UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): March 13, 2013
GENESEE & WYOMING INC.
(Exact name of registrant as specified in its charter)
Delaware | 001-31456 | 06-0984624 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) | ||
66 Field Point Road, Greenwich, Connecticut | 06830 | |||
(Address of principal executive offices) | (Zip Code) |
Registrants telephone number, including area code: (203) 629-3722
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01. | Other Events. |
On October 1, 2012, Genesee & Wyoming Inc. (G&W) acquired RailAmerica, Inc. (RailAmerica). Immediately following the acquisition, G&W placed the shares of RailAmerica into an independent voting trust pending regulatory approval of the transaction by the U.S. Surface Transportation Board (STB). G&W accounted for the earnings of RailAmerica using the equity method of accounting while the shares were held in trust. The STB approved the transaction and permitted G&W to take control of RailAmerica effective as of December 28, 2012. G&W partially financed the acquisition through the issuance of mandatorily convertible preferred stock (the Series A-1 Preferred Stock), which Series A-1 Preferred Stock was convertible into shares of G&Ws Class A Common Stock in certain circumstances. In connection with the conversion of all of the outstanding Series A-1 Preferred Stock into shares of G&Ws Class A Common Stock on February 13, 2013 and G&Ws obligation, pursuant to a related registration rights agreement, to register the resale of such shares of Class A Common Stock, the following financial information is included as Exhibits 99.1 and 99.2 hereto and is incorporated herein by reference:
| unaudited consolidated financial statements of RailAmerica for the nine months ended September 30, 2012 and 2011; and |
| unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012. |
The pro forma financial information described above gives effect to certain pro forma events related to the acquisition of RailAmerica and has been presented for informational purposes only. It does not purport to project the future financial position or operating results of the combined company. In addition, Exhibit 99.2 hereto includes additional pro forma information for freight revenues and carloads for G&W and RailAmerica on a combined basis. The pro forma freight revenues and carloads information has been reclassified to reflect G&Ws commodity classifications effective January 1, 2013.
In connection with the registration of the resale of the shares of Class A Common Stock issued upon conversion of the Series A-1 Preferred Stock, the opinion of Simpson Thacher & Bartlett LLP, and related consent, are filed as Exhibits 5 and 23 hereto and are incorporated herein by reference and into G&Ws Registration Statement on Form S-3 (File No. 333-183862).
Cautionary Statement Regarding Forward-Looking Statements
This filing contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events and future performance of G&W. Words such as anticipates, intends, plans, believes, seeks, expects, estimates, trends, outlook, variations of these words and similar expressions are intended to identify these forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast. Actual results may differ materially from those expressed or forecasted in these forward-looking statements. The areas in which there is risk and uncertainty are further described in documents that G&W files from time to time with the Securities and Exchange Commission, which contain additional important factors that could cause actual results to differ from current expectations and from the forward-looking statements contained herein. Readers of this document are cautioned that the forward-looking statements are not guarantees of future performance and G&Ws actual results or developments may differ materially from the expectations expressed in the forward-looking statements.
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits. |
Exhibit No. |
Exhibit | |
Exhibit 5 | Opinion of Simpson Thacher & Bartlett LLP. | |
Exhibit 23 | Consent of Simpson Thacher & Bartlett LLP (included in Exhibit 5). | |
Exhibit 99.1 | Unaudited consolidated financial statements of RailAmerica for the nine months ended September 30, 2012 and 2011. | |
Exhibit 99.2 | Unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed by the undersigned hereunto duly authorized.
GENESEE & WYOMING INC. | ||||
Date: March 13, 2013 | By: | /s/ Timothy J. Gallagher | ||
Name: | Timothy J. Gallagher | |||
Title: | Chief Financial Officer |
EXHIBIT INDEX
Exhibit No. |
Exhibit | |
Exhibit 5 | Opinion of Simpson Thacher & Bartlett LLP. | |
Exhibit 23 | Consent of Simpson Thacher & Bartlett LLP (included in Exhibit 5). | |
Exhibit 99.1 | Unaudited consolidated financial statements of RailAmerica for the nine months ended September 30, 2012 and 2011. | |
Exhibit 99.2 | Unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012. |
Exhibit 5
[Simpson Thacher & Barlett Letterhead]
March 13, 2013
Genesee & Wyoming Inc.
66 Field Point Road
Greenwich, Connecticut 06830
Ladies and Gentlemen:
We have acted as counsel to Genesee & Wyoming Inc., a Delaware corporation (the Company), in connection with the Registration Statement on Form S-3 (File No. 333-183862) (the Registration Statement) filed by the Company with the Securities and Exchange Commission (the Commission) under the Securities Act of 1933, as amended (the Securities Act), relating to the registration of 5,984,232 shares (the Shares) of Class A Common Stock, par value $.01 per share (the Common Stock), to be sold by the selling stockholder (the Selling Stockholder) named in the Prospectus Supplement (as defined below).
We have examined the Registration Statement as it became effective under the Securities Act; the prospectus contained therein (the Base Prospectus), as supplemented by the prospectus supplement relating to the Shares to be sold by the Selling Stockholder, dated March 13, 2013 (the Prospectus Supplement and, together with the Base Prospectus, the Prospectus), filed by the Company pursuant to Rule 424(b) of the rules and regulations of the Commission under the Securities Act on the date hereof. We also have examined the originals, or duplicates or certified or conformed copies, of such records, agreements, documents and other instruments and have made such other investigations as we have deemed relevant and necessary in connection with the opinion hereinafter set forth. As to questions of fact material to this opinion, we have relied upon certificates or comparable documents or statements of public officials, of officers and representatives of the Company and of the Selling Stockholder.
In rendering the opinion set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies and the authenticity of the originals of such latter documents.
Based upon the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that the Shares to be sold by the Selling Stockholder pursuant to the Prospectus are validly issued, fully paid and nonassessable.
We do not express any opinion herein concerning any law other than the Delaware General Corporation Law.
We hereby consent to the filing of this opinion letter as Exhibit 5 to the Current Report on Form 8-K of the Company filed with the Commission in connection with the resale of the Shares by the Selling Stockholder and to the use of our name under the caption Legal Opinion in the Base Prospectus and Validity in the Prospectus Supplement.
Very truly yours, |
/s/ Simpson Thacher & Bartlett LLP |
SIMPSON THACHER & BARTLETT LLP |
Exhibit 99.1
RAILAMERICA, INC. AND SUBSIDIARIES
NINE MONTHS ENDED SEPTEMBER 30, 2012 and 2011
UNAUDITED FINANCIAL STATEMENTS
1
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2012 | 2011 | |||||||
(In thousands, except per share data) |
||||||||
Operating revenue |
$ | 454,956 | $ | 403,817 | ||||
Operating expenses: |
||||||||
Labor and benefits |
136,316 | 124,855 | ||||||
Equipment rents |
27,655 | 26,601 | ||||||
Purchased services |
55,504 | 31,429 | ||||||
Diesel fuel |
39,805 | 41,887 | ||||||
Casualties and insurance |
11,812 | 11,095 | ||||||
Materials |
25,393 | 18,892 | ||||||
Joint facilities |
7,478 | 7,214 | ||||||
Other expenses |
31,425 | 29,876 | ||||||
Track maintenance expense reimbursement |
| (13,162 | ) | |||||
Net (gain) loss on sale of assets |
(1,495 | ) | 151 | |||||
Impairment of assets |
| 5,169 | ||||||
Depreciation and amortization |
33,264 | 35,421 | ||||||
|
|
|
|
|||||
Total operating expenses |
367,157 | 319,428 | ||||||
|
|
|
|
|||||
Operating income |
87,799 | 84,389 | ||||||
Interest expense (including amortization costs of $6,727 and $13,215, respectively) |
(32,442 | ) | (54,526 | ) | ||||
Other (loss) income |
(86,992 | ) | 804 | |||||
|
|
|
|
|||||
(Loss) income before income taxes |
(31,635 | ) | 30,667 | |||||
(Benefit from) provision for income taxes |
(8,271 | ) | 8,824 | |||||
|
|
|
|
|||||
Net (loss) income |
(23,364 | ) | 21,843 | |||||
|
|
|
|
|||||
Less: Net loss attributable to noncontrolling interest |
(489 | ) | | |||||
|
|
|
|
|||||
Net (loss) income attributable to the Company |
$ | (22,875 | ) | $ | 21,843 | |||
|
|
|
|
|||||
Basic earnings per common share: |
||||||||
Net (loss) income attributable to the Company |
$ | (0.45 | ) | $ | 0.41 | |||
Diluted earnings per common share: |
||||||||
Net (loss) income attributable to the Company |
$ | (0.45 | ) | $ | 0.41 | |||
Weighted average common shares outstanding: |
||||||||
Basic |
50,440 | 53,006 | ||||||
Diluted |
50,440 | 53,006 |
The accompanying Notes are an integral part of the Consolidated Financial Statements.
