EX-99.1 2 v082587_ex99-1.htm
 
Genesee & Wyoming Reports Results for the Second Quarter of 2007;
 
Announces Four Million Share Repurchase Program
 
GREENWICH, Conn., August 1, 2007/PRNewswire-FirstCall/ -- Genesee & Wyoming Inc. (GWI) (NYSE: GWR) reported net income in the second quarter of 2007 of $10.7 million compared with net income of $117.7 million in the second quarter of 2006. GWI's diluted earnings per share (EPS) in the second quarter of 2007 were $0.27 with 40.4 million shares outstanding, compared with EPS of $2.76 with 42.6 million shares outstanding in the second quarter of 2006.
 
Results for the second quarter of 2007 included losses related to GWI’s hurricane-damaged Mexican operations of $4.5 million pre-tax and after-tax, which reduced earnings by $0.11 per diluted share (1). Results for the second quarter of 2006 included certain gains and charges, primarily related to the sale of the Western Australia operations of the Australian Railroad Group (ARG) that totaled $183.4 million pre-tax ($102.6 million after-tax) and increased earnings by $2.41 per diluted share.
 
The financial impact of GWI’s Mexican operations, which are currently being liquidated and closed due to severe damage caused by Hurricane Stan in October 2005, is presented in the chart below.
 
Impact of Mexican Operations on Q2 2007 ($ in millions, except per share amounts)
 
   
After-Tax
 
EPS
 
   
Amount
  
Impact
  
Restructuring and related charges (a)
  
$
(3.1
 )
$
(0.08
 )
Write-off of deferred financing fees (b)
    
(0.6
 )  
(0.01
 )
Operating loss (excludes restructuring)
    
(0.8
 )  
(0.02
 )
Total impact of Mexico
  
$
(4.5
 )
$
(0.11
 )
 
(a) Includes $2.7 million restructuring expense and $0.4 million of related charges
(b) Included within interest expense
 
GWI also announced today that its Board of Directors has authorized the repurchase of up to four million shares of GWI common stock. The repurchases may occur from time to time in the open market, including under 10b5-1 plans, or in privately negotiated transactions. Subject to market conditions and other corporate factors, GWI expects to complete the repurchases during 2007. During the first and second quarters of 2007, GWI repurchased 2.5 million shares at an average price of $26.42 per share under previously authorized programs.
 
 
Operating Results
 
In the second quarter of 2007, GWI's revenue increased 16.3% to $132.1 million, compared with $113.6 million in the second quarter of 2006. Of this $18.5 million increase, $14.7 million was from acquisitions, primarily Genesee & Wyoming Australia Pty Ltd (GWA). Same railroad revenue increased $3.9 million, or 3.4%, as a result of a $4.9 million increase in non-freight revenue, primarily due to higher revenue in South Australia, higher revenue from industrial switching and higher revenue at GWI’s port railroads, offset by a $1.0 million decline in freight revenue.
 
The decline in same railroad freight revenue was the result of an 8.2% decrease in carloads, partially offset by an increase in average revenue per carload of 7.6%. The decrease in freight revenue was composed of a $2.1 million decline in Coal due primarily to power plant maintenance in Illinois and a $0.9 million decline in Other commodities due primarily to lower haulage traffic on the Meridian and Bigbee Railroad (M&B), which was closed to haulage traffic for eight weeks following a trestle failure on May 2, 2007. These declines were partially offset by an increase of $0.7 million in Metals and a net increase of $1.3 million from all remaining commodities. The increase in same railroad average revenue per carload was due to higher rates of 7.7% and change in commodity mix of 1.3%, partially offset by lower fuel surcharges of 1.4%. Including acquisitions, GWI’s average revenue per carload increased 5.9%.
 
