-----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, P16PbwcW0lV+EUtHfZ34zu6mqtx/oJ2coEE7PrqfoC2YPVyCs6QDtWogfc8KRxa9 EG+uXaJJPWqYdAYzzQslCA== 0000950130-96-004428.txt : 19961118 0000950130-96-004428.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950130-96-004428 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-20847 FILM NUMBER: 96664888 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 September 30, 1996 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 October 30, 1996: Class Number of Shares Outstanding - ----- ---------------------------- Class A Common Stock 4,399,230 Class B Common Stock 846,556 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 Months and Nine Months Ended September 30, 1995 and 1996............................... 3 Consolidated Balance Sheets - December 31, 1995 and September 30, 1996..................... 4 Consolidated Statements of Cash Flows - For the Nine Months Ended September 30, 1995 and 1996... 5 Notes to Consolidated Financial Statements........ 6 - 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 10 - 16 Part II - Other Information................................. 17 - 18 Index to Exhibits........................................... 19 - 21 Signatures.................................................. 22 (2) GENESEE & WYOMING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) (Unaudited)
Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ 1995 1996 1995 1996 ---- ---- ---- ---- OPERATING REVENUES $13,600 $19,022 $40,233 $54,640 --------------------------------------------------------- OPERATING EXPENSES: Transportation 3,137 4,354 10,648 13,012 Maintenance of ways and structures 1,721 2,392 4,866 6,914 Maintenance of equipment 2,935 3,621 9,219 10,143 General and administrative 2,798 3,461 7,639 9,496 Depreciation and amortization 1,027 1,585 2,927 4,479 --------------------------------------------------------- Total operating expenses 11,618 15,413 35,299 44,044 --------------------------------------------------------- Income from operations 1,982 3,609 4,934 10,596 INTEREST EXPENSE (907) (796) (2,485) (3,803) OTHER INCOME 53 150 240 411 --------------------------------------------------------- Income before provision for income taxes and extraordinary item 1,128 2,963 2,689 7,204 PROVISION FOR INCOME TAXES 474 1,200 1,129 2,918 --------------------------------------------------------- Income before extraordinary item 654 1,763 1,560 4,286 EXTRAORDINARY ITEM FROM EARLY EXTINGUISHMENT OF DEBT, net of related income tax benefit of $357,000 ---- ---- (494) ---- --------------------------------------------------------- NET INCOME $654 $1,763 $1,066 $4,286 ========================================================= EARNINGS PER COMMON SHARE: Income before extraordinary item $0.28 $0.34 $0.66 $1.28 Extraordinary item ---- ---- (0.21) ---- --------------------------------------------------------- Net Income $0.28 $0.34 $0.45 $1.28 ========================================================= WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,348 5,246 2,348 3,353
(3) GENESEE & WYOMING INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands)
December 31, September 30, ASSETS 1995 1996 ---- ---- (Unaudited) CURRENTS ASSETS: Cash and cash equivalents $2,115 $5,613 Accounts receivable, net 9,441 14,622 Materials and supplies 1,512 4,405 Prepaid expenses and other 1,455 1,484 Deferred income tax assets, net 1,278 1,364 ----------------------------- Total current assets 15,801 27,488 ----------------------------- PROPERTY AND EQUIPMENT, net 61,574 82,020 ----------------------------- SERVICE ASSURANCE AGREEMENT, net --- 14,499 ----------------------------- OTHER ASSETS, net 1,054 3,656 ----------------------------- Total assets $78,429 $127,663 ============================= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $1,239 $2,121 Accounts payable 8,408 14,425 Accrued expenses 3,404 3,144 ----------------------------- Total current liabilities 13,051 19,691 ----------------------------- LONG-TERM DEBT 38,702 26,798 ----------------------------- OTHER LIABILITIES 2,043 2,507 ----------------------------- DEFERRED INCOME TAX LIABILITIES, net 4,139 5,997 ----------------------------- DEFERRED ITEMS--grants from governmental agencies 9,946 12,617 ----------------------------- STOCKHOLDERS' EQUITY: Class A common stock, $0.01 par value, one vote per share; 12,000,000 shares authorized; 1,501,937 and 4,399,137 issued and outstanding on December 31, 1995 and September 30, 1996, respectively 15 44 Class B common stock, $0.01 par value, 10 votes per share; 1,500,000 shares authorized; 846,556 issued and outstanding 8 8 Additional paid-in capital 1,340 46,090 Warrants outstanding --- 471 Retained earnings 9,185 13,440 ----------------------------- Total stockholders' equity 10,548 60,053 ----------------------------- Total liabilities and stockholders' equity $78,429 $127,663 =============================
(4) GENESEE & WYOMING INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited)