2
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2012 | 2011 | |||||||
Net (loss) income |
$ | (23,364 | ) | $ | 21,843 | |||
Other comprehensive income (loss): |
||||||||
Foreign currency translation adjustments |
4,193 | (5,787 | ) | |||||
Actuarial loss associated with pension and postretirement benefit plans, net of tax benefit of $340 |
(573 | ) | | |||||
Write off of terminated swap costs, net of tax provision of $457 |
695 | | ||||||
Amortization of terminated swap costs, net of tax provision of $1,644 and $3,819, respectively |
2,594 | 5,806 | ||||||
|
|
|
|
|||||
Other comprehensive income |
6,909 | 19 | ||||||
|
|
|
|
|||||
Comprehensive (loss) income |
(16,455 | ) | 21,862 | |||||
|
|
|
|
|||||
Less: comprehensive loss attributable to noncontrolling interest |
(489 | ) | | |||||
|
|
|
|
|||||
Comprehensive (loss) income attributable to the Company |
$ | (15,966 | ) | $ | 21,862 | |||
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|
|
|
The accompanying Notes are an integral part of the Consolidated Financial Statements.
3
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended | ||||||||
September 30, | ||||||||
2012 | 2011 | |||||||
(In thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
Net (loss) income |
$ | (23,364 | ) | $ | 21,843 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
||||||||
Depreciation and amortization, including amortization of debt issuance costs classified in interest expense |
35,752 | 39,012 | ||||||
Amortization of swap termination costs |
4,237 | 9,625 | ||||||
Net (gain) loss on sale or disposal of properties |
(1,495 | ) | 151 | |||||
Impairment of assets |
| 5,169 | ||||||
Loss on extinguishment of debt |
88,107 | | ||||||
Deferred financing costs expensed |
| 719 | ||||||
Equity compensation costs |
11,946 | 7,381 | ||||||
Deferred income taxes and other |
(10,257 | ) | 4,453 | |||||
Changes in operating assets and liabilities, net of acquisitions: |
||||||||
Accounts receivable |
(5,594 | ) | (33,167 | ) | ||||
Other current assets |
(7,919 | ) | (7,209 | ) | ||||
Accounts payable |
(1,368 | ) | 17,048 | |||||
Accrued expenses |
23,833 | 7,967 | ||||||
Other assets and liabilities |
(125 | ) | (1,253 | ) | ||||
|
|
|
|
|||||
Net cash provided by operating activities |
113,753 | 71,739 | ||||||
|
|
|
|
|||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
Purchase of property, plant and equipment |
(72,147 | ) | (93,518 | ) | ||||
NECR government grant reimbursements |
7,129 | 31,329 | ||||||
Proceeds from sale of assets |
6,511 | 7,598 | ||||||
Acquisitions, net of cash acquired |
(53,107 | ) | (12,716 | ) | ||||
Change in restricted cash |
(300 | ) | | |||||
Other |
16 | (65 | ) | |||||
|
|
|
|
|||||
Net cash used in investing activities |
(111,898 | ) | (67,372 | ) | ||||
|
|
|
|
|||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
Principal payments on long-term debt |
(3,051 | ) | (263 | ) | ||||
Proceeds from issuance of long-term debt |
582,075 | | ||||||
Repurchase of senior secured notes |
(649,720 | ) | | |||||
Repayment of revolving credit facility |
(60,000 | ) | | |||||
Proceeds from revolving credit facility |
135,000 | | ||||||
Repurchase of common stock |
(520 | ) | (57,664 | ) | ||||
Financing costs paid |
(11,196 | ) | (2,891 | ) | ||||
|
|
|
|
|||||
Net cash used in financing activities |
(7,412 | ) | (60,818 | ) | ||||
|
|
|
|
|||||
Effect of exchange rates on cash |
365 | (743 | ) | |||||
|
|
|
|
|||||
Net decrease in cash |
(5,192 | ) | (57,194 | ) | ||||
Cash, beginning of period |
90,999 | 152,968 | ||||||
|
|
|
|
|||||
Cash, end of period |
$ | 85,807 | $ | 95,774 | ||||
|
|
|
|
The accompanying Notes are an integral part of the Consolidated Financial Statements.
4
RAILAMERICA, 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 RailAmerica, Inc., all of its wholly-owned subsidiaries and consolidated subsidiaries in which RailAmerica, Inc. has a controlling interest (collectively, RailAmerica or the Company). Noncontrolling interest is the portion of equity, in a subsidiary or consolidated entity, not attributable, directly or indirectly to the Company. On the Consolidated Statements of Operations, all of the revenues and expenses from less-than-wholly-owned consolidated subsidiaries are reported in net income (loss), including both the amounts attributable to the Company and noncontrolling interests. The amounts of consolidated net income (loss) attributable to the Company and to the noncontrolling interests are identified on the accompanying Consolidated Statements of Operations.
All significant intercompany transactions and accounts have been eliminated in consolidation. These interim consolidated financial statements have been prepared by the Company, without audit, and accordingly do not contain all disclosures which would be required in a full set of financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, the unaudited financial statements for the nine months ended September 30, 2012 and 2011, are presented on a basis consistent with the audited financial statements and contain all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of the results for interim periods. The results of operations for interim periods are not necessarily indicative of results of operations for the full year.
Organization
RailAmerica is a leading owner and operator of short line and regional freight railroads in North America, operating a portfolio of 45 individual railroads with approximately 7,500 miles of track in 28 states and three Canadian provinces. The Companys principal operations consist of rail freight transportation and ancillary rail services.
On July 23, 2012, the Company and Genesee & Wyoming Inc. (G&W) jointly announced that they entered into an agreement under which G&W would acquire 100% of the Company for an all cash purchase price of $27.50 per share, or approximately $1.4 billion plus net debt of $659.2 million. Effective October 1, 2012, the Company was acquired by G&W and the transaction was closed into a voting trust pending formal Surface Transportation Board approval of G&Ws application to control the Companys railroads.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Change in Depreciable Lives
For track and related assets, the Company uses the group method of depreciation under which a single depreciation rate is applied to the gross investment of each asset type. Under the group method, the service lives and salvage values for each group of assets are determined by completing periodic life studies and applying managements assumptions regarding the service lives of its properties. A life study is the periodic review of asset lives for group assets conducted and analyzed by the Companys management with the assistance of a third-party expert. The results of the life study process determine the service lives for each asset group under the group method.
5
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
There are several factors taken into account during the life study and they include statistical analysis of historical life, retirements and salvage data for each group of property, evaluation of current operations, review of the previous assessment of the condition of the assets and the outlook for their continued use, consideration of technological advances and maintenance schedules and comparison of asset groups to peer companies.
The Companys policy is to perform life studies every five years for road (e.g., bridges and signals) and track (e.g., rail, ties and ballast) assets. The Company completed life studies for road and track assets during the three months ended March 31, 2012. The life study indicated that the actual lives of certain road and track assets were different than the estimated useful lives used for depreciation purposes in the Companys financial statements. As a result, the Company changed its estimates of the useful lives of certain road and track assets to better reflect the estimated periods during which these assets will remain in service. The effect of this change in estimate during the nine months ended September 30, 2012 was to reduce depreciation expense by $5.2 million, decrease net loss by $3.2 million, and decrease basic and diluted loss per share by $0.06.
Changes in asset lives due to the results of the life studies are applied on a prospective basis and will impact future periods depreciation expense, and thus, the Companys results of operations.
New Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board (the FASB) issued Accounting Standards Update No. 2012-02, Testing IndefiniteLived Intangible Assets for Impairment (ASU No. 2012-02), which simplifies how an entity tests indefinitelived intangible assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendment permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, IntangiblesGoodwill and OtherGeneral Intangibles Other than Goodwill. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. Previous guidance in Subtopic 350-30 required an entity to test indefinite-lived intangible assets for impairment, on at least an annual basis, by comparing the fair value of the asset with its carrying amount. If the carrying amount of the intangible asset exceeds its fair value, an entity should recognize an impairment loss in the amount of that excess. In accordance with the amendments in ASU No. 2012-02, an entity will have an option not to calculate annually the fair value of an indefinite-lived intangible asset if the entity determines that it is more likely than not that the asset is not impaired. Permitting an entity to assess qualitative factors when testing indefinite-lived intangible assets for impairment results in guidance that is similar to the goodwill impairment testing guidance in Update 2011-08. The amendments in ASU No. 2012-02 are effective for interim and annual impairment tests performed for fiscal periods beginning after September 15, 2012. The Company does not expect that the adoption of the provisions of ASU No. 2012-02 will have a material impact on the Companys consolidated financial position or results of operations.
In June 2011, the FASB issued Accounting Standards Update No. 2011-05, Presentation of Comprehensive Income (ASU No. 2011-05), which improves the comparability, consistency, and transparency of financial reporting and increases the prominence of items reported in other comprehensive income (OCI) by eliminating the option to present components of OCI as part of the statement of changes in stockholders equity. The amendments in this standard require that all nonowner changes in stockholders equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Subsequently in December 2011, the FASB issued Accounting Standards Update No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income (ASU No. 2011-12), which indefinitely defers the requirement in ASU No. 2011-05 to present on the face of the financial statements reclassification adjustments for items that are reclassified from OCI to net income in the statement(s) where the components of net income and the components of OCI are presented. The amendments in these standards
6
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
do not change the items that must be reported in OCI, when an item of OCI must be reclassified to net income, or change the option for an entity to present components of OCI gross or net of the effect of income taxes. The amendments in ASU No. 2011-05 and ASU No. 2011-12 are effective for interim and annual periods beginning after December 15, 2011 and are to be applied retrospectively. Accordingly, this requirement became effective for the Company beginning with the first quarter 2012 10-Q filing. In accordance with the new guidance, RailAmerica has reported comprehensive income (loss) in a separate statement. The adoption of the provisions of ASU No. 2011-05 and ASU No. 2011-12 did not have a material impact on the Companys consolidated financial position or results of operations.