GWI's operating income in the second quarter of 2007 was $17.5 million, compared with $16.3 million in the second quarter of 2006. The operating ratio was 86.8% in the second quarter of 2007, compared with an operating ratio of 85.6% in the second quarter of 2006. The operating income for the second quarter of 2007 was impacted by an operating loss of $3.9 million from the Mexican operations, including the restructuring and related charges. Operating income for the second quarter of 2006 was impacted by ARG Sale-related expenses of $4.9 million, a gain on an insurance settlement of $1.9 million and an operating loss of $1.1 million from the Mexican operations. Excluding these items, the operating ratio would have been 82.9% and 80.8%, respectively, for the three months ended June 30, 2007 and 2006 (2).
 
Free Cash Flow (3)

On June 1, 2006, GWI and its joint venture partner, Wesfarmers Limited, completed the sale of their Western Australia operations and certain other assets of the Australian Railroad Group (ARG Sale). Also on June 1, 2006, GWI completed the acquisition of certain South Australian operations of ARG (GWA Purchase). The net proceeds from these transactions totaled $282.7 million in the six months ended June 30, 2006. Although the ARG Sale occurred in 2006, the payment of taxes to the Australian government related to the transaction totaling $95.6 million was not required until June 2007.
 
 
($ in millions)  
Six Months Ended
June 30,
  
   
2007
  
2006
  
Net cash (used in) provided by operating activities (a)
  
$
(46.4
)
$
44.5
  
Net cash (used in) provided by investing activities (b)
    
(18.6
)
  
264.2
  
Cash used for acquisitions/proceeds from divestitures
    
-
   
(282.7
)
Australian taxes on ARG Sale
    
95.6
    
-
  
Free cash flow
  
$
30.6
  
$
26.0
  
 
(a)  
Includes Australian taxes on the ARG sale totaling $95.6 million in 2007
(b)  
Includes net proceeds from the ARG Sale and GWA Purchase in 2006

GWI’s operations generated free cash flow of $30.6 million in the six months ended June 30, 2007. For the six months ended June 30, 2006, GWI’s operations generated $26.0 million in free cash flow.

Including the Australian tax payment, for the six months ended June 30, 2007, GWI used net cash in its operating activities of $46.4 million. For the six months ended June 30, 2006, GWI generated net cash from operating activities of $44.5 million. Net cash used in investing activities in the first six months of 2007 included $24.7 million in purchases of property and equipment, partially offset by $6.1 million in cash received from government grants and insurance proceeds for capital projects completed in 2006 as well as cash from dispositions.

Comments from the Chief Executive Officer

John C. Hellmann, Chief Executive Officer of GWI, commented, “Second quarter financial results from our U.S., Canadian and Australian operations were consistent with our expectations. Our South Australian business continues to perform well despite the impact of last year’s drought on current grain traffic. Our U.S. ports traffic is strong, and the overall rate environment is good. These strengths are compensating for lower lumber and forest products traffic due to the weak U.S. housing market and lower shipments of pulp and paper, particularly newsprint. With coal traffic resuming after the completion of maintenance at two major coal-fired power plants in May and haulage traffic resuming after restoration of full service on the M&B in July, we believe we are well positioned for the second half of 2007.

“The closure of our Mexican railroad is proceeding as planned, with operations scheduled to end in the third quarter and the liquidation of assets expected to be completed by year-end. Meanwhile, we continue to work on acquisition and investment opportunities, particularly natural resource-related projects and international targets.
 
 
“Our announcement of a four million share repurchase program reflects our strong long-term outlook for the intrinsic value of GWI. At the same time, however, we are retaining significant financial capacity to execute acquisitions.”
 
Conference Call and Webcast Details
 
As previously announced, GWI's conference call to discuss financial results for the second quarter will be held Wednesday, August 1, 2007 at 11:00 a.m. (Eastern Time). The dial-in number for the teleconference is (877) 209-0397; outside U.S., call (612) 332-0932, or the call may be accessed live over the Internet (listen only) under the "Investors" tab of GWI's website (http://www.gwrr.com), by selecting "Second Quarter Earnings Audio Webcast." An audio replay of the conference call will be accessible via the Investors tab of GWI's website starting at 2:30 p.m. Wednesday, August 1, 2007.
 
