999, are presented on a basis consistent with audited financial statements and contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 1999 included in the Company's Form 10-K. The results of operations for interim periods are not necessarily indicative of results of operations for the full year. 2. EXPANSION OF OPERATIONS: Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V. In August 1999, the Company's wholly-owned subsidiary, Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V. (FCCM), was awarded a 30-year concession to operate certain railways owned by the state-owned Mexican rail company Ferronales. FCCM also acquired equipment and other assets. The aggregate purchase price, including acquisition costs, was approximately 297 million pesos, or approximately $31.5 million at then-current exchange rates. The purchase included $12.3 million of rolling stock, a $9.7 million advance payment on track improvements to be completed on the state-owned track property by mid-2001, a $1.0 million escrow payment which will be returned to the Company upon successful completion of the track improvements, an expected future utilization by the Company of $2.2 million of value-added taxes paid on the transaction, and $1.0 million in goodwill. The remaining purchase price ($5.3 million) was allocated to the 30-year operating license. Genesee Rail-One Inc. On April 15, 1999, the Company closed on an agreement to acquire Rail-One Inc. (Rail-One) which has a 47.5% ownership interest in Genesee Rail-One Inc. (GRO), thereby increasing the Company's ownership of GRO to 95%. GRO owns and operates two short line railroads in Canada. Under the terms of the purchase agreement, the Company converted outstanding notes receivable from Rail-One of $4.6 million into capital, will pay approximately $844,000 in cash to the sellers of Rail-One in installments over a four year period, and granted options to the sellers of Rail-One to purchase up to 80,000 shares of the Company's Class A Common Stock at an exercise price of $8.625 per share. Exercise of the option is contingent on the Company's recovery of its capital investment in GRO including debt assumed if the Company were to sell GRO, and upon certain GRO income performance measures. Effective with this agreement, the operating results of GRO have been consolidated within the financial 6 statements of the Company, with a 5% minority interest due to another GRO shareholder. Prior to April 15, 1999, the Company accounted for its investment in GRO under the equity method. 3. NON-CASH GAIN ON U.S. DOLLAR DENOMINATED FOREIGN DEBT: At March 31, 2000, the Company's Mexican subsidiary, FCCM, had approximately $36.9 million of U.S. dollar denominated debt outstanding (see Note 2. above). The functional currency of FCCM's business is the Mexican peso while the subsidiary is financed with U.S. dollar denominated debt. Generally Accepted Accounting Principles require that the debt be translated into its value in Mexican pesos at the end of each quarter. Therefore any fluctuation in the U.S. dollar/Mexican peso exchange rate between consecutive quarters results in a non-cash gain or non-cash expense as the debt is marked to market. For the quarter ended March 31, 2000, the Company recorded approximately $871,000 of non-cash income related to the valuation adjustment on this debt in the Other Income caption in the accompanying consolidated statement of income. If the peso depreciates relative to the U.S. dollar in subsequent quarters, a non-cash expense would result. 4. CREDIT FACILITIES: On August 17, 1999, the Company amended and restated its credit facilities agreement to provide for an increase from $65.0 million to $150.0 million. The agreement provides for $88.0 million in revolving credit facilities and $62.0 million in term loan facilities. The revolving credit facility provides for a sub limit of $15.0 million in Australian dollar equivalents to be allocated to the Australian subsidiaries. The amended and restated credit facilities agreement also provides for a U.S. Term Loan facility in the amount of $10.0 million, a Canadian Term Loan facility in the Canadian Dollar Equivalent of $22.0 million, and a Mexican Term Loan facility of $30.0 million. The facility has a maturity date of August 17, 2004. The credit facilities accrue interest at various rates, plus the applicable margins, as defined in the agreement. The credit facilities are secured by essentially all the assets of the Company and its subsidiaries. The credit facilities agreement requires the maintenance of certain commitment fees, prepayments from the issuance of new equity or debt and annual sale of assets, and covenant ratios or amounts, including, but not limited to, funded debt to EBITDA, minimum EBITDA for a period, cash flow coverage, and Net Worth, all as defined in the agreement. 5. CONTINGENCIES: On August 6, 1998, a lawsuit was commenced against the Company and its subsidiary, Illinois & Midland Railroad, Inc. (IMRR), by Commonwealth Edison Company (ComEd) in the Circuit Court of Cook County, Illinois. The suit alleges that IMRR is in breach of certain provisions of a stock purchase agreement entered into by a prior unrelated owner of the IMRR rail line. The provisions allegedly pertain to limitations on rates received by IMRR and the unrelated predecessor for freight hauled for ComEd's Powerton plant. The suit seeks unspecified compensatory damages for alleged past rate overcharges. The Company believes the suit is without merit and intends to vigorously defend against the suit. The parent company of ComEd has sold certain of ComEd's power facilities, one of which is the Powerton plant served by IMRR under the provisions of a 1987 Service Assurance Agreement (the SAA), entered into by a prior unrelated owner of the IMRR rail line. The SAA, which is not terminable except for failure to perform, provides that IMRR has exclusive access to provide rail service to the Powerton plant. On April 6, 1999, a lawsuit was commenced by the Company and its subsidiary, IMRR, 7 against ComEd in the Circuit Court of Sangamon County, Illinois. The suit sought declaration of certain rights regarding the SAA including declarations that the SAA is not terminable at will and that ComEd must assign its contractual obligations under the SAA to the purchaser of the Powerton plant. On June 10, 1999, the suit commenced by the Company and IMRR against ComEd in Sangamon County was voluntarily withdrawn without prejudice in partial resolution of several procedural motions pending in the Cook County action, and with the explicit recognition from ComEd that the action may be re-filed in Cook County. Revenue for haulage to the Powerton Plant accounted for 6.6% of the consolidated revenues of the Company and its subsidiaries in 1999. Failure to satisfactorily resolve this litigation could have a material adverse effect on the Company. 6. COMPREHENSIVE INCOME: Comprehensive income is the total of net income and all other non-owner changes in equity. The following table sets forth the Company's comprehensive income for the three months ended March 31, 2000 and 1999: Statement of Comprehensive Income (in thousands) Three Months Ended March 31, 2000 1999 ------- ----- Net income (loss) $ 4,412 $(331) Other comprehensive income (loss) - Foreign currency translation adjustments (1,703) 407 ---------------------- Comprehensive income $ 2,709 $ 76 ====================== 7. BUSINESS SEGMENT INFORMATION: The Company operates in three business segments in two geographic areas: North American Railroad Operations, which includes operating short line and regional railroads, and buying, selling, leasing and managing railroad transportation equipment within the United States, Canada and Mexico; Australian Railroad Operations, which includes operating a regional railroad and providing hook and pull (haulage) services to other railroads within Australia; and Industrial Switching, which includes providing freight car switching and related services to industrial companies with extensive railroad facilities within their complexes in the United States. Corporate overhead expenses, including acquisition expense, are primarily reported in North American Railroad Operations. The accounting policies of the reportable segments are the same as those of the consolidated company. The Company evaluates the performance of its operating segments based on operating income. Intersegment sales and transfers are not significant. Summarized financial information for each business segment for the quarters ended March 31, 2000 and 1999 is shown in the following tables: The remainder of this page is intentionally left blank. 