In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU No. 2011-04), which amends current guidance to result in common fair value measurement and disclosures between GAAP and International Financial Reporting Standards. The amendments explain how to measure fair value. They do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. ASU No. 2011-04 clarifies the application of certain existing fair value measurement guidance and expands the disclosures for fair value measurements that are estimated using significant unobservable inputs (Level 3 inputs). The amendments in ASU No. 2011-04 are effective for interim and annual periods beginning after December 15, 2011. The adoption of the provisions of ASU No. 2011-04 did not have a material impact on the Companys consolidated financial position or results of operations.
2. STOCK-BASED COMPENSATION
The Company has the ability to issue restricted shares and restricted share units (RSUs) under its incentive compensation plan. Effective February 2012, the Company began granting RSUs as a form of equity compensation in place of restricted shares to better align the interests of its employees with those of its shareholders. Restricted shares and RSUs granted to employees are scheduled to vest over three to five year periods. The grant date fair values of the restricted shares and RSUs are based upon the fair market value of the Company stock at the time of grant. Stock-based compensation cost is measured at the grant date based on the fair value of the award and is typically recognized as expense on a straight-line basis over the requisite service period, which is the vesting period. Stock-based compensation cost may be recognized over a shorter requisite service period if an employee meets certain eligibility requirements or if there is a change in control of the Company.
Stock-based compensation expense for the nine months ended September 30, 2012 and 2011 was $11.9 million and $7.4 million, respectively.
A summary of the status of restricted shares and RSUs as of September 30, 2012, and the changes during the nine months then ended and the weighted average grant date fair values are presented below:
Time Based | ||||||||
Balance at December 31, 2011 |
1,258,919 | $ | 12.97 | |||||
Granted |
793,742 | $ | 22.06 | |||||
Vested |
(801,114 | ) | $ | 12.83 | ||||
Cancelled |
(15,739 | ) | $ | 15.30 | ||||
|
|
|
|
|||||
Balance at September 30, 2012 |
1,235,808 | $ | 18.84 | |||||
|
|
|
|
The balance outstanding at September 30, 2012 includes 775,350 unvested RSUs at an average price of $22.14 per share.
7
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated by dividing net income (loss) attributable to the Company by the weighted average number of common shares outstanding for the period. The basic earnings (loss) per share calculation includes all vested and nonvested restricted shares as a result of their dividend participation rights. Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to the Company by the weighted average number of common shares outstanding for the period, including all potentially dilutive RSUs. RSUs are not considered in any diluted earnings per share calculation when the Company has a loss from continuing operations.
The following table presents a reconciliation of weighted average shares outstanding (in thousands):
For the Nine Months | ||||||||
Ended | ||||||||
September 30, | ||||||||
2012 | 2011 | |||||||
Basic average shares outstanding |
50,440 | 53,006 | ||||||
Add: non-vested RSUs assumed to be vested |
| | ||||||
|
|
|
|
|||||
Diluted average shares outstanding |
50,440 | 53,006 | ||||||
|
|
|
|
Approximately 0.1 million RSUs were excluded from the computation of diluted loss per share during the nine months ended September 30, 2012, as the effect would have been anti-dilutive.
4. ACQUISITIONS
Under the acquisition method of accounting, assets acquired and liabilities assumed are recorded at their estimated fair value. The fair value amounts recorded for the allocation of the purchase price, as described below, are preliminary and certain items are subject to change based upon final valuation analysis. Any changes to the initial estimates of the fair value of assets and liabilities will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill. Assuming these transactions had been made at the beginning of any period presented, the consolidated pro forma results would not be materially different from reported results.
On April 9, 2012, the Company acquired a 70% controlling interest in the Wellsboro and Corning Railroad (WCOR) and TransRail North America (TNA) from the Myles Group for approximately $18.0 million, subject to final adjustments for working capital. The Myles Group currently owns the remaining 30% of WCOR and TNA. WCOR operates 38 miles of track running from Wellsboro, PA to Corning, NY handling a variety of industrial products primarily used in the natural resources industry. TNA performs transload, storage, and other value-added services for customers in the energy and waste management industries through four transloading facilities located in Wellsboro, PA; Corning, NY; Toledo, OH; and Amelia, VA. The acquisition was funded by borrowing $18.0 million under the Companys revolving credit facility. The results of operations of WCOR and TNA have been included in the Companys consolidated financial statements since April 9, 2012, the acquisition date. For financial reporting purposes, the assets, liabilities and earnings of WCOR and TNA are consolidated into the Companys financial statements. The Myles Groups interest in WCOR and TNA has been recorded as noncontrolling interest in the Companys financial statements.
8
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following preliminary allocation of purchase price includes additional revisions to the initial preliminary allocation that was reported at June 30, 2012 (in thousands):
Cash |
$ | 5,274 | ||
Accounts receivable |
2,345 | |||
Other current assets |
21 | |||
|
|
|||
Total current assets |
7,640 | |||
Property, plant and equipment |
11,715 | |||
Goodwill |
3,563 | |||
Intangible assets |
18,080 | |||
|
|
|||
Total assets acquired |
40,998 | |||
Accounts payable |
(4,581 | ) | ||
Accrued expenses |
(670 | ) | ||
|
|
|||
Total current liabilities |
(5,251 | ) | ||
Other long-term liabilites |
(10,165 | ) | ||
|
|
|||
Total liabilities assumed |
(15,416 | ) | ||
|
|
|||
Noncontrolling interest |
(7,674 | ) | ||
|
|
|||
Purchase price |
$ | 17,908 | ||
|
|
Definite-lived intangible assets were assigned the following amounts and weighted average amortization periods (dollars in thousands):
Value Assigned |
Weighted Average Life (Years) |
|||||||
Customer relationships |
$ | 17,800 | 13 | |||||
Non-compete agreement |
$ | 280 | 2 |
On May 1, 2012, the Company acquired 100% of Marquette Rail LLC (Marquette) for $41.0 million, including final adjustments for working capital. Headquartered in Ludington, MI, Marquette operates 126 miles of track running from Grand Rapids, MI to Ludington and Manistee, MI. Marquette interchanges with CSXT in Grand Rapids and serves customers primarily in the chemical, pulp & paper, and non-metallics industries. Marquette hauled approximately fifteen-thousand carloads of freight during the fiscal year ended 2011. The acquisition was funded by borrowing $40.0 million under the Companys revolving credit facility. The results of operations of Marquette have been included in the Companys consolidated financial statements since May 1, 2012, the acquisition date.
9
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following preliminary allocation of purchase price includes additional revisions to the initial preliminary allocation that was reported at June 30, 2012 (in thousands):
Cash |
$ | 554 | ||
Account receivable |
1,266 | |||
Other current assets |
233 | |||
|
|
|||
Total current assets |
2,053 | |||
Property, plant and equipment |
2,643 | |||
Intangible assets |
22,100 | |||
Goodwill |
19,365 | |||
|
|
|||
Total assets acquired |
46,161 | |||
Accounts payable |
(5,134 | ) | ||
|
|
|||
Total liabilities assumed |
(5,134 | ) | ||
|
|
|||
Purchase price |
$ | 41,027 | ||
|
|
Definite-lived intangible assets were assigned the following amounts and weighted average amortization periods (dollars in thousands):
Value Assigned |
Weighted Average Life (Years) |
|||||||
Customer relationships |
$ | 12,400 | 15 | |||||
Above/below market leases |
$ | 9,700 | 14 |
Goodwill related to the acquisitions of WCOR / TNA and Marquette is deductible for income tax purposes and represents the excess of cost over the fair value of net tangible and identifiable intangible assets acquired. Factors that contributed to a purchase price resulting in the recognition of goodwill include WCOR / TNA and Marquettes strategic fit into the Companys railroad portfolio as well as synergies expected to be gained from the integration of these businesses into the Companys existing operations.
The Company believes that the estimated intangible asset values related to WCOR / TNA and Marquette, represent the fair value at the date of each acquisition and do not exceed the amount a third party would pay for the assets. The Company used the income approach, specifically the discounted cash flow method, to derive the fair value of the amortizable intangible assets. These fair value measurements are based on significant unobservable inputs, including management estimates and assumptions, and accordingly, are classified as Level 3 inputs within the fair value hierarchy prescribed by GAAP.
10
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company incurred approximately $0.6 million of acquisition costs in connection with the purchase of WCOR / TNA and Marquette during the nine months ended September 30, 2012, included in Purchased services expense on the Consolidated Statements of Operations.