Nine Months Ended September 30 ------------------ 1995 1996 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $1,066 $4,286 Adjustments to reconcile net income to net cash provided by operating activities- Depreciation and amortization 2,927 4,478 Deferred income taxes 515 1,858 Gain on disposition of property (24) (44) Changes in assets and liabilities- Receivables (695) (4,900) Materials and supplies (83) (2,093) Prepaid expenses and other (263) (29) Accounts payables and accrued expenses (1,559) 5,030 Other assets and liabilities, net (946) 760 -------------------- Net cash provided by operating activities 938 9,346 -------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (13,206) (3,692) Purchase of assets of Chicago & Illinois Midland Railway Company ---- (26,330) Purchase of assets of Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company and Red Bank Railroad Company ---- (11,966) Proceeds from disposition of property 150 4,436 -------------------- Net cash used in investing activities (13,056) (37,552) -------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term borrowings, including capital leases (16,640) (53,736) Proceeds from issuance of long-term debt 23,300 41,945 Debt issuance costs (641) (1,561) Net proceeds (payments) on grants 2,185 (163) Dividends paid (159) (32) Proceeds from issuance of stock warrants ---- 471 Net proceeds from initial public offering ---- 44,780 -------------------- Net cash provided by financing activities 8,045 31,704 -------------------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (4,073) 3,498 CASH AND CASH EQUIVALENTS, beginning of period 5,884 2,115 -------------------- CASH AND CASH EQUIVALENTS, end of period $1,811 $5,613 ==================== CASH PAID DURING PERIOD FOR: Interest $2,346 $3,763 Incomes taxes 880 1,396 ==================== SUPPLEMENTAL NON-CASH INVESTING ACTIVITIES: Assumption of liabilities in connection with purchase of assets of Chicago & Illinois Midland Railway Company ---- $1,394 Assumption of deferred grants from governmental agencies in connection with purchase of assets of Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company and Red Bank Railroad Company ---- $3,194 ====================
(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 and nine-month periods ended September 30, 1995 and 1996, 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, 1995 included in the Company's registration statement on Form S-1, as amended (Registration Number 333-03972). The results of operations for interim periods are not necessarily indicative of results of operations for the full year. 2. ACQUISITIONS: Illinois & Midland Railroad, Inc. - On February 8, 1996, a newly-formed subsidiary, Illinois & Midland Railroad, Inc. ("Illinois & Midland"), purchased certain assets, primarily road and track structure, of Chicago & Illinois Midland Railway Company for approximately $27.7 million, including related costs and the assumption of certain liabilities. The purchase price was allocated to purchased inventory ($750,000), assumed note receivable ($1,220,000), property ($10,773,000), and the service assurance agreement ($14,981,000). The allocation of the purchase price is based on preliminary estimates and may be revised at a later date. Pittsburg & Shawmut Railroad, Inc. - On April 29, 1996, a newly formed subsidiary, Pittsburg & Shawmut Railroad, Inc. ("Pittsburg & Shawmut"), purchased certain assets, primarily road and track structure, of Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company, and Red Bank Railroad Company for approximately $15.2 million, including related costs and the assumption of a grant from the Commonwealth of Pennsylvania. The purchase price was allocated to purchased inventory ($50,000), property ($14,846,000), and other assets ($264,000). In addition, the purchase and sale agreement provides for additional contingency payments of up to $2.5 million. A portion of these payments are required (up to a maximum of $500,000) if certain coal shipments during any calendar year from 1997-1999, as defined, exceed 290,000 tons. The remaining contingency payments (up to a maximum of $2.0 million) are calculated as 25% of the gross revenues attributable to certain coal shipments that exceed 564,793 tons during any calendar year from 2000-2009, as defined. Upon resolution of the amount of the contingency payments, there will be an additional element of cost related to the transaction, which will be recorded as excess cost over the fair market value of tangible net assets acquired and amortized over the same period as the related track structure, which is 20 years. The acquisition was accounted for as a purchase. The (6) allocation of the purchase price is based on preliminary estimates and may be revised at a later date. On June 28, 1996, a portion of the railcars acquired in the purchase were sold for $2.4 million, the purchase price allocation was adjusted, and no gain or loss was recognized. Pro Forma for Acquisitions - Results for the operations of Illinois & Midland Railroad, Inc. and Pittsburg & Shawmut Railroad, Inc. are included within the consolidated financial statements commencing February 9, 1996, and April 29, 1996, respectively. Unaudited pro forma results assuming both acquisitions had been made as of January 1, 1995, are as follows (in thousands, except per share amounts):
Three Months Ended Nine Months Ended ------------------ ----------------- 9/30/95 9/30/96 9/30/95 9/30/96 -------- -------- -------- -------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) Revenues.................... $ 17,331 $ 19,022 $ 54,210 $ 57,893 Net income.................. 1,136 1,763 2,949 4,432 Net income per share........ $ 0.48 $ 0.32 $ 1.23 $ 1.29 ======== ======== ======== ========