About Genesee & Wyoming Inc.
 
GWI is a leading operator of short line and regional freight railroads in the United States, Canada, Mexico, Australia and Bolivia. Operations currently include 48 railroads organized in 10 regions, as well as service at 12 U.S. ports, contract coal loading and industrial switching. GWI operates more than 6,800 miles of owned and leased track and approximately 3,700 additional miles under track access arrangements.
 
 
Cautionary Statement Concerning Forward-Looking Statements
 
This press release contains forward-looking statements regarding future events and the future performance of Genesee & Wyoming Inc. that involve risks and uncertainties that could cause actual results to differ materially from its current expectations including, but not limited to, economic conditions, customer demand, increased competition in relevant markets and others. Words such as “anticipates,” “intends,” “plans,” “believes,” “seeks,” “expects,” “estimates,” variations of these words and similar expressions are intended to identify these forward-looking statements. GWI refers you to the documents that it files from time to time with the Securities and Exchange Commission, such as GWI's Forms 10-Q and 10-K which contain additional important factors that could cause its actual results to differ from its current expectations and from the forward-looking statements contained in this press release. GWI disclaims any intention to update the current expectations or forward looking statements contained in this press release.
 
(1) The losses related to GWI’s hurricane-damaged Mexico operations described above are “non-GAAP financial measures” as this term is defined in Regulation G of the Securities Exchange Act of 1934 and are not intended to replace net income of the Mexico Operations segment, calculated on a basis consistent with Generally Accepted Accounting Principles (GAAP) in the United States of America. The information required by Regulation G under the Securities Exchange Act of 1934, including reconciliation to net income of the Mexico Operations segment calculated in accordance with GAAP, is included in the tables attached to this press release.

(2) The operating ratios that exclude the items described above are non-GAAP financial measures and are not intended to replace the operating ratios calculated using total operating expenses and total revenues, calculated on a basis consistent with GAAP. The information required by Regulation G under the Securities Exchange Act of 1934, including reconciliation to the operating ratios calculated using amounts determined in accordance with GAAP, is included in the tables attached to this press release.

(3) Free Cash Flow is a non-GAAP financial measure and is not intended to replace net cash provided by operating activities, its most directly comparable GAAP measure. The information required by Regulation G under the Securities Exchange Act of 1934, including reconciliation to net cash provided by operating activities is included in the tables attached to this press release.
 
SOURCE Genesee & Wyoming Inc.
 
Michael Williams of GWI Corporate Communications
1-203-629-3722
mwilliams@gwrr.com
 

GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
 
   
Three Months Ended
  
Six Months Ended
  
   
June 30,
  
June 30,
  
   
2007
  
2006
  
2007
  
2006
  
                   
OPERATING REVENUES
  
$
132,149
  
$
113,590
  
$
262,976
  
$
226,572
  
                           
OPERATING EXPENSES
    
114,652
   
97,245
   
223,410
   
188,167
 
INCOME FROM OPERATIONS
    
17,497
   
16,345
   
39,566
   
38,405
 
                           
GAIN ON SALE OF EQUITY INVESTMENT IN ARG
    
-
   
208,423
   
-
   
208,423
 
INVESTMENT LOSS - BOLIVIA
    
-
   
(5,878
)
  
-
   
(5,878
)
EQUITY LOSS OF UNCONSOLIDATED
INTERNATIONAL AFFILIATES
    
-
   
(12,759
)
  
-
   
(10,752
)
INTEREST INCOME
    
2,624
   
1,082
   
5,987
   
1,182
 
INTEREST EXPENSE
    
(4,401
)
  
(4,689
)
  
(8,224
)
  