On May 11, 2011, the Company acquired three short-line freight railroads in the state of Alabama for a total purchase price of $12.7 million. The acquisition was funded from existing cash on hand. The three railroads, known individually as the Three Notch Railroad (TNHR), the Wiregrass Central Railroad (WGCR), and the Conecuh Valley Railroad (COEH), comprise approximately 70 miles and primarily haul agricultural and chemical products. The railroads were acquired from affiliates of Gulf and Ohio Railways, Inc. The results of operations of the railroads have been included in the Companys consolidated financial statements since May 11, 2011, the acquisition date.
5. LONG-TERM DEBT
$740 Million 9.25% Senior Secured Notes
On June 23, 2009, the Company sold $740.0 million of 9.25% senior secured notes due July 1, 2017 in a private offering, for gross proceeds of $709.8 million after deducting the initial purchasers fees and the original issue discount. On December 3, 2009, the Company consummated an exchange offer of the privately placed senior secured notes for senior secured notes which had been registered under the Securities Act of 1933, as amended. The registered notes had terms that were substantially identical to the privately placed notes.
On each of November 16, 2009, June 24, 2010 and January 5, 2012, the Company redeemed $74.0 million aggregate principal amount of the notes at a cash redemption price of 103%, plus accrued interest thereon to, but not including, the redemption date. In connection with the early retirement of indebtedness in January 2012, the Company incurred charges of approximately $7.0 million pre-tax during the nine months ended September 30, 2012. Approximately $3.6 million of the charges were non-cash charges related to the notes and $1.2 million related to the write off of interest rate swap termination costs (see Note 7).
On March 1, 2012, the Company redeemed $444.0 million in aggregate principal amount of the notes via a cash tender offer with proceeds from the Companys $585 million term loan agreement. The total consideration paid for each $1,000 principal amount of notes redeemed was equal to $1,120. In connection with early retirement of the indebtedness, the Company incurred charges of approximately $75.4 million pre-tax during the nine months ended September 30, 2012. Approximately $21.1 million of the charges were non-cash.
On June 25, 2012, the Company redeemed the remaining $74.0 million aggregate principal amount of the notes at a cash redemption price of 103%, plus accrued interest thereon to, but not including, the redemption date. In connection with early retirement of the indebtedness, the Company incurred charges of approximately $5.7 million pre-tax during the nine months ended September 30, 2012. Approximately $3.3 million of the charges were non-cash.
$585 Million Term Loan Agreement
On March 1, 2012, the Company entered into a $585 million credit agreement (the Term Loan Agreement and such loan, the Term Loan) among us and our subsidiary RailAmerica Transportation Corp. (RATC, and together with us, the Borrowers), the lenders party thereto, Morgan Stanley Senior Funding, Inc., as administrative agent, and Morgan Stanley Senior Funding, Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc. and Bank of Montreal, as joint lead arrangers and joint bookrunners.
11
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Term Loan Agreement, among other things: (i) has a seven (7) year-term, with a maturity date of March 1, 2019, (ii) carries an interest rate, at the Borrowers option, at a rate per annum of either (a) LIBOR plus 3.0%, with a 1.0% LIBOR floor or (b) the Adjusted Base Rate plus 2.0% with a Base Rate floor of 2.0% (as such terms are defined in the Term Loan Agreement) and (iii) was issued at a price of 99.5% of par value.
The net proceeds of $582.0 million received from the Term Loan were used to repay $518.0 million of the Companys 9.25% senior secured notes, fees and expenses related to the Term Loan and for general corporate purposes. The Company incurred approximately $9.2 million of deferred financing costs related to the Term Loan, which are included in Other assets.
The Term Loan amortizes quarterly, commencing on June 30, 2012, in an amount equal to 0.25% of the initial principal amount of the Term Loan. Additional mandatory prepayments will be required based upon certain leverage ratios and a tiered percentage of Excess Cash Flow (as defined in the Term Loan Agreement) or upon the occurrence of certain events as more fully set forth in the Term Loan Agreement.
The Term Loan Agreement is fully and unconditionally guaranteed (the Guarantors and Guarantees, as the case may be) on a joint and several basis by certain existing and future direct and indirect subsidiaries of the Company. The Term Loan is secured on a pari passu basis with liens on: (a) stock and other equity interests owned by Borrowers and Guarantors, and (b) certain (i) real property, (ii) equipment and inventory, (iii) patents, trademarks and copyrights, (iv) general intangibles related to the foregoing, and (v) substantially all of the tangible personal property and intangible assets of the Company and Guarantors other than accounts receivable, deposit and security accounts, and general intangibles relating to the foregoing pledged pursuant to the Revolving Credit Agreement.
The Term Loan Agreement permits us to add one or more incremental term loan facilities in an aggregate amount of up to $150 million for all such facilities, subject to the Company satisfying certain conditions set forth in the Term Loan Agreement.
In connection with the sale of the Company to G&W on October 1, 2012, the Term Loan balance, including accrued interest of $583.9 million was repaid.
$100 Million Revolving Credit Facility
On August 29, 2011, the Company entered into a credit agreement (the Revolving Credit Facility) among the Company, RailAmerica and RATC (together, the Borrowers), the lenders party thereto from time to time, Citibank N.A., as administrative agent and collateral agent, and Citigroup Global Markets Inc., as sole lead arranger and sole bookrunner, that provides for a revolving line of credit to be used for working capital and general corporate purposes. On March 1, 2012, the Company entered into an amendment (Amendment No. 1) related to its Revolving Credit Facility. Amendment No. 1, among other things, increased the existing Revolving Credit Facility from $75 million to $100 million.
The Revolving Credit Facility has a five-year term, with a maturity date of August 29, 2016. Amounts available under the Revolving Credit Facility are available for immediate drawdown, subject to the applicable financial covenants and restrictions, certain of which are described below.
The loans under the Revolving Credit Facility bear interest, at the Borrowers option, at a rate per annum of either (a) the Eurodollar Rate plus 3.50% or (b) the Adjusted Base Rate plus 2.50%. In each instance, if certain financial covenants and restrictions are met by the Borrowers, the applicable margin shall be reduced by 0.25%. In connection with the Revolving Credit Facility, the Borrowers pay a commitment fee of 0.50% or 0.75% based on leverage ratios applied to the daily amount of unused commitments made available under the Revolving Credit Facility.
12
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Revolving Credit Facility is fully and unconditionally guaranteed (the Guarantors and Guarantees, as the case may be) on a joint and several basis by certain existing and future direct and indirect subsidiaries of the Company.
All amounts outstanding under the Revolving Credit Facility (and all obligations under the Guarantees) are secured on a pari passu basis with liens on: (a) stock and other equity interests owned by Borrowers and Guarantors, and (b) certain (i) real property, (ii) equipment and inventory, (iii) patents, trademarks and copyrights, (iv) general intangibles related to the foregoing, and (v) substantially all of the tangible personal property and intangible assets of the Borrowers and Guarantors. Further, all amounts outstanding under the Revolving Credit Facility (and all obligations under the Guarantees) are secured on a first priority basis with liens on accounts receivable, deposit and security accounts, and general intangibles relating to the foregoing.
In connection with the sale of the Company to G&W on October 1, 2012, the Revolving Credit Facility balance, including accrued interest and fees of $75.3 million was repaid.
Covenants to Term Loan and Revolving Credit Facility
The Term Loan Agreement and Revolving Credit Facility include customary affirmative and negative covenants, including, among other things, restrictions on (i) the incurrence of indebtedness and liens, (ii) mergers, acquisitions and asset sales, (iii) investments and loans, (iv) dividends and other payments with respect to capital stock, (v) redemption and repurchase of capital stock, (vi) payments and modifications of other debt (including the notes), (vii) affiliate transactions, (viii) altering our business, (ix) engaging in sale-leaseback transactions and (x) entering into agreements that restrict our ability to create liens or repay loans or issue capital stock. In addition, the Company is subject to a minimum coverage ratio of Consolidated Senior Secured Net Debt to Adjusted EBITDA (which for purposes of the minimum coverage ratio will exclude the tax credits available under Section 45G of the Internal Revenue Code) beginning at 5.0 to 1.0 in the third quarter 2011 and gradually reducing to 3.25 to 1.0 beginning in the first quarter of 2016, in all cases on a pro forma basis.
The covenants are subject to important exceptions and qualifications described below:
The Company may, among other things, incur certain indebtedness that (a) provides for a maturity date of no less than 91 days after the latest applicable maturity date, (b) does not provide for any mandatory redemption or prepayment and (c) on a pro forma basis, the fixed charge coverage ratio, defined as the ratio of Adjusted EBITDA to the sum of Consolidated Interest Expense and all cash dividend payments, for the most recently ended four full fiscal quarters would be at least 2.00 to 1.00 or such ratio is greater following the transaction; purchase money indebtedness or capital lease obligations not to exceed the greater of (i) $80 million and (ii) 5.0% of total assets; indebtedness of foreign subsidiaries not to exceed the greater of (i) $25 million and (ii) 15% of total assets of foreign subsidiaries; acquired debt so long as our fixed charge coverage ratio for the most recently ended four full fiscal quarters would be at least 2.00 to 1.00 or such ratio is greater following the transaction; and up to $100 million (limited to $50 million for restricted subsidiaries) of indebtedness, disqualified stock or preferred stock, subject to increase from the proceeds of certain equity.