Such pro forma information is not necessarily indicative of the results of future operations. Income per share information has been adjusted for the stock split (see note 4) as though it took place on January 1, 1995. 3. CREDIT FACILITIES: On June 2, 1995, the Company refinanced approximately $14.3 million of previously existing notes and purchased approximately $6 million of rolling stock previously under an operating lease by entering into a credit facilities agreement. In conjunction with this refinancing transaction, an extraordinary charge for prepayment penalties and other financing costs on the early extinguishment of debt of approximately $851,000 ($494,000 net of income taxes) was incurred. These amounts have been recorded in the accompanying consolidated income statement as an extraordinary item, net of income taxes. On February 8, 1996, the Company amended and restated the credit facilities agreement. The amended and restated credit facilities provide for a $40 million term loan and a $34 million revolving credit facility. The term loan requires varying quarterly principal payments beginning September 30, 1996, with the remaining balance payable in February, 2001. The revolving credit facility provides for a mandatory commitment reduction of $2.0 million on December 31, 1997, with the remaining balance payable in February, 2001. The Company may voluntarily reduce the commitment on the revolving credit facility at any time without penalty, provided that no reinstatement of the commitment amounts may occur. In conjunction with the amendment and restatement, the Company paid debt financing fees of $1.7 million, primarily to a financial institution. These costs have been capitalized and are included in the accompanying balance sheets as of September 30, 1996 as an other asset and are being amortized over the period covered by the related credit facilities agreement using the straight- line method, which is not materially different from the amortization computed using the effective-interest method. (7) Both the term loan and the revolving credit facility accrue interest at prime or the Eurodollar rate, at the option of the Company, plus the applicable margin, which varies from 0% to 3% depending upon the Company's funded debt to EBITDA ratio, as defined in the agreement. Interest is payable in arrears based on certain elections of the Company, never to exceed three months outstanding. The Company pays a 1/2% per annum commitment fee on all unused portions of the revolving credit facilities. Both the term loan and the revolving credit facility require mandatory prepayments when certain events occur. These events include, among other things, the generation of excess cash flow, the disposition of certain levels of assets not subject to prior liens and the sale of Company stock, all as defined in the agreement. These credit facilities are secured by substantially all the assets of the Company and the stock of certain subsidiaries. These facilities require the maintenance of certain covenants, including, but not limited to, funded debt to EBITDA, funded debt to net worth, cash flow coverage, EBIT to interest and minimum net worth, all as defined in the agreement. The Company is also limited in its ability to incur additional indebtedness, create liens on its assets, make certain capital expenditures and pay dividends greater than $32,000 in any one quarter. 4. STOCKHOLDERS' EQUITY: Warrants - Detachable warrants were issued to a financial institution to purchase 41,847 shares of Class A Common Stock at an exercise price of $0.0005 per share. These warrants are exercisable at any time through March 1, 2006. Management has valued the warrants at approximately $471,000, the amount of which was recorded as a debt discount in the three-month period ending March 31, 1996. The discount is being amortized over the period covered by the related credit facilities agreement using the straight-line method, which is not materially different from the amortization computed using the effective-interest method. Initial Public Offering and Related Stock Transactions - On June 28, 1996 the Company closed an underwritten initial public offering ("IPO") of 3,045,200 shares of Class A Common Stock (the "Common Stock Offering"), of which 2,897,200 shares were offered by the Company and 148,000 shares were offered by a selling stockholder. The gross proceeds to the Company of the Common Stock Offering of $49,252,000, net of underwriters' commission of $3,448,000, were used to pay down borrowings on the credit facilities. Other costs of the IPO of $1,025,000 were paid by the Company. In connection with the Common Stock Offering, the Company, effective June 10, 1996, changed the par value of its Class A and Class B Common Stock from $10 per share to $.01 per share and increased the shares authorized to 12 million and 1.5 million shares, respectively. The rights and privileges of Class B Common Stock changed to substantially the same as Class A Common Stock, except it carries 10 votes per share, is convertible into Class A Common Stock and has transfer restrictions. The Class A Common Stock also has a 10% dividend preference over Class B Common Stock, as and if dividends are declared by the Board of Directors. Also, the Company executed an 18.5 to 1 stock split and reclassified the Company's