EX-99.1 2 v111816_ex99-1.htm
 
Genesee & Wyoming Reports Results for the First Quarter of 2008
 
GREENWICH, Conn., April 29, 2008/PRNewswire-FirstCall/ — Genesee & Wyoming Inc. (GWI) (NYSE: GWR) reported net income in the first quarter of 2008 of $10.4 million, compared with net income of $14.3 million in the first quarter of 2007. GWI's diluted earnings per share (EPS) in the first quarter of 2008 were $0.29 with 36.0 million weighted average shares outstanding, compared with diluted earnings per share of $0.34 with 41.9 million weighted average shares outstanding in the first quarter of 2007.
 
GWI’s income from continuing operations in the first quarter of 2008 was $11.2 million, or $0.31 per diluted share, compared with income from continuing operations of $16.1 million, or $0.38 per diluted share in the first quarter of 2007.
 
Three significant items negatively affected financial results in the first quarter of 2008:
 
 
1.
Severe winter weather in GWI’s Canada and Illinois regions reduced diluted earnings per share by approximately $0.05. In Canada, as a result of record snowfalls, shipments declined due to periodic shutdowns of GWI’s Quebec Gatineau Railway and weather-related service issues on connecting Class I carriers. In addition, Canadian operating costs were negatively impacted by increased overtime costs from train crews, high snow removal costs from yards and mainline track, and high diesel fuel consumption. In Illinois, the freezing and subsequent flooding of the Illinois River resulted in reduced transloading of coal from rail to barge. GWI expects to recover a portion of the Illinois coal traffic in the second quarter of 2008.
 
 
2.
Acquisition-related expenses reduced diluted earnings per share by approximately $0.02, primarily as a result of the recently announced acquisitions of Rotterdam Rail Feeding in the Netherlands and CAGY Industries in the United States.
 
 
3.
A legal settlement associated with a liability claim from the late 1990s reduced diluted earnings per share by approximately $0.01.
 
First quarter results in 2008 also included a gain from the sale of assets of $0.6 million ($0.3 million after-tax, or $0.01 per diluted share). First quarter results in 2007 included $0.7 million ($0.4 million after-tax, or $0.01 per diluted share) in expenses associated with a tunnel fire in Oregon.
 
Results from GWI’s Mexican operations for the three months ended March 31, 2008 and 2007 are now included in results from discontinued operations.


Continuing Operations
 
In the first quarter of 2008, GWI's revenues increased $15.6 million, or 12.5%, to $140.7 million, compared with $125.1 million in the first quarter of 2007. Freight revenues increased $4.0 million, or 4.7%, primarily due to an increase in average revenues per carload of 15.3%, partially offset by a 9.1% decrease in carloads. The average freight revenues per carload in the first quarter of 2008 benefited 4.0% from the appreciation of the Australian dollar and Canadian dollar relative to the U.S. dollar. Non-freight revenues increased $11.6 million, or 28.1%, primarily due to increased iron ore shipments, third-party fuel sales, crewing and equipment rentals in Australia, as well as higher revenues at GWI’s U.S. port railroads.
 
GWI's operating income in the first quarter of 2008 decreased 8.9% to $21.3 million, compared with $23.4 million in the first quarter of 2007. The operating ratio was 84.9% in the first quarter of 2008, compared with an operating ratio of 81.3% in the first quarter of 2007. The higher operating ratio in the first quarter of 2008 was primarily due to the previously discussed adverse weather conditions, acquisition-related costs and legal settlement.
 
GWI’s effective income tax rate increased from 30.6% in the first quarter of 2007 to 37.8% in the first quarter of 2008, primarily due to the expiration of the short line tax credit on December 31, 2007.
 
Comments from the Chief Executive Officer
 
John C. Hellmann, Chief Executive Officer of GWI commented, “Severe winter weather in Illinois and Canada, particularly in the Province of Quebec, resulted in difficult operating conditions and our first quarter financial results were below our expectations. Despite a tough start to the year and a weak North American economy, our outlook for the remainder of 2008 is positive. We expect to recover a portion of the lost winter shipments and we have new customers coming on-line in our Oregon, Southern and Rail Link Regions starting in the second quarter of 2008. In addition, we expect a significant increase in our free cash flow over the remainder of 2008.”
 