13
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
6. DERIVATIVE FINANCIAL INSTRUMENTS
On February 14, 2007, the Company entered into an interest rate swap with a termination date of February 15, 2014. The total notional amount of the swap started at $425 million for the period from February 14, 2007 through November 14, 2007, increased to a total notional amount of $525 million for the period from November 15, 2007 through November 14, 2008, and ultimately increased to $625 million for the period from November 15, 2008 through February 15, 2014. Under the terms of the interest rate swap, the Company was required to pay a fixed interest rate of 4.9485% on the notional amount while receiving a variable interest rate equal to the 90 day LIBOR. This swap qualified, was designated and was accounted for as a cash flow hedge. This interest rate swap agreement was terminated in June 2009, in connection with the repayment of the bridge credit facility, and thus had no fair value at September 30, 2012 or December 31, 2011. The fair value balance of the swap at termination remains in accumulated other comprehensive loss, net of tax, and is amortized to interest expense over the remaining life of the original swap (through February 14, 2014).
Interest expense for the nine months ended September 30, 2012 and 2011, included $4.2 million and $9.6 million of amortization expense related to the terminated swap, respectively. As a result of the $74.0 million redemption of the notes during January 2012, an additional $1.2 million of unamortized expense was recognized in other (loss) income. This was the result of the face value of outstanding senior secured notes dropping below the notional amount of the swap. As of September 30, 2012, accumulated other comprehensive income included $2.3 million, net of tax, of unamortized loss relating to the terminated swap.
7. COMMON STOCK TRANSACTIONS
During the nine months ended September 30, 2012 and 2011, the Company accepted 178,823 and 186,304 shares in lieu of cash payments by employees for minimum statutory payroll tax withholdings relating to stock based compensation.
Stock Repurchase Program
On February 23, 2011, the Company announced that its Board of Directors had approved a $50 million stock repurchase program. Under the program, the Company was authorized to repurchase up to $50 million of its outstanding shares of common stock from time to time at prevailing prices in the open market or in privately negotiated transactions. The timing and actual number of shares repurchased depended on a variety of factors including the price and availability of the Companys shares, trading volume and general market conditions. The Company completed this stock repurchase program on April 18, 2011, repurchasing a total of 3,036,769 shares at a weighted average price of $16.46 per share.
On August 30, 2011, the Company announced that its Board of Directors had approved a $25 million stock repurchase program. Under the program, the Company is authorized to repurchase up to $25 million of its outstanding shares of common stock from time to time at prevailing prices in the open market or in privately negotiated transactions. The timing and actual number of shares repurchased depends on a variety of factors including the price and availability of the Companys shares, trading volume and general market conditions. During the nine months ended September 30, 2012, the Company repurchased a total of 34,847 shares at a weighted average price of $14.92 per share related to the August 30, 2011 repurchase program. The Company had $4.0 million remaining for the repurchase of outstanding shares, under this program, as of September 30, 2012.
14
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. TRACK MAINTENANCE AGREEMENT
In the first quarter of 2011, the Company entered into a track maintenance agreement with an unrelated third-party customer (Shipper). Under the agreement, the Shipper paid for qualified railroad track maintenance expenditures during 2011 in exchange for the assignment of railroad track miles which permitted the Shipper to claim certain tax credits pursuant to Section 45G of the Internal Revenue Code. For the nine months ended September 30, 2011, the Shipper paid for $13.4 million of maintenance expenditures and $4.1 million of capital expenditures during the nine months ended September 30, 2011. The Company incurred $0.4 million of consulting fees related to the agreement during the nine months ended September 30, 2011.
9. INCOME TAX PROVISION
The effective tax rate for the nine months ended September 30, 2012 and 2011 from continuing operations was a benefit of 26.1% and a provision of 28.8%, respectively. The effective tax rate is affected by recurring items such as tax rates in foreign jurisdictions and the relative amount of income earned in jurisdictions. It is also affected by discrete items that may occur in any given quarter, but are not consistent from quarter to quarter. The effective tax rate for the nine months ended September 30, 2012 was adversely impacted by non-deductible professional fees related to the sale of the Company ($2.9 million) and an adjustment to the deferred tax balances resulting from a change in tax law ($0.5 million), partially offset by the reduction of tax reserves due to the lapse of the statute of limitations ($0.5 million). The effective tax rate for the nine months ended September 30, 2011 was favorably impacted by an adjustment to the deferred tax balances resulting from a change in tax law ($1.6 million) and the reduction of tax reserves due to the lapse of the statute of limitations ($0.3 million).
A reconciliation of the beginning and ending amount of unrecognized tax positions is as follows (in thousands):
Balance at January 1, 2012 |
$ | 4,691 | ||
Additions for tax positions of prior years |
| |||
Reductions for tax positions of prior years |
(38 | ) | ||
Lapse of statute of limitations |
(398 | ) | ||
|
|
|||
Balance at September 30, 2012 |
$ | 4,255 | ||
|
|
10. ACCUMULATED OTHER COMPREHENSIVE INCOME
At September 30, 2012, accumulated other comprehensive income consisted of the following (in thousands):
Foreign Currency Translation Adjustments |
Interest Rate Swap Derivatives |
Pension and Postretirement Benefit Plans |
Accumulated Other Comprehensive Income |
|||||||||||||
Balance at January 1, 2012 |
$ | 11,533 | $ | (5,609 | ) | $ | (1,918 | ) | $ | 4,006 | ||||||
Current period other comprehensive income (loss) |
4,193 | 3,289 | (573 | ) | 6,909 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Balance at September 30, 2012 |
$ | 15,726 | $ | (2,320 | ) | $ | (2,491 | ) | $ | 10,915 | ||||||
|
|
|
|
|
|
|
|
The foreign currency translation adjustments for the nine months ended September 30, 2012 related primarily to the Companys operations with a functional currency in Canadian dollars.
15
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. PENSION DISCLOSURES
Components of the net periodic pension and benefit cost for the nine months ended September 30, 2012 and 2011 were as follows (in thousands):
Pension Benefits | ||||||||
For the Nine Months | ||||||||
Ended September 30, | ||||||||
2012 | 2011 | |||||||
Service cost |
$ | 173 | $ | 164 | ||||
Interest cost |
502 | 485 | ||||||
Expected return on plan assets |
(694 | ) | (530 | ) | ||||
Amortization of net actuarial loss |
459 | 101 | ||||||
Amortization of prior service costs |
18 | 18 | ||||||
|
|
|
|
|||||
Net cost recognized |
$ | 458 | $ | 238 | ||||
|
|
|
|
|||||
Health and Welfare Benefits | ||||||||
For the Nine Months | ||||||||
Ended September 30, | ||||||||
2012 | 2011 | |||||||
Service cost |
$ | 24 | $ | 29 | ||||
Interest cost |
99 | 90 | ||||||
Amortization of net actuarial gain |
| (62 | ) | |||||
|
|
|
|
|||||
Net cost recognized |
$ | 123 | $ | 57 | ||||
|
|
|
|
12. COMMITMENTS AND CONTINGENCIES
In the ordinary course of conducting its business, the Company becomes involved in various legal actions and other claims. Litigation is subject to many uncertainties, the outcome of individual litigated matters is not predictable with assurance, and it is reasonably possible that some of these matters may be decided unfavorably to the Company. It is the opinion of management that the ultimate liability, if any, with respect to these matters will not have a material adverse effect on the Companys financial position, results of operations or cash flows. Settlement costs associated with litigation are included in Casualties and insurance on the Consolidated Statements of Operations.
The Companys operations are subject to extensive environmental regulation. The Company records liabilities for remediation and restoration costs related to past activities when the Companys obligation is probable and the costs can be reasonably estimated. Costs of ongoing compliance activities to current operations are expensed as incurred. The Companys recorded liabilities for these issues represent its best estimate (on an undiscounted basis) of remediation and restoration costs that may be required to comply with present laws and regulations. It is the opinion of management that the ultimate liability, if any, with respect to these matters will not have a material adverse effect on the Companys financial position, results of operations or cash flows.
16
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company is subject to claims for employee work-related and third-party injuries. Work-related injuries for employees are primarily subject to the Federal Employers Liability Act. The Company retains an independent actuarial firm to assist management in assessing the value of personal injury claims and cases. An analysis has been performed by an independent actuarial firm and reviewed by management. The methodology used by the actuary includes a development factor to reflect growth or reduction in the value of these personal injury claims. It is based largely on the Companys historical claims and settlement experience. Actual results may vary from estimates due to the type and severity of the injury, costs of medical treatments and uncertainties in litigation.
On August 28, 2005, a railcar containing styrene located on the Companys Indiana & Ohio Railway (IORY) property in Cincinnati, Ohio, began venting, due to a chemical reaction. Styrene is a potentially hazardous chemical used to make plastics, rubber and resin. Because of the chemical release, the U.S. Environmental Protection Agency (U.S. EPA) investigated whether criminal negligence contributed to the incident, and whether charges should be pressed. The statute of limitations was extended by a tolling agreement as to the IORY only (the Company had been dropped from this violation) through February 27, 2011. The U.S. EPA attorneys decided not to press charges and allowed the statute of limitations to lapse resolving this matter. As a result, the Company released approximately $1.2 million previously accrued for this incident, in Casualties and insurance on the Consolidated Statements of Operations, in February 2011.