8 Business Segment (amounts in thousands) North American Australian Industrial Railroad Railroad Switching 2000 Operations Operations Operations Total - -------------------------- ---------- ---------- ---------- -------- Revenues $ 42,240 $10,630 $ 2,541 $ 55,411 Operating income (loss) 7,443 884 (30) 8,297 Other expense, net (830) (359) (133) (1,322) Income (loss) before taxes 6,613 525 (163) 6,975 Identifiable assets 253,958 38,765 8,260 300,983 - -------------------------- -------- ------- ------- -------- North American Australian Industrial Railroad Railroad Switching 1999 Operations Operations Operations Total - -------------------------- ---------- ---------- ---------- -------- Revenues $ 19,939 $11,022 $ 3,211 $ 34,172 Operating income (loss) 417 1,922 (301) 2,038 Other (expense) income, net (1,923) 45 (112) (1,990) Income (loss) before taxes (1,052) 1,512 (412) 48 Identifiable assets 159,447 42,513 10,040 212,000 - -------------------------- -------- ------- ------- -------- 8. RECENTLY ISSUED ACCOUNTING STANDARDS: The Financial Accounting Standards Board recently issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and hedging activities. The new standard requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value with changes in fair value reported in income. This statement will require the Company to provide separate disclosure of derivative instruments either on the face of the balance sheet or within the footnotes to the financial statements. Adoption of this statement is required no later than the first quarter of 2001, which is when the Company expects to adopt it. The Company is in the process of assessing the impact of this statement. The remainder of this page is intentionally left blank. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Company's consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, and with the consolidated financial statements, related notes and other financial information included in the Company's 1999 Form 10-K. General The Company is a holding company whose subsidiaries own and/or operate short line and regional freight railroads and provide related rail services in the United States, Australia, Canada and Mexico. The Company, through its U.S. industrial switching subsidiary, also provides freight car switching and related services to United States industrial companies with extensive railroad facilities within their complexes. The Company generates revenues primarily from the movement of freight over track owned or operated by its railroads. The Company also generates non-freight revenues primarily by providing freight car switching and related rail services such as railcar leasing, railcar repair and storage to industrial companies with extensive railroad facilities within their complexes, to shippers along its lines, and to the Class I railroads that connect with its North American lines. The Company's operating expenses include wages and benefits, equipment rents (including car hire), purchased services, depreciation and amortization, diesel fuel, casualties and insurance, materials and other expenses. Car hire is a charge paid by a railroad to the owners of railcars used by that railroad in moving freight. Other expenses generally include property and other non-income taxes, professional services, communication and data processing costs and general overhead expense. When comparing the Company's results of operations from one reporting period to another, the following factors should be taken into consideration. The Company has historically experienced fluctuations in revenues and expenses such as one-time freight moves, customer plant expansions and shut-downs, railcar sales, accidents and derailments. In periods when these events occur, results of operations are not easily comparable to other periods. Also, much of the Company's growth to date has resulted from acquisitions. The Company completed two acquisitions during the first four months of 1996, one in November 1996, and another in November 1997. On April 15, 1999, the Company began consolidating the results of Genesee Rail-One Inc. (as described below), and on September 1, 1999, the Company began operations of its newly-formed subsidiary, Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V. as described below. Because of variations in the structure, timing and size of these acquisitions and differences in economics among the Company's railroads resulting from differences in the rates and other material terms established through negotiation, the Company's results of operations in any reporting period may not be directly comparable to its results of operations in other reporting periods. Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V. In August 1999, the Company's wholly-owned subsidiary, Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V. (FCCM), was awarded a 30-year concession to operate certain railways owned by the state-owned Mexican rail company Ferronales. FCCM also acquired equipment and other assets. The aggregate purchase price, including acquisition costs, was approximately 297 million pesos, or approximately $31.5 million at then-current exchange rates. The purchase included $12.3 million of rolling stock, a $9.7 million advance payment on track improvements to be completed 10 on the state-owned track property by mid-2000, a $1.0 million escrow payment which will be returned to the Company upon successful completion of the track improvements, an expected future utilization by the Company of $2.2 million of value-added taxes paid on the transaction, and $1.0 million in goodwill. The remaining purchase price ($5.3 million) was allocated to the 30-year operating license. Genesee Rail-One Inc. On April 15, 1999, the Company closed on an agreement to acquire Rail-One Inc. (Rail-One) which has a 47.5% ownership interest in Genesee Rail-One Inc. (GRO), thereby increasing the Company's ownership of GRO to 95%. GRO owns and operates two short line railroads in Canada. Under the terms of the purchase agreement, the Company converted outstanding notes receivable from Rail-One of $4.6 million into capital, will pay approximately $844,000 in cash to the sellers of Rail-One in installments over a four year period, and granted options to the sellers of Rail-One to purchase up to 80,000 shares of the Company's Class A Common Stock at an exercise price of $8.625 per share. Exercise of the option is contingent on the Company's recovery of its capital investment in GRO including debt assumed if the Company were to sell GRO, and upon certain GRO income performance measures. Effective with this agreement, the operating results of GRO have been consolidated within the financial statements of the Company, with a 5% minority interest due to another GRO shareholder. Prior to April 15, 1999, the Company accounted for its investment in GRO under the equity method. Non-Cash Gain on U.S. Dollar Denominated Foreign Debt At March 31, 2000, the Company's Mexican subsidiary, FCCM, had approximately $36.9 million of U.S. dollar denominated debt outstanding (see Note 2. above). The functional currency of FCCM's business is the Mexican peso while the subsidiary is financed with U.S. dollar denominated debt. Generally Accepted Accounting Principles require that the debt be translated into its value in Mexican pesos at the end of each quarter. Therefore any fluctuation in the U.S. dollar/Mexican peso exchange rate between consecutive quarters results in a non- cash gain or non-cash expense as the debt is marked to market. For the quarter ended March 31, 2000, the Company recorded approximately $871,000 of non-cash income related to the valuation adjustment on this debt in the Other Income caption in the accompanying consolidated statement of income. If the peso depreciates relative to the U.S. dollar in subsequent quarters, a non-cash expense would result. The remainder of this page is intentionally left blank. 11 Results of Operations Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Consolidated Operating Revenues Operating revenues were $55.4 million in the quarter ended March 31, 2000 compared to $34.2 million in the quarter ended March 31, 1999, a net increase of $21.2 million or 62.1%. The net increase was attributable to a $22.3 million increase in North American railroad revenues of which $8.8 million were revenues from new railroad operations in Canada, $8.4 million were revenues from new railroad operations in Mexico, and $5.1 million were from increased revenues on existing North American operations, offset by a $391,000 decrease in revenues from Australian railroad operations and a $670,000 decrease in industrial switching revenues. The following three sections provide information on railroad revenues in North America and Australia, and industrial switching revenues in the United States. North American Railroad Operating Revenues North American railroad operating revenues were $42.2 million in the quarter ended March 31, 2000 compared to $19.9 million in the quarter ended March 31, 1999, an increase of $22.3 million or 111.8%. The increase was attributable to a $18.6 million increase in freight revenues and a $3.7 million increase in non-freight revenues. The increase of $18.6 million in North American freight revenues was due to $7.1 million in freight revenues attributable to new railroad operations in Canada, $7.3 million in freight revenues attributable to new railroad operations in Mexico, and an increase of $4.2 million in freight revenues on existing railroad operations. The following table compares North American freight revenues, carloads and average freight revenues per carload for the quarters ended March 31, 2000 and 1999: The remainder of this page is intentionally left blank. 12 North American Freight Revenues and Carloads Comparison by Commodity Group Quarters Ended March 31, 2000 and 1999 (dollars in thousands, except average per carload)