“The impact of our recent acquisitions should enhance our financial results in 2008 and beyond. The newly-acquired Maryland Midland Railway is performing in line with our acquisition plan. We also expect that our recent acquisition of Rotterdam Rail Feeding and our pending acquisition of CAGY Industries will be important additions to GWI. It has become increasingly clear that we are benefiting from having access to capital in the current acquisition market, while other bidders for rail assets are restricted by difficult credit market conditions.”


Free Cash Flow (1)
 
($ in millions)
  
Three Months Ended
  
   
March 31,
  
   
2008
  
2007
  
           
Net cash provided by operating activities
  
$
8.1
  
$
31.9
  
Net cash used in investing activities
    
(7.0
)
  
(1.2
)
Cash used for acquisitions
    
3.6
   
-
  
Free cash flow (1)
  
$
4.7
  
$
30.7
  
 
GWI’s continuing operations generated free cash flow of $4.7 million for the quarter ended March 31, 2008. For the quarter ended March 31, 2007, GWI’s continuing operations generated $30.7 million in free cash flow. In the first quarter of 2008, net cash provided by operating activities included a use of $15.1 million in working capital. In the first quarter of 2007, working capital provided $4.6 million in net cash flow. Net cash used in investing activities included $15.7 million in purchases of property and equipment, $8.5 million of which related to prior year capital expenditures, partially offset by $10.4 million in cash received from government grants. Net cash used in investing activities in the first quarter of 2007 included $6.7 million in purchases of property and equipment, partially offset by $4.5 million in cash received from government grants and insurance proceeds for capital spending completed in 2006 and $1.0 million in cash received from government grants for capital spending completed in 2007.
 
Discontinued Operations
 
During the second quarter of 2007, GWI’s Mexican operating subsidiary, Ferrocarriles Chiapas-Mayab, S.A. de C.V. (FCCM), resigned its operating concession, ceased the operations of its Mexican subsidiary and commenced liquidation proceedings. In the first quarter of 2008, GWI completed certain statutory audits and other legal matters related to the wind-down of its Mexican operations.
 
For the quarter ended March 31, 2008, GWI reported a net loss from discontinued operations of $0.8 million (or $0.02 per diluted share), compared with a net loss of $1.8 million (or $0.04 per diluted share) for the quarter ended March 31, 2007. For discontinued operations, cash used in operating activities was $0.8 million and $1.7 million for the quarters ended March 31, 2008 and 2007, respectively. Cash used in investing activities of discontinued operations was $0.0 million and $0.2 million for the quarters ended March 31, 2008 and 2007, respectively. Free cash flow used in discontinued operations was $0.8 million and $1.9 million for the quarters ended March 31, 2008 and 2007, respectively (1). As of March 31, 2008, there was a net liability of $1.5 million remaining on GWI’s balance sheet associated with its Mexican operations.

 
Conference Call and Webcast Details
 
As previously announced, GWI's conference call to discuss financial results for the first quarter will be held Tuesday, April 29, 2008 at 11:00 a.m. (Eastern Time). The dial-in number for the teleconference is (888) 423-3280; outside U.S., call (612) 332-0720, 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 "First Quarter Earnings Audio Webcast." An audio replay of the conference call will be accessible via the Investors tab of GWI's website starting at 1:00 p.m. Tuesday, April 29, 2008.
 
About Genesee & Wyoming Inc.
 
GWI owns and operates short line and regional freight railroads and provides railcar switching services in the United States, Canada, Australia and the Netherlands and owns a minority interest in a railroad in Bolivia. Operations currently include 48 railroads organized in eight regions, with more than 5,700 miles of owned and leased track and approximately 3,000 additional miles under track access arrangements. GWI provides rail service at 16 ports in North America and Europe and performs contract coal loading and railcar switching for industrial customers. Corporate headquarters is in Greenwich, Conn.
 
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, political and industry conditions; customer demand, retention and contract continuation; legislative and regulatory developments; increased competition in relevant markets; funding needs and financing sources; susceptibility to various legal claims and lawsuits; strikes or work stoppages; severe weather conditions and other natural occurrences; 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) 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 a reconciliation to net cash provided by operating activities is included in the tables attached to this press release.

 
SOURCE Genesee & Wyoming Inc.
 