Government Grants
In August 2010, the Companys New England Central Railroad (NECR) was awarded a federal government grant of $50 million through the State of Vermont to improve and upgrade the track on its property. As part of the agreement, the NECR has committed to contribute up to approximately $19.0 million of capital funds and materials to the project. In September 2011, the grant agreement was amended and NECR was awarded an additional $2.7 million to extend and improve its centralized traffic control system, upgrade communications systems, improve culverts and ditching, and provide passenger bussing in lieu of Amtrak service. The amendment did not require any additional monetary commitment by the NECR. The project is expected to be completed by the end of 2012.
In May 2012, the Companys Kyle Railroad (KYLE) was awarded a government grant of $8.2 million through the State of Kansas to improve the track on its property. The grant agreement provides for the replacement of 50,400 ties over 84 miles of track. As part of the agreement, the KYLE will commit to contribute up to approximately $1.2 million of capital funds. The project is expected to be completed by April 30, 2013.
The Company accounts for proceeds from government grants as reductions to expense for expenditures that are expensed or as contra-assets within property, plant and equipment which are amortized over the life of the related asset for expenditures that are capitalized.
13. RELATED PARTY TRANSACTIONS
Investment funds managed by Fortress Investment Group LLC (Fortress) own a majority of the Companys stock. As of January 1, 2009, the Company was party to five short-term operating lease agreements with Florida East Coast Railway LLC, (FECR) an entity also owned by investment funds managed by affiliates of Fortress. During 2009, the Company entered into five additional lease agreements with the same entity. All but one of these agreements relate to the leasing of locomotives between the companies for ordinary business operations, which are based on current market rates for similar assets. During 2010, these locomotive lease agreements were combined into one master lease agreement. During the nine months ended September 30, 2012 and 2011, on a net basis the Company paid FECR $0.2 million and $2.0 million, respectively. During the three months ended September 30, 2011, the Company purchased 26 of the previously leased locomotives, discussed above, for a total purchase price of $4.5 million, based on current market values. Subsequent to this transaction, the Company continues to lease six locomotives from FECR, which have been consolidated under one master lease agreement.
17
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The remaining lease relates to the sub-leasing of office space by FECR to the Company. During the nine months ended September 30, 2012 and 2011, FECR billed the Company $0.8 million and $0.8 million, respectively, under the sub-lease agreement. As of September 30, 2012, the Company had no amounts due to FECR under these lease agreements.
Effective January 1, 2010, the Company entered into a Shared Services Agreement with FECR and its affiliates which provided for services to be provided from time to time by certain of our senior executives and other employees and for certain reciprocal administrative services, including finance, accounting, human resources, purchasing and legal. The agreements are generally consistent with arms-length arrangements with third parties providing similar services. The agreement was cancelled in 2011. As of September 30, 2012, there were no amounts due to or from FECR under this agreement.
In October 2009, certain of the Companys executives entered into consulting agreements with FECR. Under the terms of these agreements, the executives are to provide assistance to FECR with strategic initiatives designed to grow FECRs revenue and enhance the value of the franchise. Consideration for the executives performance is in the form of restricted stock units of FECR common stock that will vest 25% over four years. Since the consulting agreements are with a related-party, the Company is required to recognize compensation expense over the vesting period in labor and benefits expense with a corresponding credit in other income (loss) for management fee income. During the nine months ended September 30, 2012 and 2011, the Company recognized $0.8 million and $0.6 million of compensation expense and $0.8 million and $0.6 million of management fee income related to these consulting agreements, respectively. No additional compensation expense will be recognized subsequent to September 30, 2012 as the fourth tranche of these restricted stock units was cancelled in connection with the sale of the Company to G&W.
In October 2009, certain of the Companys executives entered into consulting agreements with Florida East Coast Industries, Inc., (FECI) an entity also owned by investment funds managed by affiliates of Fortress. Under the terms of these agreements, the executives are to provide assistance to FECI with strategic initiatives designed to enhance the value of FECIs rail-related assets. Consideration for the executives performance is in the form of restricted stock units of FECI common stock that vest 50%, 25%, and 25% over three years. Since the consulting agreements are with a related party, the Company is required to recognize compensation expense over the vesting period in labor and benefits expense with a corresponding credit in other income (loss) for management fee income. During the nine months ended September 30, 2012 and 2011, the Company recognized $0.3 million and $0.9 million of compensation expense and $0.3 million and $0.9 million of management fee income related to these consulting agreements, respectively.
Effective June 1, 2011, the Companys wholly-owned subsidiary, Atlas Railroad Construction Company (Atlas), entered into an agreement to provide engineering and construction services to the FECR for a Port of Miami Project. During the nine months ended September 30, 2012, Atlas had recorded revenues of $2.3 million and received payments totaling $7.8 million related to this project. As of September 30, 2012, Atlas had a receivable of $0.4 million related to this project. During the nine months ended September 30, 2011, Atlas had recorded revenues of $0.6 million and received payments totaling $0.2 million related to this project.
Subsequent to October 1, 2012, FECR and FECI are no longer considered a related party of the Company due to the acquisition of the Company by G&W.
18
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
14. IMPAIRMENT OF ASSETS
During the second quarter of 2011 the Company evaluated its locomotive usage and determined that certain of its surplus locomotives were not expected to be placed back into service. As a result of this determination, the Company engaged a locomotive and railcar market advisor to assist management in evaluating the market value of the identified locomotives based on recent sales and current market conditions. The evaluation resulted in the Company recording an impairment of $3.2 million ($2.0 million after tax, $0.04 per share), in accordance with ASC 360, Property, Plant, and Equipment.
During the three months ended September 30, 2011, the Company recorded an additional impairment of $1.9 million ($1.2 million after tax, $0.02 per share), based on a tentative sale agreement for a significant number of indentified locomotives and further evaluation of the market value for the remaining surplus units.
19
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Unless the context otherwise requires, when used in this Exhibit 99.2, the terms Genesee & Wyoming, G&W and the Company refer to Genesee & Wyoming Inc. and its subsidiaries. All references to currency amounts included in this Exhibit 99.2, including the statement of operations are in United States dollars unless specifically noted otherwise.
The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 is based upon Genesee & Wyomings historical consolidated statement of operations for the year ended December 31, 2012 and RailAmerica, Inc.s (RailAmerica) historical consolidated statements of operations for the nine months ended September 30, 2012 (pre-acquisition) and the period from October 1, 2012 (date of G&Ws acquisition of RailAmerica) to December 28, 2012 (the effective date of G&Ws control of RailAmerica as described below), as if G&Ws acquisition, control of and related financing of RailAmerica were consummated as of January 1, 2012. G&W considers the RailAmerica financial statements for the period ended December 28, 2012 to be representative of and materially consistent with RailAmericas financial statements for the three months ended December 31, 2012 and therefore are presented inclusive to December 31, 2012.
The unaudited pro forma condensed combined statement of operations should be read in conjunction with (1) the accompanying notes to the unaudited pro forma condensed combined statement of operations, (2) Genesee & Wyomings audited consolidated financial statements and related notes included in Genesee & Wyomings Annual Report on Form 10-K for the year ended December 31, 2012 (the G&W 2012 10-K) previously filed with the Securities and Exchange Commission (SEC), (3) the audited consolidated statement of operations and related notes of RailAmerica for the period from October 1, 2012 to December 28, 2012 included in the G&W 2012 10-K previously filed with the SEC and (4) the unaudited consolidated financial statements of RailAmerica for the nine months ended September 30, 2012 and 2011 included in this Current Report on Form 8-K.
Immediately following Genesee & Wyomings acquisition of RailAmerica on October 1, 2012, the shares of RailAmerica were held in a voting trust while the United States Surface Transportation Board (STB) considered Genesee & Wyomings control application, which application was approved with an effective date of December 28, 2012. Genesee & Wyoming accounted for the earnings of RailAmerica using the equity method of accounting while the shares were held in trust. Between October 1, 2012 and December 28, 2012, Genesee & Wyoming recognized income from its equity investment in RailAmerica of $15.6 million. In accordance with U.S. GAAP, a new accounting basis was established for RailAmerica on October 1, 2012 for its stand-alone financial statements. Upon approval of the STB to control RailAmerica, the preliminary allocation of fair value to the acquisition assets and assumed liabilities were consolidated with Genesee & Wyomings assets and liabilities as of December 28, 2012.
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 is based on preliminary estimates and assumptions of the fair values of the assets acquired and liabilities assumed, which, while considered reasonable under the circumstances, are subject to changes which may be material. The final allocation of fair value to RailAmericas assets and liabilities is subject primarily to completion of an assessment of the acquisition-date fair values of acquired non-current assets, deferred taxes and other tax matters, and contingent liabilities. The pro forma adjustments are described in the accompanying footnotes. The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations have been limited to only those adjustments that are: directly attributable to the transaction, factually supportable and expected to have a continuing impact on Genesee & Wyomings financial results.