Average Freight Revenues Per Freight Revenues Carloads Carload ------------------- -------- ------- % of % of % of % of Commodity Group 2000 Total 1999 Total 2000 Total 1999 Total 2000 1999 - -------------------- ------- ------- ------- ------ ------ ----- ------ ----- ----- ----- Coal, Coke & Ores $ 7,239 21.6% $ 3,674 24.7% 32,590 32.5% 14,972 30.5% $ 222 $ 245 Petroleum Products 5,018 15.0% 1,897 12.7% 8,355 8.3% 4,175 8.5% 601 454 Pulp & Paper 4,865 14.5% 2,011 13.5% 12,765 12.7% 5,706 11.7% 381 352 Minerals & Stone 3,848 11.5% 494 3.3% 8,961 9.0% 1,722 3.5% 429 287 Farm & Food Products 3,467 10.3% 1,018 6.8% 9,928 9.9% 3,591 7.3% 349 283 Metals 2,524 7.5% 1,046 7.0% 9,040 9.0% 4,259 8.7% 279 246 Chemicals & Plastics 2,261 6.7% 1,809 12.2% 4,412 4.4% 3,471 7.1% 512 521 Lumber & Forest Products 2,204 6.6% 1,659 11.1% 7,116 7.1% 5,801 11.8% 310 286 Autos & Auto Parts 757 2.3% 600 4.0% 1,380 1.4% 1,182 2.4% 549 508 Other 1,324 4.0% 700 4.7% 5,686 5.7% 4,169 8.5% 233 168 --------------------------------------------------------------------------------------- Total $33,507 100.0% $14,908 100.0% 100,233 100.0% 49,048 100.0% 334 304 ========================================================================================================
Coal increased by $3.6 million or 97.0% of which $3.5 million was on existing railroad operations and $63,000 was from the acquisition of GRO. The increase on existing railroad operations in the first quarter of 2000 was primarily attributable to a return to normalized shipments at a key customer's facilities relative to reduced shipments in the first quarter of 1999 due to scheduled inventory reductions and planned maintenance projects at the key customer's facilities. Petroleum Products increased by $3.1 million or 164.5% of which $2.9 was attributable to new railroad operations in Mexico, $163,000 was on existing railroad operations, and $52,000 was attributable to the acquisition of GRO. Pulp and Paper increased by $2.8 million or 141.9% of which $2.2 million was attributable to the acquisition of GRO, $543,000 was on existing railroad operations, and $95,000 was attributable to new railroad operations in Mexico. Minerals and Stone increased by $3.4 million or 678.9% of which $2.5 million was attributable to new railroad operations in Mexico, $443,000 was on existing railroad operations, and $391,000 was attributable to the acquisition of GRO. Metals increased by $1.5 million or 141.3% of which $1.2 million was attributable to the acquisition of GRO, $194,000 was on existing railroad operations, and $60,000 was attributable to new railroad operations in Mexico. Freight revenues from all remaining commodities reflected a net increase of $4.2 million or 73.1% of which $3.2 million was attributable to the acquisition of GRO and $1.7 million was attributable to new railroad operations in Mexico, which were offset by a $610,000 decrease on existing railroad operations. 13 Total North American carloads were 100,233 in the quarter ended March 31, 2000 compared to 49,048 in the quarter ended March 31, 1999, an increase of 51,185 or 104.4%. The increase of 51,185 consisted of an increase of 19,058 carloads on existing railroad operations of which 17,387 carloads were coal, 21,322 carloads were attributable to the acquisition of GRO, and 10,805 carloads were attributable to new railroad operations in Mexico. The overall average revenue per carload increased to $334 in the quarter ended March 31, 2000, compared to $304 per carload in the quarter ended March 31, 1999, an increase of 9.9% due primarily to higher per carload revenues attributable to Canada and Mexico netted against a slight decrease on existing railroad operations. North American non-freight railroad revenues were $8.7 million in the quarter ended March 31, 2000 compared to $5.0 million in the quarter March 31, 1999, an increase of $3.7 million or 73.6%. The increase is the net result of $1.7 million of non-freight revenues attributable to the acquisition of GRO and $1.1 million of non-freight revenues attributable to new railroad operations in Mexico, and an increase of $866,000 in non-freight revenues on existing railroad operations. The following table compares North America non-freight revenues for the quarters ended March 31, 2000 and 1999: North American Railroad Non-Freight Operating Revenue Comparison Quarters Ended March 31, 2000 and 1999 (dollars in thousands) 2000 1999 ------------------- ------------------- $ % of $ % of Non-Freight Non-Freight Revenue Revenue Railroad switching $2,754 31.5% $1,580 31.4% Car hire and rental income 1,988 22.8% 1,606 31.9% Car repair services 889 10.2% 548 10.9% Other operating income 3,101 35.5% 1,297 25.8% ------ ----- ------ ----- Total non-freight revenues $8,732 100.0% $5,031 100.0% ====== ===== ====== ===== Australian Operating Revenues Australian operating revenues were $10.6 million in the quarter ended March 31, 2000, compared to $11.0 million in the quarter ended March 31, 1999, a decrease of $391,000 or 3.6%. The decrease was attributable to a $301,000 decline in freight revenues and a $90,000 decrease in non-freight revenues. The following table outlines Australian freight revenues for the quarters ended March 31, 2000 and 1999: The remainder of this page is intentionally left blank. 14 Australian Freight Revenues by Commodity Quarters Ended March 31, 2000 and 1999 (in thousands)
Average Freight Revenues Per Freight Revenues Carloads Carload ------------------- -------- ------- % of % of % of % of Commodity Group 2000 Total 1999 Total 2000 Total 1999 Total 2000 1999 - -------------------- ------- ------- ------- ------ ------ ----- ------ ----- ----- ----- Hook and Pull (Haulage) $4,308 44.8% $4,224 42.6% 13,507 21.4% 12,098 28.8% $ 319 $ 349 Grain 2,659 27.6% 3,663 36.9% 10,470 16.6% 13,906 33.1% 254 263 Iron Ores 1,032 10.7% - 0.0% 25,725 40.8% - 0.0% 40 - Gypsum 691 7.2% 653 6.6% 9,711 15.4% 8,946 21.3% 71 73 Marble 481 5.0% 472 4.8% 2,018 3.2% 1,970 4.7% 238 240 Lime 430 4.5% 255 2.5% 1,180 1.9% 778 1.9% 364 328 Coal - 0.0% 654 6.5% - 0.0% 4,317 10.2% - 151 Other 25 0.2% 6 0.1% 367 0.7% 10 0.0% 68 60 ---------------------------------------------------------------------------------------- Total $9,626 100.0% $9,927 100.0% 62,978 100.0% 42,025 100.0% 153 236 ==========================================================================================================
The net decrease of $301,000 in Australian freight revenues was primarily attributable to decreases in the shipment of Grain of $1.0 million and Coal of $654,000, offset by an increase of $1.0 million from the shipment of Iron Ores for a new customer. Grain revenues for the 1999 quarter reflect the strong harvest experienced during the 1998/99 season. There were no freight revenues from coal in the quarter ended March 31, 2000, due to the non-renewal of a coal contract. Freight revenues from Hook and Pull increased $84,000 while freight revenues from all remaining commodities increased $241,000. Australia carloads were 62,978 in the quarter ended March 31, 2000 compared to 42,025 in the quarter ended March 31, 1999, a net increase of 20,953 or 49.9%. The net increase of 20,953 was primarily the result of 25,725 carloads from the shipment of Iron Ores for a new customer. The net remaining decrease of 4,772 is comprised of a 1,409 carload increase in Hook and Pull offset by a decrease in coal carloads of 4,317 and a net decrease in all other commodities of 1,864 carloads. The overall average revenue per carload decreased to $153 in the quarter ended March 31, 2000, compared to $236 per carload in the quarter ended March 31, 1999, a decrease of 35.2% due primarily to the increase in Iron Ores carloads at a lower revenue per car. Excluding Iron Ores, the average revenue per carload in the quarter ended March 31, 2000 was $231. Australian non-freight revenues were $1.0 million in the quarter ended March 31, 2000, compared to $1.1 million in the quarter ended March 31, 1999, a decrease of $90,000 or 8.2%. The following table compares Australian non-freight revenues for the quarters ended March 31, 2000 and 1999: 15 Australia Railroad Non-freight Operating Revenue Comparison Quarters Ended March 31, 2000 and 1999 (dollars in thousands) 2000 1999 ------------------- ------------------- $ % of $ % of Non-freight Non-freight Revenue Revenue Car hire and rental income $ 658 65.5% $ 715 65.3% Other operating income 347 34.5% 380 34.7% ------ ----- ------ ----- Total non-freight revenues $1,005 100.0% $1,095 100.0% ====== ===== ====== ===== Industrial Switching Revenues Revenues from U.S. industrial switching activities were $2.5 million in the quarter ended March 31, 2000 compared to $3.2 million in the quarter ended March 31, 1999, a decrease of $670,000 or 20.9% due primarily to the Company's decision to exit an unprofitable switching contract. Consolidated Operating Expenses Operating expenses for all operations combined were $47.1 million