Contact: Michael E. Williams
Director, Corporate Communications
Genesee & Wyoming Inc.
+1 (203) 629-3722
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(In thousands, except per share amounts)
(unaudited)

   
Three Months Ended
  
   
March 31,
  
   
2008
  
2007
  
           
OPERATING REVENUES
  
$
140,681
  
$
125,107
  
               
OPERATING EXPENSES
    
119,375
   
101,721
 
INCOME FROM OPERATIONS
    
21,306
   
23,386
 
               
INTEREST INCOME
    
585
   
3,353
 
INTEREST EXPENSE
    
(3,909
)
  
(3,495
)
MINORITY INTEREST
    
(25
)
  
-
 
OTHER INCOME (EXPENSE), NET
    
98
   
(83
)
               
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    
18,055
   
23,161
 
               
PROVISION FOR INCOME TAXES
    
6,819
   
7,078
 
               
INCOME FROM CONTINUING OPERATIONS
    
11,236
   
16,083
 
               
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX
    
(839
)
  
(1,763
)
               
NET INCOME
  
$
10,397
  
$
14,320
  
               
BASIC EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS
  
$
0.36
  
$
0.43
  
BASIC LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS
    
(0.03
)
  
(0.05
)
BASIC EARNINGS PER COMMON SHARE
  
$
0.33
  
$
0.38
  
               
WEIGHTED AVERAGE SHARES - BASIC
    
31,498
   
37,270
 
           
DILUTED EARNINGS PER COMMON SHARE FROM CONTINUING OPERATIONS
  
$
0.31
  
$
0.38
  
DILUTED LOSS PER COMMON SHARE FROM DISCONTINUED OPERATIONS
    
(0.02
)
  
(0.04
)
DILUTED EARNINGS PER COMMON SHARE
  
$
0.29
  
$
0.34
  
               
WEIGHTED AVERAGE SHARES - DILUTED
    
36,033
   
41,861
 


GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2008 AND DECEMBER 31, 2007
(In thousands)
(unaudited)

   
March 31,
  
December 31,
  
   
2008
  
2007
  
ASSETS
              
               
CURRENT ASSETS:
              
Cash and cash equivalents
  
$
38,737
  
$
46,684
  
Accounts receivable, net
    
120,770
   
125,934
 
Materials and supplies
    
7,925
   
7,555
 
Prepaid expenses and other
    
17,767
   
18,147
 
Current assets of discontinued operations
    
1,534
   
2,213
 
Deferred income tax assets, net
    
7,487
   
7,495
 
Total current assets
    
194,220
   
208,028
 
               
PROPERTY AND EQUIPMENT, net
    
696,814
   
696,990
 
INVESTMENT IN UNCONSOLIDATED AFFILIATES
    
4,782
   
4,696
 
GOODWILL
    
38,959
   
39,352
 
INTANGIBLE ASSETS, net
    
116,215
   
117,106
 
OTHER ASSETS, net
    
8,302
   
10,276
 
DEFERRED INCOME TAX ASSETS, net
    
1,324
   
1,353
 
Total assets
  
$
1,060,616
  
$
1,077,801
  
           
LIABILITIES AND STOCKHOLDERS' EQUITY
              
               
CURRENT LIABILITIES:
              
Current portion of long-term debt
  
$
2,106
  
$
2,247
  
Accounts payable
    
107,397
   
128,038
 
Accrued expenses
    
36,361
   
37,792
 
Current liabilities of discontinued operations
    
3,056
   
3,919
 
Deferred income tax liabilities, net
    
116
   
66
 
Total current liabilities
    
149,036
   
172,062
 
               
LONG-TERM DEBT, less current portion
    
256,827
   
270,519
 
DEFERRED INCOME TAX LIABILITIES, net
    
95,267
   
93,336
 
DEFERRED ITEMS - grants from governmental agencies
    
96,822
   
94,651
 
OTHER LONG-TERM LIABILITIES
    
14,793
   
15,144
 
MINORITY INTEREST
    
1,133
   
1,108
 
               
TOTAL STOCKHOLDERS' EQUITY
    
446,738
   
430,981
 
Total liabilities and stockholders' equity
  
$
1,060,616
  
$
1,077,801
  


GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)