(9,697
)
OTHER INCOME, NET
    
977
   
1,037
   
894
   
1,483
 
                           
INCOME BEFORE INCOME TAXES
    
16,697
   
203,561
   
38,223
   
223,166
 
                           
PROVISION FOR INCOME TAXES
    
5,954
   
85,812
   
13,160
   
91,403
 
                           
NET INCOME
 
$
10,743
  
$
117,749
  
$
25,063
  
$
131,763
  
                           
BASIC EARNINGS PER COMMON SHARE
  
$
0.30
  
$
3.12
  
$
0.69
  
$
3.51
  
                           
WEIGHTED AVERAGE SHARES - BASIC
    
35,847
   
37,680
   
36,554
   
37,515
 
                           
                           
DILUTED EARNINGS PER COMMON SHARE
  
$
0.27
  
$
2.76
  
$
0.61
  
$
3.10
  
                           
WEIGHTED AVERAGE SHARES - DILUTED
    
40,425
   
42,602
   
41,141
   
42,533
 
 

GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
 
   
June 30,
  
December 31,
  
ASSETS
  
2007
  
2006
  
           
CURRENT ASSETS:
          
Cash and cash equivalents
  
$
105,623
  
$
240,206
  
Accounts receivable, net
    
117,637
   
117,099
 
Materials and supplies
    
10,262
   
11,302
 
Prepaid expenses and other
    
12,324
   
14,695
 
Deferred income tax assets, net
    
7,687
   
7,617
 
Total current assets
    
253,533
   
390,919
 
               
PROPERTY AND EQUIPMENT, net
    
596,666
   
573,292
 
INVESTMENT IN UNCONSOLIDATED AFFILIATES
    
4,636
   
4,644
 
GOODWILL
    
38,626
   
37,788
 
INTANGIBLE ASSETS, net
    
118,887
   
120,669
 
OTHER ASSETS, net
    
9,650
   
11,055
 
DEFERRED INCOME TAX ASSETS, net
    
2,663
   
2,697
 
Total assets
  
$
1,024,661
  
$
1,141,064
  
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
               
CURRENT LIABILITIES:
              
Current portion of long-term debt
  
$
2,483
  
$
4,372
  
Accounts payable
    
95,574
   
98,186
 
Accrued expenses
    
36,929
   
38,364
 
Income tax payable - Australia
    
2,684
   
91,925
 
Deferred income tax liabilities, net
    
495
   
291
 
Total current liabilities
    
138,165
   
233,138
 
               
LONG-TERM DEBT, less current portion
    
231,779
   
241,313
 
DEFERRED INCOME TAX LIABILITIES, net
    
77,272
   
72,876
 
DEFERRED ITEMS - grants from governmental agencies
    
65,080
   
56,588
 
OTHER LONG-TERM LIABILITIES
    
17,004
   
16,962
 
               
TOTAL STOCKHOLDERS' EQUITY
    
495,361
   
520,187
 
Total liabilities and stockholders' equity
  
$
1,024,661
  
$
1,141,064
  
 

GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
   
Six Months Ended
June 30,
  
   
2007
  
2006
  
           
CASH FLOWS FROM OPERATING ACTIVITIES:
          
Net income
 
$
25,063
  
$
131,763
  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
              
Depreciation and amortization
    
15,932
   
14,250
 
Compensation cost related to equity awards
    
2,754
   
4,787
 
Excess tax benefits from share-based compensation
    
(815
)
  
(3,445
)
Deferred income taxes
    
3,836
   
10,827
 
Gain on insurance recovery
    
-
   
(1,937
)
Gain on sale of equity investment in ARG
    
-
   
(208,423
)
Net gain on sale of assets
   
(444
)
  
(132
)
Decrease/(increase) in cash surrender value of split dollar life insurance
   
66
   
(281
)
Non-cash restructuring charges
    
2,704
   
-
 
Write-off of deferred financing fees from early extinguishment of debt
    
561
   
-
 
Investment loss - Bolivia
    
-
   
5,878
 
Equity income of unconsolidated international affiliates, net of tax
    
-
   
7,500
 
Changes in assets and liabilities which provided (used) cash, net of effect of acquisitions:
              