in the quarter ended March 31, 2000, compared to $32.1 million in the quarter ended March 31, 1999, an increase of $15.0 million or 46.6%. Expenses attributable to North American railroad operations were $34.8 million in the quarter ended March 31, 2000, compared to $19.5 million in the quarter ended March 31, 1999, an increase of $15.3 million or 78.2% of which $7.6 million were expenses attributable to new railroad operations in Canada, $6.3 million were expenses attributable to new railroad operations in Mexico and $1.4 million were expenses attributable to existing railroad operations. Expenses attributable to operations in Australia were $9.7 million in the quarter ended March 31, 2000, compared to $9.1 million in the quarter ended March 31, 1999, an increase of $646,000 or 7.1%. Expenses attributable to U.S. industrial switching were $2.6 million in the quarter ended March 31, 2000, compared to $3.5 million in the quarter ended March 31, 1999, a decrease of $941,000 or 26.8%. The following three sections provide information on railroad expenses in North America and Australia, and industrial switching expenses in the United States. North America Railroad Operating Expenses The following table sets forth a comparison of the Company's North American railroad operating expenses in the quarters ended March 31, 2000 and 1999: The remainder of this page is intentionally left blank. 16 North American Railroad Operating Expense Comparison Quarters Ended March 31, 2000 and 1999 (dollars in thousands) 2000 1999 --------------- -------------- % of % of Operating Operating $ Revenue $ Revenue Labor and benefits $13,953 33.0% $ 7,164 35.9% Equipment rents 5,148 12.2% 2,720 13.6% Purchased services 2,743 6.5% 994 5.0% Depreciation and amortization 2,422 5.7% 1,992 10.0% Diesel fuel 3,388 8.0% 572 2.9% Casualties and insurance 1,788 4.2% 588 2.9% Materials 2,906 6.9% 1,621 8.1% Other expenses 2,449 5.9% 3,871 19.5% ------ ---- ------ ---- Total operating expenses $34,797 82.4% $19,522 97.9% ====== ==== ====== ==== Labor and benefits expense was $14.0 million in the quarter ended March 31, 2000 compared to $7.2 million in the quarter ended March 31, 1999, an increase of $6.8 million or 94.8% of which $2.0 million was attributable to the acquisition of GRO, $2.7 million was attributable to new railroad operations in Mexico and $2.1 million was attributable to existing railroad operations. The increase on existing railroad operations primarily relates to increased freight operations and the addition of senior administrative and safety personnel. Equipment rents were $5.1 million in the quarter ended March 31, 2000 compared to $2.7 million in the quarter ended March 31, 1999, a net increase of $2.4 million or 89.3% of which $1.7 million was attributable to the acquisition of GRO, $212,000 was attributable to new railroad operations in Mexico and $480,000 was attributable to existing railroad operations. Purchased services were $2.7 million in the quarter ended March 31, 2000 compared to $994,000 in the quarter ended March 31, 1999, a net increase of $1.7 million or 176.0% of which $987,000 was attributable to the acquisition of GRO, $594,000 was attributable to new railroad operations in Mexico and $168,000 was attributable to an increase on existing railroad operations. Diesel fuel expense was $3.4 million in the quarter ended March 31, 2000 compared to $572,000 in the quarter ended March 31, 1999, an increase of $2.8 million or 492.3% of which $1.1 million was attributable to the acquisition of GRO, $728,000 was attributable to new railroad operations in Mexico and $965,000 was attributable to an increase on existing railroad operations. The increase on existing railroad operations is primarily the result of significant fuel price increases experienced at all operating locations. All other expenses combined were $9.6 million in the quarter ended March 31, 2000 compared to $8.1 million in the quarter ended March 31, 1999, a net increase of $1.5 million or 18.5% of which $1.7 million was attributable to the acquisition of GRO, $2.0 million was attributable to new railroad operations in Mexico and $2.2 million was attributable to a decrease on existing railroad operations primarily due to reduced acquisition costs in the 2000 period. 17 Australian Railroad Operating Expenses The following table sets forth a comparison of the Company's Australian railroad operating expenses in the quarters ended March 31, 2000 and 1999: Australian Railroad Operations Operating Expense Comparison Quarters Ended March 31, 2000 and 1999 (dollars in thousands) 2000 1999 -------------- -------------- % of % of Operating Operating $ Revenue $ Revenue Labor and benefits $1,450 13.6% $1,373 12.5% Equipment rents 47 0.4% 29 0.3% Purchased services 3,422 32.2% 2,953 26.8% Depreciation and amortization 605 5.7% 496 4.5% Diesel fuel 2,183 20.5% 1,978 17.9% Casualties and insurance 591 5.6% 621 5.6% Materials 317 3.0% 481 4.4% Other expenses 1,131 10.7% 1,169 10.6% ----- ---- ----- ---- Total operating expenses $9,746 91.7% $9,100 82.6% ====== ==== ====== ==== Purchased services were $3.4 million in the quarter ended March 31, 2000 compared to $3.0 million in the quarter ended March 31, 1999, an increase of $469,000 or 15.9%, due primarily to contract maintenance costs associated with new Iron Ore movements. Diesel fuel was $2.2 million in the quarter ended March 31, 2000 compared to $2.0 million in the quarter ended March 31, 1999, an increase of $205,000 or 10.4%, due primarily to price increases. All other expenses combined were $4.1 million in the quarter ended March 31, 2000 compared to $4.2 million in the quarter ended March 31, 1999, a decrease of $28,000 or 0.7%. U. S. Industrial Switching Operating Expenses The following table sets forth a comparison of the Company's U.S. industrial switching operating expenses in the quarters ended March 31, 2000 and 1999: The remainder of this page is intentionally left blank. 18 U.S. Industrial Switching Operating Expense Comparison Quarters Ended March 31, 2000 and 1999 (dollars in thousands) 2000 1999 -------------- -------------- % of % of Operating Operating $ Revenue $ Revenue Labor and benefits $1,542 60.7% $2,297 71.5% Equipment rents 46 1.8% 47 1.5% Purchased services 95 3.7% 106 3.3% Depreciation and amortization 160 6.3% 207 6.4% Diesel fuel 160 6.3% 120 3.7% Casualties and insurance 125 4.9% 393 12.2% Materials 178 7.0% 201 6.3% Other expenses 265 10.4% 141 4.4% ----- ----- ----- ----- Total operating expenses $2,571 101.1% $3,512 109.3% ====== ===== ===== ===== Labor and benefits expense was $1.5 million in the quarter ended March 31, 2000 compared to $2.3 million in the quarter ended March 31, 1999, a decrease of $755,000 or 32.9%, due primarily to the Company's decision to exit unprofitable switching contracts. All other expenses combined were $1.0 million in the quarter ended March 31, 2000 compared to $1.2 million in the quarter ended March 31, 1999, a decrease of $186,000 or 15.3% again due primarily to the Company's decision to exit an unprofitable switching contract. Operating Ratios The Company's combined operating ratio decreased to 85.0% in the quarter ended March 31, 2000 from 94.0% in the quarter ended March 31, 1999. The operating ratio for North American railroad operations decreased to 82.4% in the quarter ended March 31, 2000 from 97.9% in the quarter ended March 31, 1999. The operating ratio for Australian railroad operations increased to 91.7% in the quarter ended March 31, 2000 from 82.6% in the quarter ended March 31, 1999. The operating ratio for U.S. industrial switching operations decreased to 101.1% in the quarter ended March 31, 2000 from 109.3% in the quarter ended March 31, 1999. Interest Expense and Income Taxes Interest expense in the quarter ended March 31, 2000 was $2.8 million compared to $1.4 million in the quarter ended March 31, 1999, an increase of $1.4 million or 97.4% due primarily to financing of the Canada and Mexico acquisitions. The Company's effective income tax rate in the quarter ended March 31, 2000 was 36.7% which compared to 46.4% (after adjustment for equity losses in the then unconsolidated results of GRO) in the quarter ended March 31, 1999. The decrease is primarily attributable to a statutory reduction in the Australian income tax rate, a reduced effective tax rate on Canadian operations resulting from the utilization of net operating loss carry-forwards, and lower effective tax rates in the United States and Mexico. 