   
Three Months Ended March 31,
  
   
2008
  
2007
  
           
CASH FLOWS FROM OPERATING ACTIVITIES:
              
Net income
 
$
10,397
  
$
14,320
  
Adjustments to reconcile net income to net cash provided
              
by operating activities:
              
Loss from discontinued operations, net of tax
    
839
   
1,763
 
Depreciation and amortization
    
9,199
   
7,706
 
Compensation cost related to equity awards
    
1,338
   
1,206
 
Excess tax benefits from share-based compensation
    
(845
)
  
(420
)
Deferred income taxes
    
2,826
   
2,752
 
Net gain on sale of assets
   
(550
)
  
(31
)
Minority Interest
    
25
   
-
 
Changes in assets and liabilities which provided (used) cash, net of effect of acquisitions:
              
Accounts receivable, net
    
(2,994
)
  
4,659
 
Materials and supplies
    
(268
)
  
(488
)
Prepaid expenses and other
    
594
   
(958
)
Accounts payable and accrued expenses
    
(12,716
)
  
781
 
Other assets and liabilities, net
   
256
   
599
 
Net cash provided by operating activities from continuing operations
    
8,101
   
31,889
 
Net cash used in operating activities from discontinued operations
    
(776
)
  
(1,699
)
Net cash provided by operating activities
    
7,325
   
30,190
 
           
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Purchase of property and equipment
    
(15,664
)
  
(6,710
)
Grant proceeds from government agencies
    
10,360
   
4,084
 
Cash paid for acquisitions, net of cash acquired
    
(3,613
)
  
-
 
Insurance proceeds for the replacement of assets
    
-
   
1,422
 
Proceeds from disposition of property and equipment
    
1,897
   
33
 
Net cash used in investing activities from continuing operations
    
(7,020
)
  
(1,171
)
Net cash used in investing activities from discontinued operations
    
-
   
(214
)
Net cash used in investing activities
   
(7,020
)
  
(1,385
)
           
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Principal payments on long-term borrowings, including capital leases
    
(30,058
)
  
(458
)
Proceeds from issuance of long-term debt
    
17,500
   
-
 
Net proceeds from employee stock purchases
    
2,353
   
1,552
 
Treasury stock purchases
    
-
   
(37,370
)
Excess tax benefits from share-based compensation
    
845
   
420
 
Net cash used in financing activities
    
(9,360
)
  
(35,856
)
           
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    
1,067
   
2,691
 
               
CHANGE IN CASH BALANCES INCLUDED IN CURRENT ASSETS OF DISCONTINUED OPERATIONS
    
41
   
-
 
           
DECREASE IN CASH AND CASH EQUIVALENTS
    
(7,947
)
  
(4,360
)
CASH AND CASH EQUIVALENTS, beginning of period
    
46,684
   
240,206
 
CASH AND CASH EQUIVALENTS, end of period
  
$
38,737
  
$
235,846
  


GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)

   
Three Months Ended
  
   
March 31,
  
   
2008
  
2007
  
       
% of
      
% of
  
   
Amount
  
Revenue
  
Amount
  
Revenue
  
Revenues:
                          
Freight
  
$
87,728
    
62.4
%
$
83,754
    
66.9
%
Non-freight
   
52,953
   
37.6
%
  
41,353
   
33.1
%
                           
Total revenues
  
$
140,681
    
100.0
%
$
125,107
    
100.0
%
                           
Operating Expense Comparison:
                          
Natural Classification
                          
Labor and benefits
 
$
46,117
    
32.8
%
$
40,964
    
32.6
%
Equipment rents
   
8,381
   
6.0
%
  
9,358
   
7.5
%
Purchased services
   
10,837
   
7.7
%
  
9,291
   
7.4
%
Depreciation and amortization
   
9,199
   
6.5
%
  
7,706
   
6.2
%
Diesel fuel used in operations
    
15,785
   
11.2
%
  
10,448
   
8.4
%
Diesel fuel sold to third parties
    
8,567
   
6.1
%
  
5,321
   
4.3
%
Casualties and insurance
   
4,234
   
3.0
%
  
4,471
   
3.6
%
Materials
   
6,105
   
4.4
%
  
5,074
   
4.1
%
Net gain on sale of assets
    
(550
)
  
-0.4
%
  
(31
)
  
