Genesee & Wyoming Reports Results for the Second Quarter of 2015

DARIEN, Conn.--()--Genesee & Wyoming Inc. (G&W) (NYSE:GWR)

Second Quarter Highlights

  • Operating revenues increased 30.8% to $542.2 million from $414.6 million.
  • Same railroad operating revenues, excluding the $18.3 million negative impact of foreign currency depreciation, declined 10.2%, primarily due to weakness in iron ore, utility coal and steel shipments.
  • Adjusted income from operations (operating income) decreased 9.6% to $99.8 million; Reported income from operations decreased 9.7% to $99.5 million. (1)
  • Adjusted diluted earnings per common share (EPS) decreased 17.0% to $0.93; Reported diluted EPS decreased 14.0% to $0.92. (1)

Jack Hellmann, President and CEO of G&W, commented, “Our financial results for the second quarter of 2015 were consistent with our updated guidance. However, our results were disappointing with second quarter adjusted diluted earnings per share declining 17% versus last year. At a high level, our North American operating income was down 10%, primarily due to significant weakness in utility coal and steel and scrap shipments in the United States, which more than overcame the benefits of the Pinsly Arkansas acquisition and Rapid City, Pierre & Eastern start-up. In addition, Australian operating income was down 40%, primarily due to the previously announced closures of several customer iron ore mines. Partially offsetting these declines was a positive earnings contribution from the newly-acquired Freightliner Group, which were included in our financial results for the first full period in the second quarter.”

“In North America, our same railroad revenue excluding the impact of foreign currency declined 8.2%, with the two largest areas of weakness being a 31% decline in coal revenue, primarily due to competition from low priced natural gas, and a 22% decline in steel and scrap revenue, primarily due to competition from imported steel. In response to the revenue shortfall, we aggressively reduced expenses, maintaining a North American operating ratio of 75.4%.”

“In Australia, our same railroad revenue excluding the impact of foreign currency decreased over 20% in the second quarter due to reduced iron ore shipments, while our management team continued to intensely manage costs. Meanwhile, the addition of Freightliner Australia in New South Wales is enhancing the scope of new business development opportunities outside of our existing Australian geographies.”

“In the United Kingdom and Europe, the integration of Freightliner is progressing well. Although U.K. coal shipments are expected to remain relatively low into the fourth quarter due to a combination of seasonal electricity consumption patterns and the gradual reduction of high coal stockpiles that preceded the new U.K. carbon tax, we are pleased with the overall trajectory and management of the business.”

“In the second half of 2015, we expect somewhat better financial results based on modest improvements in North American carloads, seasonal improvements in the U.K./Europe business including intermodal shipments, as well as a sharp focus on additional cost reductions. Meanwhile, we continue to generate strong free cash flow and to evaluate a range of acquisition and investment opportunities worldwide.” (1)

Financial Results

G&W reported net income in the second quarter of 2015 of $52.8 million, compared with net income of $60.7 million in the second quarter of 2014. Excluding the net impact of certain items affecting comparability between periods discussed below, G&W’s adjusted net income in the second quarter of 2015 was $53.0 million, compared with adjusted net income of $63.7 million in the second quarter of 2014. (1)

G&W’s reported diluted EPS in the second quarter of 2015 were $0.92 with 57.1 million weighted average shares outstanding, compared with reported diluted EPS in the second quarter of 2014 of $1.07 with 56.9 million weighted average shares outstanding. G&W’s adjusted diluted EPS in the second quarter of 2015 were $0.93 with 57.1 million weighted average shares outstanding, compared with adjusted diluted EPS in the second quarter of 2014 of $1.12 with 56.9 million weighted average shares outstanding. (1)

G&W’s effective income tax rate was 35.7% in the second quarter of 2015, compared with 34.9% in the second quarter of 2014.

Items Affecting Comparability

In the second quarter of 2015 and 2014, G&W’s results included certain items affecting comparability between the periods that are set forth in the following table (in millions, except per share amounts):

       

Income/(Loss)
Before Income
Taxes Impact

   

After-Tax Net
Income/(Loss)
Impact

   

Diluted
Earnings/(Loss)
Per Common
Share Impact

Three Months Ended June 30, 2015

 
Business development and related costs $ (0.8 ) $ (0.5 ) $ (0.01 )
Net gain on sale of assets $ 0.5 $ 0.3 $ 0.01
 

Three Months Ended June 30, 2014

Credit facility refinancing-related costs $ (4.7 ) $ (2.9 ) $ (0.05 )
Business development and related costs $ (1.7 ) $ (1.0 ) $ (0.02 )
Net gain on sale of assets $ 1.4 $ 1.0 $ 0.02
 

In the second quarter of 2015, G&W’s results included business development and related costs of $0.8 million primarily related to the integration of Freightliner Group Limited (Freightliner) and a net gain on the sale of assets of $0.5 million. G&W’s second quarter of 2014 results included credit facility refinancing-related costs of $4.7 million, business development and related costs of $1.7 million and a net gain on the sale of assets of $1.4 million.