19 Net Income (Loss) and Earnings Per Share The Company's net income in the quarter ended March 31, 2000 was $4.4 million compared to a net loss of $331,000 in the quarter ended March 31, 1999, an increase of $4.7 million. The increase in net income is the net result of an increase in net income from North America railroad operations of $5.2 million and a decrease in the net loss of industrial switching operations of $176,000, offset by a decrease in net income from operations in Australia of $631,000. Basic and Diluted Earnings Per Share in the quarter ended March 31, 2000 were $1.02 and $1.00 respectively, on weighted average shares of 4.3 million and 4.4 million respectively, compared to losses of $0.07 and $0.07 respectively, on weighted average shares of 4.9 million in the quarter ended March 31, 1999. The change in weighted average shares outstanding primarily reflects the impact of a 1.0 million share buy-back program which started in August, 1998 and ended in May, 1999. Liquidity and Capital Resources During the three months ended March 31, 2000 the Company generated cash from operations of $1.7 million, invested $4.8 million in capital assets (including $682,000 in state grant funds received for track rehabilitation and construction), had a net increase in debt of $4.3 million, and received $68,000 in proceeds from the disposition of property. During the three months ended March 31, 1999 the Company generated cash from operations of $1.9 million, invested $3.2 million in capital assets (including $225,000 in state grant funds received for track rehabilitation and construction), had a net increase in debt of $3.5 million, and received $38,000 in proceeds from the disposition of property. Stock Repurchase - On August 12, 1998, the Company's board of directors authorized the Company to repurchase up to one million shares of the Company's Class A common stock under SEC Rule 10b-18. In May, 1999, the Company completed its purchase of the one million shares authorized by the board of directors at a total cost of $11.0 million. Credit Facilities - On August 17, 1999, the Company amended and restated its credit facilities agreement to provide for an increase from $65.0 million to $150.0 million. The agreement provides for $88.0 million in revolving credit facilities and $62.0 million in term loan facilities. The revolving credit facility provides for a sub limit of $15.0 million in Australian dollar equivalents to be allocated to the Australian subsidiaries. The amended and restated credit facilities agreement also provides for a U.S. Term Loan facility in the amount of $10.0 million, a Canadian Term Loan facility in the Canadian Dollar Equivalent of $22.0 million, and a Mexican Term Loan facility of $30.0 million. The facility has a maturity date of August 17, 2004. The credit facilities accrue interest at various rates, plus the applicable margins, as defined in the agreement. The credit facilities are secured by essentially all the assets of the Company and its subsidiaries. The credit facilities agreement requires the maintenance of certain commitment fees, prepayments from the issuance of new equity or debt and annual sale of assets, and covenant ratios or amounts, including, but not limited to, funded debt to EBITDA, minimum EBITDA for a period, cash flow coverage, and Net Worth, all as defined in the agreement. The Company has budgeted approximately $38.7 million in capital expenditures in 2000, primarily for track rehabilitation, of which $7.7 million is expected to be used in Australia. Of the $38.7 million in capital expenditures, $12.8 million is 20 expected to be funded by rehabilitation grants from state and federal agencies to several of the Company's railroads. Approximately $4.8 million of the budgeted capital expenditures of $38.7 million were completed as of March 31, 2000. At March 31, 2000, the Company had long-term debt (including current portion) totaling $112.0 million, which comprised 57.0% of its total capitalization. This compares to long-term debt, including current portion, of $108.4 million at December 31, 1999, comprising 57.0% of total capitalization. The Company has historically relied primarily on cash generated from operations to fund working capital and capital expenditures relating to ongoing operations, while relying on borrowed funds to finance acquisitions and equipment needs (primarily rolling stock) related to acquisitions. The Company believes that its cash flow from operations together with amounts available under its credit facilities will enable the Company to meet its liquidity and capital expenditure requirements relating to ongoing operations for at least the duration of its credit facilities. Forward-Looking Statements This Report and the documents incorporated herein by reference may contain forward-looking statements based on current expectations, estimates and projections about the Company's industry, management's beliefs, and assumptions made by management. Words such as "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are no guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast. Therefore, actual results may differ materially from those expressed or forecast in any such forward-looking statements. Such risks and uncertainties include, in addition to those set forth in this Item 2, those noted in the documents incorporated by reference. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Company is exposed to the impact of interest rate changes. The Company's exposure to changes in interest rates applies to its borrowings under its credit facilities which have variable interest rates depending on the country in which the funds are drawn, plus the applicable margin, which varies from 1.75% to 2.5% depending upon the country in which the funds are drawn and the Company's funded debt to EBITDA ratio, as defined in the credit facilities agreement. The Company is also exposed to the impact of foreign currency exchange rate risk as it relates to debt valuation adjustments resulting from currency exchange rate changes on certain U.S. denominated foreign debt. At March 31, 2000, approximately $36.9 million of the Company's debt was U.S. denominated foreign debt related to the Company's Mexican acquisition (see Notes 2. and 3. to Consolidated Financial Statements) which is subject to debt valuation adjustments resulting from currency exchange rate changes. The Company estimates that the fair value of these debt instruments approximated their market values and carrying values at March 31, 2000. The Company invests excess cash in overnight money market accounts. The remainder of this page is intentionally left blank. 21 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - NONE ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - NONE ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE ITEM 5. OTHER INFORMATION - NONE ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A). EXHIBITS - SEE INDEX TO EXHIBITS (B). REPORTS ON FORM 8-K: No Reports on Form 8-K were filed by the Registrant during the period covered by this Report. The remainder of this page is intentionally left blank. 22 INDEX TO EXHIBITS (2) Plan of acquisition, reorganization, arrangement, liquidation or succession Not applicable. (3) (i) Articles of Incorporation The Form of Restated Certificate of Incorporation referenced under (4)(a) hereof is incorporated herein by reference. (ii) By-laws The By-laws referenced under (4)(b) hereof are incorporated herein by reference. (4) Instruments defining the rights of security holders, including indentures (a) Form of Restated Certificate of Incorporation (Exhibit 3.2)2 (b) By-laws (Exhibit 3.3)1 (c) Specimen stock certificate representing shares of Class A Common Stock (Exhibit 4.1)3 (d) Form of Class B Stockholders' Agreement dated as of May 20, 1996, among the Registrant, its executive officers and its Class B stockholders (Exhibit 4.2)2 (e) Promissory Note dated October 7, 1991 of Buffalo & Pittsburgh Railroad, Inc. in favor of CSX Transportation, Inc. (Exhibit 4.6)1 (f) First Amendment to Promissory Note dated as of March 19, 1999 between Buffalo & Pittsburgh Railroad, Inc. and CSX Transportation, Inc. (Exhibit 4.1)4 (g) Third Amended and Restated Revolving Credit and Term Loan Agreement dated as of August 17, 1999 among the Registrant, certain subsidiaries, BankBoston, N.A. and the banks named therein (Exhibit 4.1)5 (10) Material Contracts *(10.1) Amendment No. 3 to Genesee & Wyoming Inc. 1999 Stock Option Plan *(11.1) Statement re computation of per share earnings (15) Letter re unaudited interim financial information Not applicable. (18) Letter re change in accounting principles 23 Not applicable. (19) Report furnished to security holders Not applicable. (22) Published report regarding matters submitted to vote of security holders Not applicable. (23) Consents of experts and counsel Not applicable. (24) Power of attorney Not applicable. *(27) Financial Data Schedule (99) Additional Exhibits Not applicable. ____________________________ *Exhibit filed with this Report. 1Exhibit previously filed as part of, and incorporated herein by reference to, the Registrant's Registration Statement on Form S-1 (Registration No. 333-3972). The exhibit number contained in parenthesis refers to the exhibit number in such Registration Statement. 2Exhibit previously filed as part of, and incorporated herein by reference to, Amendment No. 1 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-3972). The exhibit number contained in parenthesis refers to the exhibit number in such Amendment. 3Exhibit previously filed as part of, and incorporated herein by reference to, Amendment No. 2 to the Registrant's Registration Statement on Form S-1 (Registration No. 333-3972). The exhibit number contained in parenthesis refers to the exhibit number in such Amendment. 