Accounts receivable, net
    
2,293
   
2,817
 
Materials and supplies
    
1,364
   
(1,937
)
Prepaid expenses and other
    
1,537
   
(207
)
Accounts payable and accrued expenses
    
(8,157
)
  
1,324
 
Income tax payable - Australia
    
(94,103
)
  
82,070
 
Other assets and liabilities, net
   
1,017
   
(344
)
Net cash (used in) provided by operating activities
    
(46,392
)
  
44,510
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Purchase of property and equipment, net of government grants
    
(20,773
)
  
(18,690
)
Proceeds from ARG Sale
    
-
   
296,277
 
Cash paid for acquisitions, net
    
-
   
(13,611
)
Insurance proceeds for the replacement of assets
    
1,715
   
-
 
Premiums paid on split dollar life insurance
    
(61
)
  
(89
)
Proceeds from disposition of property and equipment
    
570
   
343
 
Net cash (used in) provided by investing activities
    
(18,549
)
  
264,230
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Principal payments on long-term borrowings, including capital leases
    
(14,286
)
  
(182,832
)
Proceeds from issuance of long-term debt
    
-
   
92,500
 
Net proceeds from employee stock purchases
    
2,431
   
3,969
 
Treasury stock purchases
    
(65,144
)
  
-
 
Excess tax benefits from share-based compensation
    
815
   
3,445
 
Net cash used in financing activities
    
(76,184
)
  
(82,918
)
               
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    
6,542
   
(2,224
)
               
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
(134,583
)
  
223,598
 
CASH AND CASH EQUIVALENTS, beginning of period
    
240,206
   
18,669
 
CASH AND CASH EQUIVALENTS, end of period
  
$
105,623
  
$
242,267
  
 

GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
 
   
Three Months Ended
  
   
June 30,
  
   
2007
  
2006
  
       
% of
      
% of
  
   
Amount
  
Revenue
  
Amount
  
Revenue
  
Revenues:
                  
Freight
  
$
86,209
    
65.2
%
$
82,923
    
73.0
%
Non-freight
   
45,940
   
34.8
%
  
30,667
   
27.0
%
                           
Total revenues
  
$
132,149
    
100.0
%
$
113,590
    
100.0
%
                           
Operating Expense Comparison:
                          
Natural Classification
                          
Labor and benefits
 
$
43,317
    
32.8
%
$
42,746
    
37.6
%
Equipment rents
   
10,018
   
7.6
%
  
9,119
   
8.0
%
Purchased services
   
11,650
   
8.8
%
  
8,372
   
7.4
%
Depreciation and amortization
   
8,038
   
6.1
%
  
6,939
   
6.1
%
Diesel fuel used in operations
    
12,025
   
9.1
%
  
11,357
   
10.0
%
Diesel fuel sold to third parties
    
5,256
   
4.0
%
  
1,631
   
1.4
%
Casualties and insurance
   
4,214
   
3.2
%
  
4,139
   
3.6
%
Materials
   
7,461
   
5.7
%
  
5,704
   
5.0
%
Net gain on sale of assets
    
(394
)
  
-0.3
%
  
(38
)
  
0.0
%
Gain on insurance recovery
    
-
   
0.0
%
  
(1,937
)
  
-1.7
%
Other expenses
   
10,363
   
7.8
%
  
9,213
   
8.2
%
Restructuring
    
2,704
   
2.0
%
  
-
   
0.0
%
                           
Total operating expenses
  
$
114,652
    
86.8
%
$
97,245
    
85.6
%
                           
Functional Classification
                          
Transportation
 
$
43,659
    
33.1
%
$
38,880
    
34.2
%
Maintenance of ways and structures
   
13,794
   
10.4
%
  
10,412
   
9.2
%
Maintenance of equipment
   
19,048
   
14.4
%
  
16,078
   
14.2
%
Diesel fuel sold to third parties
    
5,256
   
4.0
%
  
1,631
   
1.4
%
General and administrative
   
22,547
   
17.1
%
  
25,280
   
22.2
%
Net gain on sale of assets
    
(394
)
  