outstanding Class A Common Stock into Class A and Class B Common Stock, depending on the election of the shareholder. (8) The Company established an incentive and nonqualified stock option plan for key employees and a nonqualified stock option plan for nonemployee directors that will allow employees and directors to purchase up to an aggregate of 500,000 shares of Class A Common Stock. Options totalling 382,500 shares were granted in connection with the IPO at the offering price of $17.00. The options are exercisable in twenty-five percent increments annually in June, 1997 to June, 2000. In addition, the Company established an employee stock purchase plan and reserved 450,000 shares under the plan. The plan allows employees to purchase stock at market value. All references in the consolidated financial statements of the Company to the number of shares authorized and outstanding of Class A and Class B Common Stock have been retroactively adjusted to reflect the reclassification of the capital stock and the stock split. 5. SUPPLEMENTAL EARNINGS PER SHARE: Had the IPO occurred on January 1, 1996, earnings per share and weighted average shares outstanding for the nine-month period ending September 30, 1996 would have been as follows: Net income per share...................................$0.99 Weighted average shares and equivalent shares outstanding (in thousands).............................5,526 The supplemental earnings per share information is not necessarily indicative of the results of future operations. 6. SUBSEQUENT EVENTS: Rail Link, Inc.--On November 8, 1996, the Company completed its acquisition of --------------- all of the common stock of Rail Link, Inc. ("Rail Link"). Rail Link provides railroad switching and related services to North American industries with extensive railroad facilities within their complexes. The purchase price was $9 million, with additional amounts payable based on performance. GWI financed the purchase by drawing on its revolving credit facility. Headquartered in Richmond, Virginia, Rail Link manages 20 switching operations, three short line railroads, a railcar cleaning operation, two track maintenance operations, and a locomotive leasing operation in 11 states. 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 registration statement on Form S-1, as amended (Registration number 333-03972). General The Company is a holding company whose subsidiaries own and operate short line and regional freight railroads and provide related rail services. 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 related rail services such as railcar leasing, railcar repair, switching and storage to shippers along its lines and to the Class I railroads that connect with its 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 due to unpredictable events 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 the acquisitions of the Illinois & Midland and Pittsburg & Shawmut Railroads during the first four months of 1996 (See Notes to Consolidated Financial Statements). 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. Results of Operations Three Months Ended September 30, 1996 Compared to Three Months Ended September 30, 1995 Operating Revenues Operating revenues were $19.0 million in the quarter ended September 30, 1996 compared to $13.6 million for the same quarter of 1995, an increase of $5.4 million or 39.9%. The increase was largely attributable to a $4.9 million increase in freight revenues. (10) The following table compares freight revenues, carloads and average freight revenues per carload for the third quarters of 1995 and 1996: Freight Revenues and Carloads Comparison by Commodity Group Three Months Ended September 30, 1995 and 1996
AVERAGE FREIGHT REVENUES FREIGHT REVENUES CARLOADS PER CARLOAD ---------------------------- ----------------------------- ----------- % OF % OF % OF % OF COMMODITY GROUP 1995 TOTAL 1996 TOTAL 1995 TOTAL 1996 TOTAL 1995 1996 - --------------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ---- (DOLLARS IN THOUSANDS) COAL, COKE & ORES............ $831 7.7% $4,758 30.3% 3,863 12.8% 20,009 38.9% $215 $238 PETROLEUM PRODUCTS........... 2,194 20.3 2,079 13.3 4,623 15.3 4,256 8.3 475 488 PULP & PAPER................. 1,792 16.6 1,774 11.3 4,936 16.4 4,835 9.4 363 367 LUMBER & FOREST PRODUCTS..... 1,156 10.7 1,354 8.6 3,760 12.5 4,350 8.4 307 311 METALS....................... 1,136 10.5 1,322 8.4 4,393 14.6 5,013 9.7 259 264 CHEMICALS & PLASTICS......... 881 8.2 1,170 7.5 1,750 5.8 2,300 4.5 503 509 FARM & FOOD PRODUCTS......... 729 6.8 1,045 6.7 2,084 6.9 3,482 6.8 350 300 AUTOS & AUTO PARTS........... 878 8.2 873 5.6 1,599 5.3 1,662 3.2 549 525 MINERALS & STONE............. 361 3.4 729 4.7 1,138 3.8 2,234 4.3 317 326 OTHER........................ 555 5.2 454 2.9 915 3.0 2,652 5.1 607 171 SALT......................... 258 2.4 102 0.7 1,081 3.6 736 1.4 239 139 ------- ----- ------- ----- ------ ----- ------ ----- ---- ---- TOTAL..................... $10,771 100.0% $15,660 100.0% 30,142 100.0% 51,529 100.0% $380 $331 ======= ===== ======= ===== ====== ===== ====== ===== ==== ====