4Exhibit previously filed as part of, and incorporated herein by reference to, the Registrant's Report on Form 10-K for the fiscal year ended December 31, 1998. The exhibit number contained in parenthesis refers to the exhibit number in such Report. 5Exhibit previously filed as part of, and incorporated herein by reference to, the Registrant's Report on Form 10-Q for the quarter ended September 30, 1999. The exhibit number contained in parenthesis refers to the exhibit number in such Report. The remainder of this page is intentionally left blank. 24 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GENESEE & WYOMING INC. Date: May 12, 2000 By: /s/ Mortimer B. Fuller, III --------------------------- Name: Mortimer B. Fuller, III Title: Chairman of the Board and CEO Date: May 12, 2000 By: /s/ Alan R. Harris --------------------------- Name: Alan R. Harris Title: Senior Vice President and Chief Accounting Officer The remainder of this page is intentionally left blank. 25 EX-10.1 2 AMENDMENT TO NO 3 TO GENESEE & WYOMING EXHIBIT 10.1 AMENDMENT NO. 3 to the GENESEE & WYOMING INC. 1996 STOCK OPTION PLAN Effective April 14, 2000 WHEREAS, Genesee & Wyoming Inc., a Delaware corporation (the "Company"), has established the Genesee & Wyoming Inc. 1996 Stock Option Plan, as heretofore amended (the "Plan"); and WHEREAS, deeming it appropriate and advisable so to do, and pursuant to Section 19 of the Plan, the Board of Directors of the Company has authorized, approved and adopted the further amendments to the Plan set forth herein; NOW, THEREFORE, the Plan is hereby amended and restated in its entirety, effective April 14, 2000, as set forth below: Genesee & Wyoming Inc. 1996 Stock Option Plan as amended and restated on April 14, 2000 (including those amendments comprising Amendment No. 3) 1. Purpose. The Genesee & Wyoming Inc. 1996 Stock Option Plan (the "Plan"), effective June 24, 1996 and subsequently amended, is designed to create an incentive for executive and other employees of Genesee & Wyoming Inc., a Delaware corporation (the "Company"), and its subsidiaries, to remain in the employ of the Company and its subsidiaries and to contribute to their success by providing the opportunity for stock ownership. The Company may grant under the Plan both incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") ("Incentive Stock Options") and stock options that do not qualify for treatment as Incentive Stock Options ("Nonstatutory Stock Options"). Unless expressly provided to the contrary, all references herein to "Options" include both Incentive Stock Options and Nonstatutory Stock Options. 2. Administration. (a) The Plan shall be administered by a committee (the "Stock Option Committee") which shall be comprised of two or more members of the Board of Directors of the Company. (b) Each member of the Stock Option Committee shall be a "Non-Employee Director" of the Company within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). (c) Subject to the express provisions of the Plan, the Stock Option Committee shall have the authority, in its discretion and without limitation: (i) to determine the individuals to whom Options are granted, whether an Option is intended to be an Incentive Stock Option or a Nonstatutory Stock Option, the times when such individuals shall be granted Options, the number of shares to be subject to each Option, the term of each Option, the date when each Option shall become exercisable, whether an Option shall be exercisable in whole or in part in installments, the number of shares to be subject to each installment, the date each installment shall become exercisable, the term of each installment, and the option price of each Option; (ii) to accelerate the date of exercise of any Option or any installment thereof (irrespective of any vesting schedule that may have been part of the grant of such Option); (iii) to modify unilaterally the terms of any Option grant or Option exercise (irrespective of the provisions of any stock option agreement) so as to avoid variable accounting treatment under Accounting Principles Board Opinion No. 25 or any Financial Accounting Standards Board interpretation; and 2 (iv) to make all other determinations necessary or advisable for administering the Plan. (d) The Stock Option Committee shall act by majority vote. The decision of the Stock Option Committee on any question concerning or involving the interpretation or administration of the Plan shall, as between the Company and Option holders, be final and conclusive. The Stock Option Committee may consult with counsel, who may be counsel for the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel. 3. Eligibility. (a) Participants in the Plan shall be selected by the Stock Option Committee from among the full-time employees of the Company, including those who are also directors or officers thereof. An employee on leave of absence may be considered as still in the employ of the Company for purposes of eligibility for participation in the Plan. All references in this Plan to employees of the Company shall include employees of any parent or subsidiary of the Company, as those terms are defined in Section 424 of the Code. (b) The right of the Company to terminate the employment of a Plan participant at any time, with or without cause, shall in no way be restricted by the existence of the Plan, any Option granted hereunder, or any stock option agreement relating thereto. 4. Number of Shares. Subject to the provisions of Section 5, the total number of shares of the Company's Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), which may be issued under Options granted pursuant to the Plan shall not exceed 850,000. Shares subject to the Plan may be either authorized but unissued shares or shares that were once issued and subsequently reacquired by the Company. If any Option is surrendered before exercise, or lapses without exercise, or for any other reason ceases to be exercisable, the shares reserved therefor shall continue to be available for the grant of Options under the Plan. The Plan shall terminate on June 23, 2006, or the earlier dissolution of the Company, and no Option shall be granted after such date. 5. Adjustment Provisions. In the event that: (a) in connection with a merger or consolidation of the Company or a sale by the Company of all or a part of its assets, the outstanding shares of Class A Common Stock are exchanged for a different number or class of shares of stock or other securities of the Company, or for shares of the stock or other securities of any other entity; or (b) new, different or additional shares or other securities of the Company or of another entity are received by the holders of Class A Common Stock, whether by way of recapitalization or otherwise; or 3 (c) any dividend in the form of stock is made to the holders of Class A Common Stock, or any stock split or reverse split pertaining to Class A Common Stock is effected; then the Stock Option Committee shall make the appropriate adjustment to: (i) the number and kind of shares or other securities that may be issued upon exercise of Options yet to be granted; (ii) the option price per share to be paid upon exercise of each outstanding Option; and (iii) the number and kind of shares or other securities covered by each outstanding Option. 6. Incentive Stock Options. (a) The aggregate fair market value (determined as of the Grant Date of the Option) of the shares with respect to which Incentive Stock Options are exercisable for the first time by a grantee during any calendar year (under all plans of the Company and any parent and subsidiaries of the Company) shall not exceed $100,000. (b) If any Incentive Stock Option is for any reason disqualified as an incentive stock option within the meaning of Section 422 of the Code, it shall instead remain in full force and effect, in accordance with its terms, as a Nonstatutory Stock Option. 