-0.3
%
  
(38
)
  
0.0
%
Gain on insurance recovery
    
-
   
0.0
%
  
(1,937
)
  
-1.7
%
Depreciation and amortization
   
8,038
   
6.1
%
  
6,939
   
6.1
%
Restructuring
    
2,704
   
2.0
%
  
-
   
0.0
%
                           
Total operating expenses
  
$
114,652
    
86.8
%
$
97,245
    
85.6
%
 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
 
   
Six Months Ended
   
June 30,
  
   
2007
  
2006
  
       
% of
      
% of
  
   
Amount
  
Revenue
  
Amount
  
Revenue
  
Revenues:
                  
Freight
  
$
174,844
    
66.5
%
$
168,437
    
74.3
%
Non-freight
   
88,132
   
33.5
%
  
58,135
   
25.7
%
                           
Total revenues
  
$
262,976
    
100.0
%
$
226,572
    
100.0
%
                           
Operating Expense Comparison:
                          
Natural Classification
                          
Labor and benefits
 
$
86,524
    
32.9
%
$
79,937
    
35.3
%
Equipment rents
   
19,920
   
7.6
%
  
19,025
   
8.4
%
Purchased services
   
21,899
   
8.3
%
  
15,724
   
6.9
%
Depreciation and amortization
   
15,932
   
6.1
%
  
14,250
   
6.3
%
Diesel fuel used in operations
    
23,525
   
9.0
%
  
22,632
   
10.0
%
Diesel fuel sold to third parties
    
10,198
   
3.9
%
  
1,631
   
0.7
%
Casualties and insurance
   
9,433
   
3.6
%
  
6,921
   
3.1
%
Materials
   
13,944
   
5.3
%
  
11,499
   
5.1
%
Net gain on sale of assets
    
(444
)
  
-0.2
%
  
(132
)
  
-0.1
%
Gain on insurance recovery
    
-
   
0.0
%
  
(1,937
)
  
-0.9
%
Other expenses
   
19,775
   
7.5
%
  
18,617
   
8.2
%
Restructuring
    
2,704
   
1.0
%
  
-
   
0.0
%
                           
Total operating expenses
  
$
223,410
    
85.0
%
$
188,167
    
83.0
%
                           
Functional Classification
                          
Transportation
 
$
86,021
    
32.7
%
$
77,280
    
34.1
%
Maintenance of ways and structures
   
25,701
   
9.8
%
  
20,338
   
9.0
%
Maintenance of equipment
   
38,135
   
14.5
%
  
32,511
   
14.3
%
Diesel fuel sold to third parties
    
10,198
   
3.9
%
  
1,631
   
0.7
%
General and administrative
   
45,163
   
17.2
%
  
44,226
   
19.6
%
Net gain on sale of assets
    
(444
)
  
-0.2
%
  
(132
)
  
-0.1
%
Gain on insurance recovery
    
-
   
0.0
%
  
(1,937
)
  
-0.9
%
Depreciation and amortization
   
15,932
   
6.1
%
  
14,250
   
6.3
%
Restructuring
    
2,704
   
1.0
%
  
-
   
0.0
%
                           
Total operating expenses
  
$
223,410
    
85.0
%
$
188,167
    
83.0
%
 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUE, CARLOADS AND AVERAGE REVENUE PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenue per carload)
(unaudited)
 