Freight revenues were $15.7 million in the third quarter of 1996 compared to $10.8 million in the third quarter of 1995, an increase of 45.4%. The increase in freight revenues was largely attributable to the operations on new acquisitions, which generated freight revenues of $4.5 million during the quarter, $3.9 million of which were revenues from the shipment of coal. Portland & Western, which started operations in August, 1995 in the Oregon region, generated $640,000 of freight revenues in the third quarter of 1996 compared to $110,000 in the same period of 1995, primarily from shipments of grain and lumber. Total carloads were 51,529 in the third quarter of 1996 compared to 30,142 in the comparable 1995 period, an increase of 21,387 or 71.0%. The increase was largely attributable to 17,633 carloads transported by new acquisitions, and 3,010 by Portland & Western compared to 718 in the same period of 1995. Non-freight revenues were $3.4 million in the third quarter of 1996 compared to $2.8 million in the comparable quarter of 1995, an increase of $533,000 or 18.8%. The increase is largely attributable to an increase of $306,000 in car hire and rental income, from $891,000 in the third quarter of 1995 to $1.2 million in the third quarter of 1996. Much of the increase is additional car hire revenue from new acquisitions. Operating Expenses Operating expenses were $15.4 million in the third quarter of 1996 compared to $11.6 million in the same period of 1995, an increase of $3.8 million or 32.7%. Expenses associated with new acquisitions represented $3.1 million of the increase, and Portland & Western expenses represented an increase of $446,000 over the same period of 1995. The Company's operating ratio improved to 81.0% in the 1996 quarter from 85.4% for the 1995 quarter. (11) The following table sets forth a comparison of the Company's operating expenses for the third quarters of 1995 and 1996: Operating Expense Comparison Three Months Ended September 30, 1995 and 1996 1995 1996 ------------------ ---------------- % of % of Operating Operating $ Revenues $ Revenues ------- --------- ------- -------- (dollars in thousands) Labor and benefits............ $4,743 34.9% $6,288 33.1% Equipment rents............... 1,812 13.3 2,191 11.5 Purchased services............ 564 4.1 821 4.3 Depreciation and amortization. 1,027 7.5 1,585 8.3 Diesel fuel................... 771 5.7 986 5.2 Casualties and insurance...... 839 6.2 1,173 6.2 Materials..................... 711 5.2 752 3.9 Other......................... 1,151 8.5 1,617 8.5 ------- ------- ------- -------- Total......................... $11,618 85.4% $15,413 81.0% ======= ======= ======= ======== Labor and benefits expense was $6.3 million in the third quarter of 1996 compared to $4.7 million in the same period of 1995, an increase of $1.6 million or 32.6%, primarily due to the commencement of operations by new acquisitions. Labor costs decreased as a percentage of revenues, however, to 33.1% in the third quarter of 1996 from 34.9% in the same period of 1995. The decrease reflects the efficiency of the new acquisition's unit coal train operations. Equipment rents expense increased to $2.2 million in the third quarter of 1996 compared to $1.8 million in the third quarter of 1995, but it decreased to 11.5% of operating revenues from 13.3% in the year ago period. This is mainly because the largest component of equipment rents, car hire expense, decreased from 7.3% of operating revenue in the third quarter of 1995 to 5.3% for the third quarter of 1996 due to the efficiency of the new acquisitions. Depreciation and amortization expense was $1.6 million in the third quarter of 1996 compared to $1.0 million for the same period of 1995, an increase of $558,000 or 54.3%. The increase primarily reflects depreciation and amortization related to new acquisitions. Interest Expense and Income Taxes Interest expense in the third quarter of 1996 was $796,000 compared to $907,000 in the comparable period of 1995. The decrease reflects the lower overall debt outstanding due to the equity offering in June, 1996, and subsequent reduction of debt with the proceeds of $45.8 million, after underwriter commission, on June 28, 1996. The effective rate of state and federal income taxes was 42% in 1995 compared to 40.5% in 1996. (12) Net Income The Company's net income in the quarter ended September 30, 1996 was $1.8 million compared to $654,000 for the same period of 1995. The difference of $1,109,000 is largely attributable to new acquisitions in 1996. Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30, 1995 Operating Revenues Operating revenues were $54.6 million in the nine months ended September 30, 1996 compared to $40.2 million for the same period of 1995, an increase of $14.4 million or 35.8%. The increase was largely attributable to a $12.7 million increase in freight revenues. The following table compares freight revenues, carloads and average freight revenues per carload for the nine month periods ended September 30, 1995 and 1996: Freight Revenues and Carloads Comparison by Commodity Group Nine Months Ended September 30 1995 and 1996