7. Option Price. (a) For purposes of the Plan, the term "Grant Date" shall mean either (i) the date on which the grant of an Option is duly authorized by the Stock Option Committee, or (ii) the later date specified in the authorizing resolutions of the Stock Option Committee as the date on which the Option is granted. The option price at which an Option shall be exercisable shall be at least the fair market value per share of the Class A Common Stock on the Grant Date of such Option. However, if an Incentive Stock Option is granted to any person who would, after the grant of such Option, be deemed to own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company, or of any parent or subsidiary of the Company (a "Ten Percent Stockholder"), the option price shall be not less than 110 percent of the fair market value per share of the Class A Common Stock on the Grant Date of such Option. (b) For purposes of the Plan, the fair market value per share of the Class A Common Stock on any date ("Fair Market Value") shall be the closing price of the Class A Common Stock on the principal national securities exchange on which the Class A Common Stock is then listed or admitted to trading, and the closing price shall be the last reported sale price regular way on such date (or, if no sale takes place on such date, the last reported sale price regular way on the next preceding date on which such sale took place), as reported by such exchange. If the Class A Common Stock is not then so listed or admitted to trading on a national securities exchange, then Fair Market Value shall be the closing price (the last reported sale price regular way) of the Class A Common Stock in the over-the-counter market as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), if the closing price of the Class A Common Stock is then reported by NASDAQ. If the Class A Common Stock closing price is 4 not then reported by NASDAQ, then Fair Market Value shall be the mean between the representative closing bid and closing asked prices of the Class A Common Stock in the over-the-counter market as reported by NASDAQ. If the Class A Common Stock bid and asked prices are not then reported by NASDAQ, then Fair Market Value shall be the quote furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If no member of the National Association of Securities Dealers, Inc. then furnishes quotes with respect to the Class A Common Stock, then Fair Market Value shall be determined by resolution of the Company's Board of Directors. Notwithstanding the foregoing provisions of this Section 7(b), if the Board of Directors shall at any time determine that it is impracticable to apply the foregoing methods of determining Fair Market Value, then the Board of Directors is hereby empowered to adopt any other reasonable method for such purpose. 8. Term of Options. Subject to the provisions of Section 18, the term of each Option shall be determined by the Stock Option Committee, but in no event shall an Option be exercisable, either in whole or in part, after the expiration of ten years from the Grant Date of such Option. Notwithstanding the foregoing, an Incentive Stock Option granted to a Ten Percent Stockholder shall not be exercisable, either in whole or in part, after the expiration of five years from the Grant Date of such Option. The Stock Option Committee and an Option holder may at any time by mutual agreement terminate any Option held by such Option holder. 9. Stock Option Agreements. Each Option shall be evidenced by a written agreement which sets forth: (a) the number of shares subject to the Option; (b) the option price; (c) the vesting schedule of the Option or a statement that the Option is immediately exercisable in full; (d) the expiration date of the Option; (e) the method of payment on exercise of the Option; (f) whether the Option is intended to be an Incentive Stock Option or a Nonstatutory Stock Option; and (g) such additional provisions, not inconsistent with the Plan, as the Stock Option Committee may prescribe. 10. Exercise of Options. (a) Each Option, or any installment thereof, shall be exercised, whether in whole or in part, by giving written notice to the Company at its principal office, specifying the number of shares of Class A Common Stock being purchased and the purchase price being paid, and accompanied by payment in full of the purchase price. (b) An Option holder shall pay for the shares subject to the Option by one or any combination of the following methods, as determined by the Stock Option Committee on the Grant Date of the Option: (i) in cash, or (ii) by delivery of shares of Class A Common Stock already owned by the Option holder and held by the Option holder for any holding period required by law or regulation. Any shares of Class A Common Stock that are so delivered to pay the option price shall be valued at Fair Market Value on the date of such Option exercise. (c) The exercise of an Option shall be conditioned upon the Option holder making arrangements satisfactory to the Stock Option Committee for the payment to the Company of the amount of all taxes required by any governmental authority to be withheld and paid over by the 5 Company to the governmental authority on account of the exercise. The payment of such withholding taxes to the Company shall be made by one or any combination of the following methods, as determined by the Stock Option Committee on the Grant Date of the Option: (i) in cash, or (ii) by the Company withholding such taxes from any other compensation owed to the Option holder by the Company or any of its subsidiaries. 11. Non-Assignment. Each Option by its terms shall provide that it is not transferable by the grantee other than by will or the laws of descent and distribution, and that during the lifetime of the grantee, it is exercisable only by him; except that a Nonstatutory Stock Option may be transferred during the lifetime of a grantee, and may be exercised by the transferee in accordance with the express terms of such Nonstatutory Stock Option and the stock option agreement applicable thereto, but only if and to the extent that such transfer is permitted by the Stock Option Committee, in its discretion, pursuant to the express terms of a stock option agreement and subject to any terms and conditions which the Stock Option Committee may impose thereon; provided, however, that Nonstatutory Stock Options that are transferable may be granted only on terms that do not preclude other grants of Options under the Plan that are exempt under Rule 16b-3 promulgated under the Exchange Act. A transferee or other person claiming any rights under the Plan shall be subject to all of the terms and conditions of the Plan and of the stock option agreement applicable to such transferee's transferor (except as otherwise determined by the Stock Option Committee) and to any additional terms and conditions which the Stock Option Committee may deem appropriate. 12. Death of Grantee. In the event that a grantee shall die: (i) while he is an employee of the Company, or within three months after termination of such employment (or within such other period after termination of employment as may be determined by the Stock Option Committee and set forth in the applicable stock option agreement); and (ii) prior to the complete exercise of Options granted to him under the Plan; then any such remaining Options with exercise periods outstanding may be exercised, in whole or in part, within one year after the date of the grantee's death (or within such other period after the grantee's death as may be determined by the Stock Option Committee and set forth in the applicable stock option agreement) and then only: (a) by the grantee's estate, by such person(s) to whom the grantee's rights hereunder shall have passed under his will or the laws of descent and distribution, or by a transferor contemplated by Section 11; (b) to the extent that the grantee was entitled to exercise the Option on the date of his death, and subject to all of the conditions on exercise imposed hereby; and (c) prior to the expiration of the term of the Option. 6 13. Termination of Employment. (a) During the lifetime of a grantee, an Option shall be exercisable only while he is an employee of the Company and has been an employee continuously since the Grant Date of the Option, or within three months after the date on which he ceases to be such an employee for any reason (or within such other period after termination of his employment as may be determined by the Stock Option Committee and set forth in the applicable stock option agreement); provided, however, that in the case of a grantee who is permanently and totally disabled (within the meaning of Section 22(e)(3) of the Code), such three-month period shall instead be one year (or such other period as may be determined by the Stock Option Committee and set forth in the applicable stock option agreement). (b) Any Option that is exercisable after termination of employment, as provided by Section 13(a), shall be exercisable only to the extent that the grantee would have been entitled to exercise the Option on the date of termination of employment; and further, no Option shall be exercisable after the expiration of the term thereof. (c) For purposes of this Section 13, an employment relationship shall be treated as continuing during the period when a grantee is on military duty, sick leave or other bona fide leave of absence if the period of such leave does not exceed 90 days or, if longer, so long as a statute or contract guarantees the grantee's right to re-employment with the Company. When the period of leave exceeds 90 days and the individual's right to re-employment is not so guaranteed, the employment relationship shall be deemed to have terminated on the 91st day of such leave. 