In addition, the pro forma condensed combined statement of operations for the year ended December 31, 2012 does not include the impact of any potential operating efficiencies, savings from expected synergies, costs to integrate the operations or costs necessary to achieve savings from expected synergies or the impact of derivative instruments that Genesee & Wyoming has entered into or may enter into to mitigate interest rate or currency exchange rate risk. The unaudited pro forma condensed combined statement of operations is for information purposes only and is not necessarily an indication of the results of operations of Genesee & Wyoming that would have been achieved had the acquisition and control of RailAmerica and the related financing thereof been completed as of January 1, 2012 or that may be achieved in the future.
Genesee & Wyoming Inc.
Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2012
(dollars in thousands, except per share amounts)
(unaudited)
RailAmerica | ||||||||||||||||||||||||||||
For the Period | ||||||||||||||||||||||||||||
from | ||||||||||||||||||||||||||||
G&W | RailAmerica | October 1, | ||||||||||||||||||||||||||
For the Year | For the Nine | 2012 | ||||||||||||||||||||||||||
Ended | Months Ended | (Acquisition) to | Acquisition/ | |||||||||||||||||||||||||
December 31, | September 30, | December 28, | Financing | |||||||||||||||||||||||||
2012 | 2012 | 2012 | Adjustments | Combined | Adjustments | Pro Forma | ||||||||||||||||||||||
OPERATING REVENUES |
$ | 874,916 | $ | 454,956 | $ | 151,065 | $ | | $ | 1,480,937 | $ | (16,697 | ) b. | $ | 1,464,240 | |||||||||||||
OPERATING EXPENSES |
684,594 | 367,157 | 124,928 | | 1,176,679 | (54,978 | ) c. | 1,121,701 | ||||||||||||||||||||
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INCOME FROM OPERATIONS |
190,322 | 87,799 | 26,137 | | 304,258 | 38,281 | 342,539 | |||||||||||||||||||||
Interest income |
3,725 | 48 | 18 | | 3,791 | | 3,791 | |||||||||||||||||||||
Interest expense |
(62,845 | ) | (32,490 | ) | (108 | ) | | (95,443 | ) | 13,053 | d. | (82,390 | ) | |||||||||||||||
Contingent forward sale contract mark-to-market expense |
(50,106 | ) | | | | (50,106 | ) | 50,106 | e. | | ||||||||||||||||||
Other income/(expense), net |
2,300 | (86,992 | ) | 9 | | (84,683 | ) | | (84,683 | ) | ||||||||||||||||||
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Income/(loss) from continuing operations before income taxes and income from equity investment |
83,396 | (31,635 | ) | 26,056 | | 77,817 | 101,440 | 179,257 | ||||||||||||||||||||
(Provision for)/benefit from income taxes |
(46,402 | ) | 8,271 | (10,250 | ) | | (48,381 | ) | (15,664 | ) f. | (64,045 | ) | ||||||||||||||||
Income from equity investment, net |
15,557 | | | (15,557 | ) a. | | | | ||||||||||||||||||||
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Income/(loss) from continuing operations, net of taxes |
52,551 | (23,364 | ) | 15,806 | (15,557 | ) | 29,436 | 85,776 | 115,212 | |||||||||||||||||||
Less: Net loss attributable to noncontrolling interest |
| (489 | ) | | | (489 | ) | | (489 | ) | ||||||||||||||||||
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Income/(loss) from continuing operations attributable to GWI, net of taxes |
52,551 | (22,875 | ) | 15,806 | (15,557 | ) | 29,925 | 85,776 | 115,701 | |||||||||||||||||||
Series A-1 Preferred Stock dividend |
4,375 | | | 4,375 | 13,125 | g. | 17,500 | |||||||||||||||||||||
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Income/(loss) available to common stockholders |
$ | 48,176 | $ | (22,875 | ) | $ | 15,806 | $ | (15,557 | ) | $ | 25,550 | $ | 72,651 | $ | 98,201 | ||||||||||||
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Basic earnings per common share from continuing operations |
$ | 1.13 | $ | 2.06 | ||||||||||||||||||||||||
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Weighted average sharesBasic |
42,693 | 4,896 | h. | 47,589 | ||||||||||||||||||||||||
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Diluted earnings per common sharefrom continuing operations |
$ | 1.02 | $ | 1.96 | ||||||||||||||||||||||||
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Weighted average sharesDiluted |
51,316 | (1,088 | ) h. | 50,228 | ||||||||||||||||||||||||
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The accompanying notes are an integral part of this pro forma condensed combined financial information.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
1. BASIS OF PRESENTATION:
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 is based upon Genesee & Wyomings historical consolidated statement of operations for the year ended December 31, 2012 and RailAmericas historical consolidated statements of operations for the nine months ended September 30, 2012 and the period from October 1, 2012 to December 28, 2012, as if Genesee & Wyomings acquisition and control of RailAmerica and related financing had been consummated as of January 1, 2012. The Company considers the RailAmerica financial statements for the period ended December 28, 2012 to be representative of and materially consistent with RailAmericas financial statements for the three months ended December 31, 2012 and therefore are presented inclusive to December 31, 2012.
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 is based on preliminary estimates and assumptions of the fair values of the assets acquired and liabilities assumed, which, while considered reasonable under the circumstances, are subject to changes which may be material. The final allocation of fair value to RailAmericas assets and liabilities is primarily subject to completion of an assessment of the acquisition-date fair values of acquired non-current assets, deferred taxes and other tax matters, and contingent liabilities. The pro forma adjustments are described in these footnotes. The pro forma adjustments included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 have been limited to only those adjustments that are: directly attributable to the transaction, factually supportable and expected to have a continuing impact on Genesee & Wyomings financial results. In addition, the pro forma condensed combined statement of operations for the year ended December 31, 2012 does not include the impact of any potential operating efficiencies, savings from expected synergies, costs to integrate the operations or costs necessary to achieve savings from expected synergies or the impact of derivative instruments that Genesee & Wyoming has entered into or may enter into to mitigate interest rate or currency exchange rate risk.
The unaudited pro forma condensed combined statement of operations should be read in conjunction with (1) these notes to the unaudited pro forma condensed combined statement of operations, (2) Genesee & Wyomings audited consolidated financial statements and related notes included in the G&W 2012 10-K, (3) the audited consolidated financial statements and related notes of RailAmerica for the period from October 1, 2012 to December 28, 2012 included in the G&W 2012 10-K and (4) the unaudited consolidated financial statements of RailAmerica for the nine months ended September 30, 2012 and 2011 included in this Current Report on Form 8-K.
2. ACQUISITION AND RELATED FINANCING
On October 1, 2012, the Company acquired 100% of RailAmericas outstanding shares for cash at a price of $27.50 per share and, in connection with such acquisition, the Company repaid RailAmericas term loan and revolving credit facility. The calculation of the total consideration for the RailAmerica acquisition is presented below (dollars in thousands, except share and per share amounts):
RailAmerica outstanding shares acquired |
49,933,964 | |||
Cash purchase price per share |
$ | 27.50 | ||
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1,373,184 | ||||
Payment of RailAmericas outstanding debt |
659,198 | |||
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Cash consideration |
2,032,382 | |||
Impact of pre-acquisition share-based awards |
9,400 | |||
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Total consideration |
$ | 2,041,782 | ||
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The Company financed the $1.4 billion cash purchase price for RailAmericas common stock, the refinancing of $1.2 billion of the Companys and RailAmericas outstanding debt prior to the acquisition, as well as transaction and financing related expenses with approximately $1.9 billion of debt from a new five-year Senior Secured Syndicated Facility (the New Credit Agreement), $475.5 million of gross proceeds from the Companys public offerings of Class A Common Stock and Tangible Equity Units (TEUs) completed in September 2012 and $350.0 million through a private issuance of mandatorily convertible preferred stock (the Series A-1 Preferred Stock) to affiliates of Carlyle Partners V, L.P. (collectively, Carlyle) pursuant to an investment agreement (the Investment Agreement).
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
3. PRO FORMA ADJUSTMENTS:
The RailAmerica columns reflect RailAmericas actual consolidated statements of operations for the nine months ended September 30, 2012 (pre-acquisition) and for the period from October 1, 2012 (date of acquisition) to December 28, 2012. RailAmericas other (expense)/income, net for the nine months ended September 30, 2012 included $88.1 million ($55 million after - tax) of costs associated with the redemption of $592.0 million of its 9.25% senior secured notes in January 2012 that represent nonrecurring expenses but do not qualify for exclusion from the pro forma results under Article 11 of Regulation S-X of the Securities Exchange Act of 1934, as amended.