AVERAGE FREIGHT REVENUES FREIGHT REVENUES CARLOADS PER CARLOAD --------------------------------- ------------------------------ ----------- % OF % OF % OF % OF COMMODITY GROUP 1995 TOTAL 1996 TOTAL 1995 TOTAL 1996 TOTAL 1995 1996 - ----------------------------- ------- ----- ------- ----- ------ ----- ------- ----- ---- ---- (DOLLARS IN THOUSANDS) COAL, COKE & ORES............ $2,047 6.4% $13,227 29.8% 10,004 11.1% 53,251 37.5% $205 $248 PETROLEUM PRODUCTS........... 6,271 19.7 6,507 14.6 13,162 14.7 13,195 9.3 476 493 PULP & PAPER................. 5,222 16.4 5,194 11.7 14,407 16.1 13,985 9.9 362 371 LUMBER & FOREST PRODUCTS..... 3,259 10.2 4,043 9.1 10,108 11.3 13,143 9.3 322 308 METALS....................... 3,376 10.6 3,801 8.5 12,712 14.2 14,682 10.4 266 259 CHEMICALS & PLASTICS......... 2,515 7.9 3,311 7.4 5,080 5.7 6,281 4.4 495 527 AUTOS & AUTO PARTS........... 2,516 7.9 2,688 6.0 4,607 5.1 5,096 3.6 546 527 FARM & FOOD PRODUCTS......... 1,943 6.1 2,622 5.9 5,593 6.2 8,198 5.8 347 320 MINERALS & STONE............. 1,065 3.3 1,559 3.5 3,177 3.5 4,757 3.4 335 328 OTHER........................ 1,680 5.3 1,304 2.9 3,540 3.9 7,518 5.3 475 173 SALT......................... 1,973 6.2 271 0.6 7,352 8.2 1,615 1.1 268 168 ------- ----- ------- ----- ------ ----- ------- ----- ---- ---- TOTAL..................... $31,867 100.0% $44,527 100.0% 89,742 100.0% 141,721 100.0% $372 $338 ======= ===== ======= ===== ====== ===== ======= ===== ==== ====
Freight revenues were $44.5 million in the first nine months of 1996 compared to $31.9 million in the same period of 1995, an increase of $12.7 million or 39.7%. The increase in freight revenues was largely attributable to the operations on new acquisitions, which generated freight revenues of $12.6 million during the period, $11.5 million of which were from the shipment of coal. Portland & Western, which started operations in August, 1995 in the Oregon region, generated $1.8 million of freight revenues in the nine months of 1996 compared to $110,000 in the same period of 1995, primarily from shipments of grain and lumber. (13) Total carloads were 141,721 in the first nine months of 1996 compared to 89,742 in the comparable 1995 period, an increase of 51,979 or 57.9%. The increase was largely attributable to 47,770 carloads, primarily coal, transported by new acquisitions. Portland & Western transported 8,396 carloads in the 1996 period compared to 718 carloads in the 1995 period. Non-freight revenues were $10.1 million in the first nine months of 1996 compared to $8.4 million in the comparable period of 1995, an increase of $1.7 million or 20.9%. The new acquisitions generated $1.2 million of facility management, switching and lumber storage revenues, and an additional $421,000 was generated from car hire revenue. There is also a gain of $593,000 in the 1996 period from the sale of railcars, with no similar transaction in the 1995 period. Operating Expenses Operating expenses were $44.0 million in the first nine months of 1996 compared to $35.3 million in the same period of 1995, an increase of $8.7 million or 24.8%. Expenses associated with new acquisitions represented $7.5 million of the increase, and Portland & Western expenses represented an increase of $1.7 million over the same period of 1995. The Company's operating ratio improved to 80.6% in the 1996 period from 87.7% for the first nine months of 1995. The following table sets forth a comparison of the Company's operating expenses for the first nine months of 1995 and 1996: Operating Expense Comparison Nine Months Ended September 30, 1995 and 1996 1995 1996 ----------------- ----------------- % of % of Operating Operating $ Revenues $ Revenues ------- -------- ------- -------- (dollars in thousands) Labor and benefits............. $14,037 34.9% $17,822 32.6% Equipment rents................ 5,658 14.1 6,194 11.3 Purchased services............. 1,698 4.2 2,432 4.5 Depreciation and amortization.. 2,927 7.3 4,479 8.2 Diesel fuel.................... 2,391 5.9 3,105 5.7 Casualties and insurance....... 2,822 7.0 3,191 5.8 Materials...................... 2,233 5.5 2,185 4.0 Other.......................... 3,533 8.8 4,636 8.5 ------- ------- ------- -------- Total.......................... $35,299 87.7% $44,044 80.6% ======= ======= ======= ======== Labor and benefits expense was $17.8 million in the first nine months of 1996 compared to $14.0 million in the same period of 1995, an increase of $3.8 million or 27.0%, primarily due to the commencement of operations on new acquisitions. Labor costs decreased as a percentage of revenues, however, to 32.6% in the first nine months of 1996 from 34.9% in the same period of 1995. The decrease reflects the efficiency of the unit coal train operations on new acquisitions. (14) Equipment rents expense increased to $6.2 million for the nine months ended September 30, 1996 compared to $5.7 million for the same period of 1995, but it decreased to 11.3% of operating revenues from 14.1% in the year ago period. This is mainly because the largest component of equipment rents, car hire expense, decreased from 10.1% of operating revenue for the first nine months of 1995 to 8.3% for the same period of 1996 due to the efficiency of the new acquisitions. The reduction of equipment rents expense as a percentage of operating revenues also reflects the reduction in the amount of equipment under operating leases. In June, 1995 the Company purchased railcars and locomotives, which it had previously used under operating leases, which reduced equipment rent expense under the terminated lease. Depreciation and amortization expense was $4.5 million in the first nine months of 1996 compared to $2.9 million for the same period of 1995, an increase of $1.6 million or 53.0%. The increase primarily reflects depreciation and amortization related to new acquisitions. Interest Expense and Income Taxes