Second Quarter Results

In the second quarter of 2015, G&W’s operating revenues increased $127.7 million, or 30.8%, to $542.2 million, compared with $414.6 million in the second quarter of 2014. Excluding $186.2 million of revenues from new operations, including Freightliner, Rapid City, Pierre & Eastern Railroad, Inc. (RCP&E) and Pinsly’s Arkansas Division (Pinsly Arkansas), and an $18.3 million decrease due to the depreciation of foreign currencies relative to the U.S. dollar, G&W’s same railroad operating revenues decreased $40.3 million, or 10.2%. The decrease in G&W’s same railroad operating revenues was primarily driven by a decrease in freight revenues.

In the second quarter of 2015, G&W’s same railroad freight revenues decreased $51.8 million, or 16.4%, to $265.0 million, compared with $316.8 million in the second quarter of 2014. Excluding a $13.0 million decrease due to the depreciation of foreign currencies relative to the U.S. dollar, G&W’s same railroad freight revenues decreased $38.8 million, or 12.8%, primarily driven by decreases in iron ore, coal and metals traffic.

G&W’s traffic increased 241,256 carloads, or 47.3%, to 750,887 carloads in the second quarter of 2015. Excluding 304,177 carloads from new operations, same railroad traffic decreased 62,921 carloads, or 12.3%, in the second quarter of 2015 compared with the second quarter of 2014. The same railroad traffic decrease was principally due to decreases of 25,969 carloads of coal and coke (primarily in the Midwest, Central and Ohio Valley regions), 14,051 carloads of metals traffic (primarily in the Southern, Northeast and Ohio Valley regions), 6,786 carloads of Other traffic (primarily overhead Class I shipments), 6,642 carloads of metallic ores (primarily in the Australia Region) and 6,585 carloads of agricultural products traffic (primarily in the Midwest, Ohio Valley and Canada regions). All remaining traffic decreased by a net 2,888 carloads.

G&W’s income from operations in the second quarter of 2015 was $99.5 million, compared with $110.1 million in the second quarter of 2014. G&W’s operating ratio in the second quarter of 2015 was 81.7%, compared with an operating ratio of 73.4% in the second quarter of 2014. The increase in G&W’s operating ratio was primarily driven by lower operating margins from Freightliner as well as the decrease in iron ore and coal traffic.

Second Quarter Results by Segment

Prior to April 1, 2015, G&W presented its financial information as two reportable segments: North American & European Operations and Australian Operations. Based on G&W’s significant increase in operations in the U.K. and continental Europe resulting from the acquisition of Freightliner, the Company is now breaking out its North American & European Operations into North American Operations and U.K./European Operations and will now present its financial information as three reportable segments: North American Operations, Australian Operations and U.K./European Operations, based on the geographic regions in which the Company operates. G&W’s segment information for prior periods has been restated to reflect this change.

Operating revenues from North American Operations decreased $14.8 million, or 4.5%, to $311.0 million in the second quarter of 2015, compared with $325.7 million in the second quarter of 2014. Excluding $15.2 million of revenues from new operations and a $3.4 million decrease due to the impact of foreign currency depreciation, North American Operations same railroad revenues decreased by $26.6 million, or 8.2%, primarily due to declines in utility coal and steel shipments.

North American Operations traffic decreased 37,605 carloads, or 8.3%, to 413,888 carloads in the second quarter of 2015. Excluding 19,282 carloads from new operations, same railroad traffic decreased 56,887 carloads, or 12.6%, in the second quarter of 2015 compared with the second quarter of 2014. The same railroad traffic decrease was principally due to decreases of 25,969 carloads of coal and coke (primarily in the Midwest, Central and Ohio Valley regions), 14,051 carloads of metals traffic (primarily in the Southern, Northeast and Ohio Valley regions), 8,396 carloads of Other traffic (primarily overhead Class I shipments) and 5,727 carloads of agricultural products traffic (primarily in the Midwest, Ohio Valley and Canada regions). All remaining traffic decreased by a net 2,744 carloads.

Income from operations from North American Operations in the second quarter of 2015 was $76.6 million, compared with $85.4 million in the second quarter of 2014. North American Operations operating ratio was 75.4% in the second quarter of 2015, compared with an operating ratio of 73.8% in the second quarter of 2014.

Australian Operations operating revenues in the second quarter of 2015 decreased $16.3 million, or 19.6%, to $66.8 million, compared with $83.1 million in the second quarter of 2014. Excluding $11.6 million of revenues from the newly acquired Freightliner Australian operations and a $13.8 million decrease due to the impact of foreign currency depreciation, Australian Operations same railroad revenues decreased by $14.1 million, or 20.4%, primarily due to a decrease in freight revenues resulting from a decline in iron ore shipments.

Australian Operations traffic decreased 6,034 carloads, or 10.4%, to 52,104 carloads in the second quarter of 2015. The traffic decrease was principally due to a decrease of 7,416 carloads of metallic ores traffic, partially offset by a 2,542 carload increase in minerals and stone traffic. All remaining traffic decreased by a net 1,160 carloads.