0.0
%
Other expenses
   
10,700
   
7.6
%
  
9,119
   
7.2
%
                   
Total operating expenses
  
$
119,375
    
84.9
%
$
101,721
    
81.3
%
                   
Functional Classification
                          
Transportation
 
$
47,856
    
34.0
%
$
39,485
    
31.5
%
Maintenance of ways and structures
   
12,152
   
8.7
%
  
10,707
   
8.6
%
Maintenance of equipment
   
17,941
   
12.8
%
  
17,495
   
14.0
%
Diesel fuel sold to third parties
    
8,567
   
6.1
%
  
5,321
   
4.3
%
General and administrative
   
24,210
   
17.2
%
  
21,038
   
16.7
%
Net gain on sale of assets
    
(550
)
  
-0.4
%
  
(31
)
  
0.0
%
Depreciation and amortization
   
9,199
   
6.5
%
  
7,706
   
6.2
%
                   
Total operating expenses
  
$
119,375
    
84.9
%
$
101,721
    
81.3
%


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
  
   
March 31, 2008
  
March 31, 2007
  
   
Freight
      
Average Revenue
  
Freight
      
Average Revenue
  
Commodity Group
  
Revenues
  
Carloads
  
Per Carload
  
Revenues
  
Carloads
  
Per Carload
  
   
 
  
 
  
 
  
 
  
 
  
 
  
Pulp & Paper
  
$
18,013
    
29,926
 
$
602
  
$
17,473
    
31,992
 
$
546
  
Coal, Coke & Ores
    
16,746
   
45,480
   
368
   
15,863
   
49,090
   
323
 
Farm & Food Products
    
10,887
   
17,932
   
607
   
9,910
   
22,162
   
447
 
Metals
    
9,519
   
19,127
   
498
   
8,923
   
19,685
   
453
 
Minerals & Stone
    
9,214
   
31,653
   
291
   
6,769
   
27,280
   
248
 
Lumber & Forest Products
    
7,972
   
18,137
   
440
   
8,705
   
20,732
   
420
 
Chemicals-Plastics
    
7,423
   
11,377
   
652
   
6,472
   
11,254
   
575
 
Petroleum Products
    
5,007
   
7,451
   
672
   
4,384
   
6,935
   
632
 
Autos & Auto Parts
    
1,755
   
3,345
   
525
   
1,682
   
3,510
   
479
 
Intermodal
    
124
   
259
   
478
   
282
   
537
   
525
 
Other
    
1,068
   
4,740
   
225
   
3,291
   
15,296
   
215
 
                               
Totals
  
$
87,728
    
189,427
   
463
 
$
83,754
    
208,473
   
402
 

 
Reconciliation of non-GAAP Financial Measure
 
This earnings release contains free cash flow, which is a "non-GAAP financial measure" as this term is defined in Regulation G of the Securities Exchange Act of 1934. In accordance with Regulation G, GWI has reconciled this non-GAAP financial measure to its most directly comparable U.S. GAAP measures.
 
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 from Continuing Operations less Net Cash Used in Investing Activities from Continuing Operations, excluding the Cost of Acquisitions. Free Cash Flow from Discontinued Operations is defined as Net Cash Used in Operating Activities from Discontinued Operations less Net Cash Used in Investing Activities from Discontinued Operations. 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 from Continuing Operations to GWI's Free Cash Flow ($ in millions):

   
Three Months Ended
  
   
March 31,
  
   
2008
  
2007
  
Net cash provided by operating activities from continuing operations
  
$
8.1
  
$
31.9
  
Net cash used in investing activities from continuing operations
    
(7.0
)
  
(1.2
)
Cash paid for acquisitions, net of cash acquired
    
3.6
   
-
  
Free cash flow
  
$
4.7
  
$
30.7
  


The following table sets forth a reconciliation of GWI's Net Cash Used In Operating Activities from Discontinued Operations to GWI's Free Cash Flow from Discontinued Operations ($ in millions):

   
Three Months Ended
  
   
March 31,
  
   
2008
  
2007
  
Net cash used in operating activities from discontinued operations
  
$
(0.8
)
$
(1.7
)
Net cash used in investing activities from discontinued operations
    
-
    
(0.2
)
Free cash flow from discontinued operations
  
$
(0.8
)
$
(1.9
)