Interest expense for the period ended September 30, 1996 was $3.8 million compared to $2.5 million for the comparable period of 1995, an increase of $1.3 million or 53.0%. The increase reflects the increased debt for the financing of new acquisitions, offset in part by the repayment of $45.8 million of debt on June 28, 1996, from proceeds of the equity offering. The effective rate of state and federal income taxes was 42% in 1995 compared to 40.5% in 1996. Net Income The Company's net income for the nine months ended September 30, 1996 was $4,286,000 compared to $1,066,000 for the same period of 1995. The difference of $3,220,000 is largely attributable to the new acquisitions in 1996; the application of equity offering proceeds of $45.8 million to debt on June 28, 1996; and in 1995, to the write-off of prepayment penalties and financing fees totaling $494,000 after netting out $357,000 of related income taxes. Liquidity and Capital Resources During the nine months ended September 30, 1996 the Company generated cash from operations of $9.3 million. Of this amount, $695,000 was generated by an excess of trade accounts payable over trade accounts receivable as recorded by new acquisitions. The Company received $4.4 million in proceeds from the sale of equipment. During the first nine months of 1995 the Company generated cash from operations of $938,000 and had net new borrowings of $6.7 million. A total of $13.2 million was invested in capital assets. The Company has budgeted $7.3 million in capital expenditures in 1996 (excluding the acquisitions of Illinois & Midland and Pittsburg & Shawmut), $3.7 million of which was completed as of September 30, 1996. (15) On June 28, 1996 the Company closed an underwritten initial public offering of 3,045,200 shares of class A common stock, of which 2,897,200 shares were offered by the Company and 148,000 shares were offered by a selling stockholder. The selling price was $17 per share. The proceeds of the offering of $45.8 million, after netting 7% underwriting commission, were used to pay down the debt. Other costs of the IPO of $1.0 million were paid by the Company. At September 30, 1996 the Company had long-term debt (including current portion) totaling $28.9 million, which comprised 32.5% of its total capitalization. This compares to long-term debt, including current portion, of $39.9 million at December 31, 1995, comprising 79.1% 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. The remainder of this page is intentionally left blank. (16) PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - NONE ITEM 2. CHANGES IN SECURITIES - NONE ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE ITEM 5. OTHER INFORMATION - ON NOVEMBER 11, 1996 THE REGISTRANT ISSUED THE FOLLOWING PRESS RELEASE: NEWS RELEASE Contact: Mark W. Hastings For Immediate Release Senior VP and CFO November 11, 1996 (203) 629-3722 GENESEE & WYOMING INC. ACQUIRES VARLEN'S RAIL LINK, INC. COMPANY SPECIALIZES IN RAILROAD SWITCHING FOR INDUSTRY GREENWICH, CT, Nov. 11 -- Genesee & Wyoming Inc. (Nasdaq: GNWR) ("GWI") reported that on Friday it completed its acquisition of all of the common stock of Rail Link, Inc. ("Rail Link"). Rail Link is a leading provider of railroad switching and related services to North American industries with extensive railroad facilities within their complexes. The purchase represents a significant expansion into this segment of the industry by GWI, which already operates a switching facility in Dayton, Texas. The purchase price was $9 million, with additional amounts payable based on performance. GWI financed the purchase by drawing on its revolving credit facility with a group of lenders headed by BancBoston. James W. Benz, who started Rail Link in 1988, will continue as President of the company. Rail Link manages 20 switching operations, three short line railroads, a railcar cleaning operation, two track maintenance operations, and a locomotive leasing operation in 11 states. The company's operating revenues for calendar 1996 are estimated at over $10 million, and it employs about 230 people. Headquartered in Richmond, Virginia, Rail Link was a wholly-owned subsidiary of Brenco, Inc., which was acquired by Chicago-based Varlen Corporation (Nasdaq: VRLN) in August, 1996. Varlen is a manufacturer of precision engineered products for the railroad, heavy duty truck, automotive and petroleum industries. Mort Fuller, Chairman and CEO of GWI, commented on the transaction as follows: "We feel that the railroad switching service industry still has room to grow in North America, a fact recognized by Jim Benz eight years ago. Rail Link has carved out a place in this segment of the industry by offering high quality service, which mirrors our approach in operating our current short line and regional companies. We are pleased to have Rail Link as a platform from which to pursue new opportunities, and we feel that this is a natural fit with our current operations." (17) GWI is a leading operator of short line and regional freight railroads and provider of industrial switching services. Operating over 1,500 miles of track, rail operations are concentrated in four distinct regions of the United States, with industrial switching operations throughout the country. 