Adjustments
a. | Represents the elimination of the Companys net income from its equity investment in RailAmerica of $15.6 million ($15.8 million of net income reported by RailAmerica less $0.2 million to eliminate the activity between RailAmerica and G&W) for the period October 1, 2012 to December 28, 2012. |
Acquisition/Financing Adjustments
b. | Represents the following components: |
| The reduction of $8.7 million in RailAmerica freight revenues for the twelve months ended December 31, 2012 (with an offsetting reduction in operating expenses see note c. below) to conform to G&Ws financial presentation. |
| The elimination of $8.0 million in non-freight revenues earned during the year ended December 31, 2012 (see note c. below for the elimination of the related expense) by a subsidiary of RailAmerica for work performed for various subsidiaries of the Company. |
c. | Represents the following components: |
| The elimination of $27.8 million of acquisition-related expenses and costs related to change of control agreements associated with the acquisition incurred by the Company during the year ended December 31, 2012. |
| The elimination of $20.4 million of acquisition-related expenses incurred by RailAmerica during the year ended December 31, 2012. |
| The estimated increase of $8.9 million in depreciation and amortization expense from the amount recorded in RailAmericas historical financial statements through September 30, 2012 in order to reflect the total estimated depreciation and amortization expense for the year ended December 31, 2012 of approximately $56 million related to the estimated preliminary fair value of property and equipment and identifiable intangible assets acquired, which are expected to have estimated useful lives of 5 50 years. |
| The reduction of $8.7 million in operating expenses to conform to G&Ws financial presentation (see b. above). |
| The elimination of $7.0 million in expenses incurred during the year ended December 31, 2012 by a subsidiary of RailAmerica associated with work performed for various subsidiaries of the Company (see b. above). |
d. | Represents the following components: |
| The elimination of $31.9 million of RailAmericas interest expense due to the extinguishment of RailAmericas term loan and revolving credit facility upon consummation of the acquisition. |
| The net increase of $28.0 million in the Companys interest expense estimated under the New Credit Agreement. The interest rates used were based on the rates applicable to the New Credit Agreement as of October 1, 2012 (the date the Company entered into the New Credit Agreement). A 1/8% variance in the variable interest rates would change the pro forma income available to common stockholders by approximately $1.1 million, assuming no impact from derivative instruments. |
| The elimination of $12.6 million in interest expense for a make-whole payment incurred by the Company due to the redemption of its Series B Senior Notes on October 1, 2012. |
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
| The elimination of $3.2 million in interest expense for the write-off of deferred financing fees in connection with the Companys refinancing of its outstanding debt on October 1, 2012. |
| The net increase of $5.6 million in amortization of debt issuance costs associated with the New Credit Agreement and the TEUs. |
| $1.1 million in interest expense associated with the TEUs. |
e. | The elimination of a $50.1 million non-cash mark-to-market expense on the contingent forward sale contract incurred by the Company for the period between July 23, 2012 and September 30, 2012 related to the Investment Agreement for the Series A-1 Preferred Stock. The expense resulted from the significant increase in the Companys share price between July 23, 2012 (the date the Company entered into the Investment Agreement) and September 28, 2012 (the last trading date prior to issuing the Series A-1 Preferred Stock). |
f. | Of the $101.4 million acquisition/financing pro forma adjustments, the $50.1 million mark-to-market expense and approximately $9 million of acquisition-related expenses are non-deductible for tax purposes. The remaining pro forma adjustments listed above were calculated using a 37% statutory tax rate. |
g. | Represents accrued preferred stock dividends for the nine months ended September 30, 2012 for the Series A-1 Preferred Stock. No adjustment is needed for preferred stock dividends for the three months ended December 31, 2012 as they were recorded in G&Ws audited consolidated statement of operations for the year ended December 31, 2012. |
As the closing price of the Companys Class A Common Stock exceeded $76.03 for 30 consecutive trading days as of February 12, 2013, the Company converted all of the outstanding Series A-1 Preferred Stock into 5,984,232 shares of the Companys Class A Common Stock on February 13, 2013. On the conversion date, the Company paid to Carlyle cash in lieu of fractional shares and all accrued and unpaid dividends to such date on the Series A-1 Preferred Stock totaling $2.1 million.
h. | Includes 2.7 million and 2.2 million of additional basic and diluted weighted average shares from the Companys public offerings of Class A Common Stock and TEUs to finance the acquisition, respectively, assuming the offerings occurred on January 1, 2012. The diluted weighted average shares include a reduction of 6.0 million shares as a result of the anti-dilutive effect of the Series A-1 Preferred Stock on the pro forma diluted earnings per share (EPS) calculation. |
For basic EPS, the Company deducted the cumulative dividends on the Series A-1 Preferred Stock in calculating income available to common stockholders (i.e., the numerator in the calculation of basic EPS) and divided the income available to common stockholders by the weighted-average number of common shares outstanding during the period.
For diluted EPS, the Company used the if-converted method prescribed under U.S. GAAP in calculating the diluted impact of the Series A-1 Preferred Stock. In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. Convertible preferred stock is anti-dilutive whenever the amount of the dividend declared in or accumulated for the current period per common share obtainable on conversion exceeds basic EPS.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
4. ADDITIONAL FREIGHT REVENUES AND CARLOAD INFORMATION:
The following provides additional information with regard to G&W and RailAmerica pro forma freight revenues and carloads by commodity for the year ended December 31, 2012. Such information for both G&W and RailAmerica has been reclassified to reflect G&Ws commodity classifications effective January 1, 2013. (See also notes 3b and 3c).
Pro Forma Q1 2012 | Pro Forma Q2 2012 | |||||||||||||||||||||||
Commodity Group | Freight Revenues | Carloads | Avg Freight Revenues Per Carload |
Freight Revenues |
Carloads | Avg Freight Revenues Per Carload |
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Agricultural Products |
$ | 35,666 | 64,237 | $ | 555 | $ | 36,393 | 63,819 | $ | 570 | ||||||||||||||
Chemicals & Plastics |
30,261 | 39,513 | 766 | 29,613 | 39,382 | 752 | ||||||||||||||||||
Metals |
30,403 | 46,448 | 655 | 28,480 | 42,740 | 666 | ||||||||||||||||||
Pulp & Paper |
25,049 | 38,800 | 646 | 25,267 | 38,383 | 658 | ||||||||||||||||||
Coal & Coke |
23,603 | 72,594 | 325 | 24,177 | 72,513 | 333 | ||||||||||||||||||
Intermodal |
18,702 | 13,456 | 1,390 | 23,088 | 16,710 | 1,382 | ||||||||||||||||||
Minerals & Stone |
20,512 | 48,350 | 424 | 25,440 | 60,098 | 423 | ||||||||||||||||||
Metallic Ores |
13,603 | 9,862 | 1,379 | 18,074 | 13,578 | 1,331 | ||||||||||||||||||
Lumber & Forest Products |
16,587 | 28,929 | 573 | 18,390 | 31,952 | 576 | ||||||||||||||||||
Petroleum Products |
13,143 | 19,061 | 690 | 11,937 | 17,576 | 679 | ||||||||||||||||||
Food or Kindred Products |
7,694 | 14,229 | 541 | 7,863 | 13,928 | 565 | ||||||||||||||||||
Autos & Auto Parts |
5,344 | 7,672 | 697 | 5,799 | 8,023 | 723 | ||||||||||||||||||
Waste |
4,939 | 10,288 | 480 | 5,337 | 10,519 | 507 | ||||||||||||||||||
Other |
4,809 | 17,478 | 275 | 5,817 | 17,462 | 333 | ||||||||||||||||||
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Total G&W and RailAmerica |
$ | 250,315 | 430,917 | $ | 581 | $ | 265,675 | 446,683 | $ | 595 |
Pro Forma Q3 2012 | Pro Forma Q4 2012 | |||||||||||||||||||||||
Commodity Group | Freight Revenues | Carloads | Avg Freight Revenues Per Carload |
Freight Revenues |
Carloads | Avg Freight Revenues Per Carload |
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Agricultural Products |
$ | 29,998 | 50,440 | $ | 595 | $ | 30,771 | 57,312 | $ | 537 | ||||||||||||||
Chemicals & Plastics |
30,354 | 39,450 | 769 | 30,194 | 39,037 | 773 | ||||||||||||||||||
Metals |
27,750 | 40,618 | 683 | 27,727 | 38,157 | 727 | ||||||||||||||||||
Minerals & Stone |
26,963 | 41,860 | 644 | 26,296 | 40,410 | 651 | ||||||||||||||||||
Pulp & Paper |
30,008 | 88,582 | 339 | 24,212 | 73,602 | 329 | ||||||||||||||||||
Lumber & Forest Products |
25,505 | 17,754 | 1,437 | 27,439 | 18,786 | 1,461 | ||||||||||||||||||
Coal & Coke |
23,164 | 55,503 | 417 | 20,949 | 51,069 | 410 | ||||||||||||||||||
Petroleum Products |
19,655 | 14,109 | 1,393 | 30,193 | 14,197 | 2,127 | ||||||||||||||||||
Food or Kindred Products |
18,409 | 32,090 | 574 | 18,714 | 32,647 | 573 | ||||||||||||||||||
Autos & Auto Parts |
13,038 | 20,820 | 626 | 15,248 | 23,855 | 639 | ||||||||||||||||||
Waste |
8,267 | 14,395 | 574 | 8,149 | 14,193 | 574 | ||||||||||||||||||
Metallic Ores |
5,574 | 7,600 | 733 | 5,556 | 8,047 | 690 | ||||||||||||||||||
Other |
5,801 | 10,987 | 528 | 5,775 | 10,944 | 528 | ||||||||||||||||||
Intermodal |
7,039 | 17,985 | 391 | 4,905 | 16,662 | 294 | ||||||||||||||||||
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Total G&W and RailAmerica |
$ | 271,525 | 452,193 | $ | 600 | $ | 276,128 | 438,918 | $ | 629 |