14. Additional Requirements. Each grant of an Option under the Plan, and (unless a Registration Statement with respect thereto shall then be effective under the Securities Act of 1933, as amended (the "Securities Act")) each issuance of shares of Class A Common Stock upon exercise of an Option, shall be conditioned upon the Company's prior receipt of representations of investment intent, in form and content satisfactory to counsel for the Company, of the Option holder that such Option and such shares are being acquired by such holder solely for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of selling, transferring or disposing of the same. Any shares of Class A Common Stock acquired by the holder upon exercise of the Option may not thereafter be offered for sale, sold or otherwise transferred unless (a) a Registration Statement with respect thereto shall then be effective under the Securities Act, and the Company shall have been furnished with proof satisfactory to it that such holder has complied with applicable state securities laws, or (b) the Company shall have received an opinion of counsel in form and substance satisfactory to counsel for the Company that the proposed offer for sale, sale or transfer is exempt from the registration requirements of the Securities Act and may otherwise be transferred in compliance with the Securities Act and in compliance with any other applicable law, including all applicable state securities laws; and the Company may withhold transfer, registration and delivery of such securities until one of the foregoing conditions shall have been met. 7 15. Listing and Registration. The Company, in its discretion, may postpone the issuance and delivery of shares upon any exercise of an Option until completion of such stock exchange listing, or registration or other qualification of such shares under any state or federal law, rule or regulation, as the Company may consider appropriate; and may require any person exercising an Option to make such representations and furnish such information as it considers appropriate in connection with the issuance of the shares in compliance with applicable law, including without limitation federal or state laws regulating the sale or issuance of securities. Notwithstanding the foregoing, the Company shall be under no obligation whatsoever to list, register or otherwise qualify any shares subject to Options under the Plan. 16. Rights as a Stockholder. No Option holder shall have any rights as a stockholder with respect to the shares of Class A Common Stock purchased by him pursuant to the exercise of an Option until the date of the issuance to him of a stock certificate representing such shares. No adjustment shall be made for dividends or for distributions of any other kind with respect to shares for which the record date is prior to the date of the issuance to the Option holder of a certificate for the shares. 17. Effect of Acquisition, Reorganization or Liquidation. Notwithstanding any provision to the contrary in this Plan or in any agreement evidencing Options granted hereunder, all Options with exercise periods then currently outstanding shall become immediately exercisable in full and remain exercisable until their expiration in accordance with their respective terms upon the occurrence of either of the following events: (a) the first purchase of shares pursuant to a tender or exchange offer which is intended to effect the acquisition of more than 50% of the voting power of the Company (other than a tender or exchange offer made by the Company); or (b) approval by the Company's stockholders of: (i) a merger or consolidation of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving corporation and which does not result in any reclassification or reorganization of the shares), (ii) a sale or disposition of all or substantially all of the Company's assets, or (iii) a plan of complete liquidation or dissolution of the Company. 8 18. Conditional Options. Prior to approval and ratification of the Plan by the stockholders of the Company, the Stock Option Committee may grant "Conditional Options" under the Plan. In addition, in the event that any amendment to the Plan requires approval and ratification by the stockholders, then prior to such approval and ratification the Stock Option Committee may grant Conditional Options under the Plan. Conditional Options may be granted under the Plan only under the following conditions: (a) a Conditional Option shall be clearly identified as a Conditional Option; (b) the grant of a Conditional Option shall be expressly conditioned upon the approval and ratification of the Plan (or of the amendment to the Plan, as the case may be) by the stockholders of the Company; (c) such stockholder approval and ratification shall occur no later than the Annual Meeting of Stockholders of the Company next following the effective date of the Plan (or of the amendment to the Plan, as the case may be); and (d) notwithstanding any other provision of the Plan, no holder of a Conditional Option shall have any right to exercise such Option prior to such approval and ratification of the Plan (or of the amendment to the Plan, as the case may be) by the stockholders. Notwithstanding any other provision of the Plan, prior to approval and ratification of the Plan (or of the amendment to the Plan, as the case may be) by the stockholders of the Company, no holder of a Conditional Option shall have any right to sell, assign, transfer, pledge or encumber the Conditional Option, or the shares underlying the Conditional Option, except by will or the laws of descent and distribution. If the stockholders of the Company fail to approve and ratify the Plan (or the amendment to the Plan, as the case may be) at such Annual Meeting of Stockholders, then all Conditional Options granted hereunder conditioned upon such approval and ratification shall be automatically cancelled and shall immediately become null and void. 19. Amendment of Plan. The Plan may be amended at any time by the Board of Directors, provided that (except for amendments made pursuant to Section 5) no amendment made without the approval and ratification of the stockholders of the Company shall increase the total number of shares which may be issued under Options granted pursuant to the Plan, reduce the minimum option price, extend the latest date upon which Options may be granted or shall be exercisable, change the class of employees eligible to be granted Options, or otherwise materially increase the benefits accruing to participants under the Plan. 20. No Reservation of Shares. The Company shall be under no obligation to reserve shares of Class A Common Stock or other securities to satisfy the exercise of Options. The grant of Options hereunder shall not be construed as constituting the establishment of a trust of such shares, and no particular shares shall be identified as optioned or reserved for issuance hereunder. The Company shall have complied with the terms of the Plan if, at the time of its delivery of shares upon the exercise of any Option, it has a sufficient number of shares authorized and unissued, or issued and held in its treasury, which may then be delivered under the Plan, irrespective of the date on which such shares were authorized. 9 21. Application of Proceeds. The proceeds of the sale of shares of Class A Common Stock by the Company under the Plan will constitute general funds of the Company and may be used by the Company for any purpose. 22. Choice of Law. The validity, interpretation and administration of the Plan and of any rules, regulations, determinations or decisions made hereunder, and the rights of any and all persons having or claiming to have any interest herein or hereunder, shall be determined exclusively in accordance with the laws of the State of Delaware (without regard to the choice of law provisions of such laws). 23. Rule 16b-3 Qualification. Some or all of the Options granted under the Plan are intended to qualify under Rule 16b-3 promulgated under the Exchange Act. 24. In General. (a) As used herein, the masculine pronoun shall include the feminine and the neuter, as appropriate to the context. (b) As used herein, the term "Section" shall mean the appropriate Section of the Plan. * * * * * The foregoing amendment and restatement of the Genesee & Wyoming Inc. 1996 Stock Option Plan was duly adopted by the Board of Directors of Genesee & Wyoming Inc. on April 14, 2000. /s/ Mark W. Hastings -------------------- Mark W. Hastings, Secretary 10 EX-11.1 3 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS Exhibit 11.1 GENESEE & WYOMING INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE (in thousands, except per share amounts) Three Months Three Months Ended Ended March 31, 2000 March 31, 1999 -------------- -------------- BASIC EARNINGS (LOSS) PER SHARE CALCULATION: Net Income (loss) $4,412 $ (331) Weighted average number of shares of common stock 4,328 4,933 Earnings (loss) per share - basic $ 1.02 $(0.07) DILUTED EARNINGS (LOSS) PER SHARE CALCULATION: Net Income (loss) $4,412 $(331) Weighted average number of shares of common stock and common stock equivalents outstanding: Weighted average number of shares of common stock 4,328 4,933 Common stock equivalents issuable under stock option plans 97 -0- Weighted average number of shares of common stock and common stock equivalents - diluted 4,425 4,933 Earnings (loss) per share - diluted $ 1.02 $(0.07) EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from Balance Sheet Income Statement and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 9,352 0 46,620 0 6,385 72,233 231,841 43,015 300,983 68,823 96,375 0 0 53 84,495 300,983 55,411 55,411 47,114 47,114 1,430 0 (2,752) 6,975 2,563 4,412 0 0 0 4,412 1.02 1.00
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