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. (18) 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 December 28, 1989 of GWI Leasing Corporation in favor of Deutsche Credit Corporation (Exhibit 4.3)/1/ (f) Railcar Finance Notes dated July 8, 1991 and November 27, 1991 of GWI Leasing Corporation in favor of Deutsche Credit Corporation (Exhibit 4.4)/1/ (g) Railcar Finance Notes, dated November 27, 1991 and December 31, 1991 of GWI Leasing Corporation in favor of Deutsche Credit Corporation (Exhibit 4.5)/1/ (h) Promissory Note dated October 7, 1991 of Buffalo & Pittsburgh Railroad, Inc. in favor of CSX Transportation, Inc. (Exhibit 4.6)/1/ (i) Amended and Restated Loan and Security Agreement dated December 28, 1989 between GWI Leasing Corporation, and Deutsche Credit Corporation and Amendment No. 1 dated December 28, 1989 (Exhibit 4.7)/1/ (19) (j) Loan and Security Agreement dated December 27, 1990 between GWI Leasing Corporation and Deutsche Credit Corporation, and Amendments dated June 28, 1991 and November 22, 1991 (Exhibit 4.8)/1/ (k) Guaranty dated December 27, 1990 of the Registrant in favor of Deutsche Credit Corporation (Exhibit 4.9)/1/ (l) Amended and Restated Revolving Credit and Term Loan Agreement dated as of February 8, 1996 among the Registrant and certain of its Subsidiaries, The First National Bank of Boston, as agent, and the Banks party thereto (Exhibit 4.10)/1/ (m) Revolving Credit Note dated as of February 8, 1996 of the Registrant and certain of its subsidiaries in favor of The First National Bank of Boston (Exhibit 4.11)/1/ (n) Term Note dated as of February 8, 1996 of the Registrant and certain of its Subsidiaries in favor of The First National Bank of Boston (Exhibit 4.12)/1/ (o) Amended and Restated Security Agreement dated as of February 8, 1996 among the Registrant, certain of its Subsidiaries and The First National Bank of Boston (Exhibit 4.13)/1/ (p) Amended and Restated Stock Pledge Agreement dated as of February 8, 1996 between the Registrant and The First National Bank of Boston (Exhibit 4.14)/1/ (q) Amended and Restated Collateral Assignment of Partnership Interests dated as of February 8, 1996 of the Registrant and GWI Dayton, Inc. in favor of The First National Bank of Boston (Exhibit 4.15)/1/ (r) Amendment No. 1 to Amended and Restated Revolving Credit and Term Loan Agreement dated as of April 26, 1996 among the Registrant and certain of its Subsidiaries, The First National Bank of Boston, as agent, and the Banks party thereto (Exhibit 4.16)/2/ (10) MATERIAL CONTRACTS - NONE *(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 Not applicable. (19) REPORT FURNISHED TO SECURITY HOLDERS Not applicable. (20) (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 ____________________________ *Exhibit filed with this Report. /1/Exhibit 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. /2/Exhibit 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. /3/Exhibit 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. /4/Exhibit previously filed as part of, and incorporated herein by reference to, Amendment No. 5 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 . The remainder of this page is intentionally left blank. (21) 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: November 14, 1996 By: /s/ Mortimer B. Fuller, III --------------------------- Name: Mortimer B. Fuller, III Title: President and CEO Date: November 14, 1996 By: /s/ Alan R. Harris --------------------------- Name: Alan R. Harris Title: Chief Accounting Officer The remainder of this page is intentionally left blank. (22) EX-11 2 COMPUTATION OF EARNINGS EXHIBIT 11.1 GENESEE & WYOMING INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE (in thousands, except per share amounts) (Unaudited)
Three Months Nine Months Ended September 30 Ended September 30 ------------------ ------------------ 1995 1996 1995 1996 ---- ---- ---- ---- BASIC EARNINGS PER SHARE CALCULATION: - ------------------------------------- Net Income $654 $1,763 $1,066 $4,286 Weighted average number of shares of common stock outstanding: 2,348 5,246 2,348 3,353 ====================================================== Earnings per share - basic $0.28 $0.34 $0.45 $1.28 ====================================================== FULLY DILUTED EARNINGS PER SHARE CALCULATION: - --------------------------------------------- Net Income $654 $1,763 $1,066 $4,286 Weighted average number of common stock and common stock equivalents outstanding: Weighted average number of shares outstanding 2,348 5,246 2,348 3,353 Common stock equivalents applicable to warrants 42 42 42 42 Common stock equivalents issuable under stock option plans ---- 144 ---- 50 ------------------------------------------------------ Common stock assuming full dilution 2,390 5,432 2,390 3,445 ====================================================== Earnings per share - fully diluted $0.27 $0.32 $0.45 $1.24 ====================================================== (1)
(1) This calculation is submitted in accordance with the regulations of the Securities and Exchange Commission although not required by APB Opinion No. 15 because it results in dilution of less than 3%. EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM BALANCE SHEET & INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 5613 0 14622 0 4405 27488 104017 21997 127663 19691 26798 0 0 52 60001 127663 54640 54640 44044 44044 0 0 3803 7204 2918 4286 0 0 0 4286 1.28 1.24
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