   
Three Months Ended
  
Three Months Ended
  
   
June 30, 2007
  
June 30, 2006
  
   
Freight
      
Average Revenue
  
Freight
      
Average Revenue
  
Commodity Group
  
Revenues
  
Carloads
  
Per Carload
  
Revenues
  
Carloads
  
Per Carload
  
                           
Pulp & Paper
  
$
17,080
    
30,956
 
$
552
  
$
17,328
    
34,817
 
$
498
  
Coal, Coke & Ores
    
12,922
   
42,513
   
304
   
14,998
   
47,335
   
317
 
Minerals & Stone
    
10,751
   
36,128
   
298
   
8,935
   
25,423
   
351
 
Metals
    
10,067
   
21,704
   
464
   
9,344
   
21,475
   
435
 
Lumber & Forest Products
    
9,927
   
23,383
   
425
   
9,405
   
24,409
   
385
 
Farm & Food Products
    
8,986
   
16,813
   
534
   
5,947
   
16,321
   
364
 
Chemicals-Plastics
    
6,430
   
10,244
   
628
   
6,265
   
10,611
   
590
 
Petroleum Products
    
5,519
   
7,012
   
787
   
5,256
   
7,090
   
741
 
Autos & Auto Parts
    
2,187
   
4,137
   
529
   
2,114
   
4,017
   
526
 
Intermodal
    
279
   
563
   
496
   
405
   
920
   
440
 
Other
    
2,061
   
9,672
   
213
   
2,926
   
14,440
   
203
 
                                       
Totals
  
$
86,209
    
203,125
   
424
 
$
82,923
    
206,858
   
401
 
 

GENESEE & WYOMING INC. AND SUBSIDIARIES
RAILROAD FREIGHT REVENUE, CARLOADS AND AVERAGE REVENUE PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenue per carload)
(unaudited)
 
   
Six Months Ended
  
Six Months Ended
  
   
June 30, 2007
  
June 30, 2006
  
   
Freight
      
Average Revenue
  
Freight
      
Average Revenue
  
Commodity Group
  
Revenues
  
Carloads
  
Per Carload
  
Revenues
  
Carloads
  
Per Carload
  
                           
Pulp & Paper
  
$
34,608
    
63,013
 
$
549
  
$
34,727
    
70,179
 
$
495
  
Coal, Coke & Ores
    
28,800
   
91,629
   
314
   
32,022
   
99,030
   
323
 
Farm & Food Products
    
19,570
   
40,315
   
485
   
12,083
   
32,531
   
371
 
Minerals & Stone
    
19,502
   
66,120
   
295
   
17,134
   
45,462
   
377
 
Metals
    
19,224
   
41,722
   
461
   
18,745
   
43,867
   
427
 
Lumber & Forest Products
    
18,685
   
44,325
   
422
   
18,934
   
49,841
   
380
 
Chemicals-Plastics
    
12,683
   
20,812
   
609
   
12,504
   
21,610
   
579
 
Petroleum Products
    
11,708
   
15,239
   
768
   
11,707
   
15,652
   
748
 
Autos & Auto Parts
    
4,024
   
7,742
   
520
   
3,779
   
7,451
   
507
 
Intermodal
    
560
   
1,100
   
509
   
855
   
1,955
   
437
 
Other
    
5,480
   
25,141
   
218
   
5,947
   
28,054
   
212
 
                                       
Totals
  
$
174,844
    
417,158
   
419
 
$
168,437
    
415,632
   
405
 
 
 
Reconciliation of non-GAAP Financial Measures
 
This earnings release contains the losses related to GWI’s hurricane-damaged Mexico operations, free cash flow and adjusted operating ratios, which are "non-GAAP financial measures" as this term is defined in Regulation G of the Securities Exchange Act of 1934. In accordance with Regulation G, GWI has reconciled these non-GAAP financial measures to their most directly comparable U.S. GAAP measures.
 
Losses of Mexico Operations Description and Discussion

Management views the losses related to GWI’s hurricane-damaged Mexico operations, which exclude interest income and interest expense related to financing and investing activities, as an important financial measure of the impact of those operations on the consolidated financial results of GWI. Such financing and investing activities are managed at the consolidated level. As a result of the centralized decision-making, effective June 8, 2007, GWI fully settled the third-party debt of its Mexico operations through its U.S. operations. The losses related to GWI’s hurricane-damaged Mexico operations, which exclude interest income and interest expense related to financing and investing activities, are not intended to represent, and should not be considered more meaningful than, or as an alternative to, the net loss of GWI’s Mexico Operations segment determined in accordance with Generally Accepted Accounting Principles (GAAP).

The following table sets forth a reconciliation of the losses (impact) related to GWI’s hurricane-damaged Mexico operations, which exclude interest income and interest expense related to financing and investing activities, to the reported net losses of GWI’s Mexico Operations segment ($ in millions):
 
   
For the Three Months Ended
June 30, 2007
  
       
Total impact of Mexico
  
$
(4.5
)
Write-off of deferred financing fees (a)
    
0.6
  
Interest expense, net
    
(1.2
)
Net loss of Mexico Operations segment
  
$
(5.1
)

(a) Included within interest expense, net

Operating Ratio Description and Discussion

Management views the Operating Ratio, calculated as total Operating Expenses divided by total Revenues, as an important measure of GWI’s operating performance. Because management believes it is useful for investors in assessing GWI's financial results compared to the same period in the prior year, Adjusted Operating Ratios for the three months ended June 30, 2007, are presented excluding the impact of restructuring and other related charges in Mexico. The Adjusted Operating Ratios for the three months ended June 30, 2006, are presented excluding the effects of certain ARG Sale-related expenses and a gain on insurance settlement. The Adjusted Operating Ratios presented excluding these effects are not intended to represent, and should not be considered more meaningful than, or as an alternative to, the Operating Ratios calculated using amounts determined in accordance with GAAP.
 
 
The following table sets forth a reconciliation of GWI's Operating Ratio calculated using amounts determined in accordance with GAAP to the Adjusted Operating Ratios described above for the three months ended June 30, 2007 and 2006 ($ in millions):
 
   
For the Three Months Ended
June 30, 2007
  
 
  
Total
Revenues
  
Total Operating Expenses
  
Operating
Ratio
  
 
  
 
  
 
  
 
  
As Reported
  
$
132.1
  
$
114.7
    
86.8
%
Operating Loss in Mexico
    
(6.8
)
  
(10.7
)
    
                     
Excluding Above Items
  
$
125.2
  
$
104.0
    
82.9
%
   
For the Three Months Ended
June 30, 2006
  
 
  
Total
Revenues
  
Total Operating Expenses
  
Operating
Ratio
  
 
  
 
  
 
  
 
  
As Reported
  
$
113.6
  
$
97.2
    
85.6
%
ARG Sale-Related Expenses
    
-
    
(4.9
)
    
Gain on Insurance Settlement
    
-
    
1.9
      
Operating Loss in Mexico
    
(7.2
)
  
(8.2
)
      
                     
Excluding Above Items
  
$
106.4
  
$
86.0
    
80.8
%
 
Free Cash Flow Description and Discussion

Management views Free Cash Flow as an important financial measure of how well GWI is managing its assets. Subject to the limitations discussed below, Free Cash Flow is a useful indicator of cash flow that may be available for discretionary use by GWI. Free Cash Flow is defined as Net Cash Provided by Operating Activities less Net Cash Used in/Provided by Investing Activities, excluding the Cost of Acquisitions/Proceeds from Divestitures and directly related tax effects. Key limitations of the Free Cash Flow measure include the assumptions that GWI will be able to refinance its existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt. Free Cash Flow is not intended to represent, and should not be considered more meaningful than, or as an alternative to, measures of cash flow determined in accordance with GAAP.
 
 
The following table sets forth a reconciliation of GWI's Net Cash Provided by Operating Activities to GWI's Free Cash Flow ($ in millions):       
   
   
Six Months Ended
June 30,
  
   
2007
  
2006
  
Net cash (used in) provided by operating activities
  
$
(46.4
)
$
44.5
  
Net cash (used in) provided by investing activities
    
(18.6
)
  
264.2
  
Cash used for acquisitions/proceeds from divestitures
    
-
   
(282.7
)
Australian taxes on ARG Sale
    
95.6
    
-
  
Free cash flow
  
$
30.6
  
$
26.0