Income from operations from Australian Operations in the second quarter of 2015 was $15.1 million, compared with $25.3 million in the second quarter of 2014. Australian Operations operating ratio was 77.4% in the second quarter of 2015, compared with an operating ratio of 69.5% in the second quarter of 2014. The increase in Australian Operations operating ratio was primarily driven by the decrease in iron ore traffic.

U.K./European Operations operating revenues in the second quarter of 2015 increased $158.7 million to $164.4 million, compared with $5.7 million in the second quarter of 2014. Excluding $159.4 million of revenues from the newly acquired Freightliner U.K./European operations and a $1.1 million decrease due to the impact of foreign currency depreciation, U.K./European Operations same railroad revenues increased by $0.4 million, or 8.4%. U.K./European Operations traffic consisted of 284,895 carloads in the second quarter of 2015, primarily related to intermodal traffic from G&W’s newly acquired Freightliner U.K./European operations.

Income from operations from U.K./European Operations in the second quarter of 2015 was $7.7 million with an operating ration of 95.3%. The prior year was not comparable because over 95% of the revenue and income from operations was generated from the recently acquired Freightliner business. As a reminder, our U.K./European Operations require substantially lower capital expenditures and generate at a higher operating ratio than our other segments. The loss in the second quarter of 2014 included costs associated with the start-up of a significant new long-term customer contract.

Free Cash Flow (1)

G&W’s free cash flow for the six months ended June 30, 2015 and 2014 was as follows (in millions):

        Six Months Ended
June 30,

   2015   

   

   2014   

Net cash provided by operating activities $ 184.7 $ 200.1
Net cash used in investing activities, excluding new business investments (842.7 ) (302.3 )
Add back: net cash used for acquisitions (a) 776.3   220.5  
Free cash flow before new business investments 118.3 118.3
New business investments (37.0 ) (61.0 )
Free cash flow (1) $ 81.3   $ 57.3  
 
(a)   The 2015 period primarily consisted of net cash used for the acquisition of Freightliner and Pinsly Arkansas as well as $30.9 million in cash paid for incremental expenses related to the purchase and integration of the acquisition. The 2014 period primarily consisted of net cash used for the RCP&E acquisition.
 

Conference Call and Webcast Details

As previously announced, G&W’s conference call to discuss financial results for the second quarter of 2015 will be held on Monday, August 3, 2015, at 11 a.m. EDT. The dial-in number for the teleconference in the U.S. is (800) 230-1096; outside the U.S. is (612) 332-0802, or the call may be accessed live over the Internet (listen only) at www.gwrr.com/investors. Management will be referring to a slide presentation that will also be available at gwrr.com/investors. The webcast will be archived at www.gwrr.com/investors until the following quarter’s earnings press release. Telephone replay is available for 30 days beginning at 1 p.m. EDT on August 3, 2015, by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 345265.

About G&W

G&W owns or leases 120 freight railroads worldwide that are organized in 11 operating regions with 7,700 employees and more than 2,500 customers.

  • G&W’s nine North American regions serve 41 U.S. states and four Canadian provinces and include 113 short line and regional freight railroads with more than 13,000 track-miles.
  • G&W’s Australia Region provides rail freight services in New South Wales, the Northern Territory and South Australia and operates the 1,400-mile Tarcoola-to-Darwin rail line.
  • G&W’s U.K./European Region is led by Freightliner, the U.K.’s largest rail maritime intermodal operator and second-largest rail freight company. Operations also include heavy-haul in Poland and Germany and cross-border intermodal services connecting Northern European seaports with key industrial regions throughout the continent.

G&W subsidiaries provide rail service at more than 40 major ports in North America, Australia and Europe and perform contract coal loading and railcar switching for industrial customers.

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 are based on current expectations, estimates and projections about our industry, management’s beliefs, and assumptions made by management. Words such as “anticipates,” “intends,” “plans,” “believes,” “could,” “should,” “seeks,” “expects,” “will,” “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, including the following: risks related to the operation of our railroads; severe weather conditions and other natural occurrences, which could result in shutdowns, derailments, railroad network congestion or other substantial disruption of operations; customer demand and changes in our operations; exposure to the credit risk of customers and counterparties; changes in commodity prices; consummation and integration of acquisitions; economic, political and industry conditions (including employee strikes or work stoppages); retention and contract continuation; legislative and regulatory developments, including changes in environmental and other laws and regulations to which we are subject; increased competition in relevant markets; funding needs and financing sources, including our ability to obtain government funding for capital projects; international complexities of operations, currency fluctuations, finance, tax and decentralized management; challenges of managing rapid growth including retention and development of senior leadership; unpredictability of fuel costs; susceptibility to various legal claims and lawsuits; increase in, or volatility associated with, expenses related to estimated claims, self-insured retention amounts, and insurance coverage limits; consummation of new business opportunities; decrease in revenues and/or increase in costs and expenses; susceptibility to the risks of doing business in foreign countries; our ability to realize the expected synergies associated with acquisitions; and others including, but not limited to, those noted in our 2014 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q under “Risk Factors.” Therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Forward-looking statements speak only as of the date of this press release or as of the date they were made. G&W does not undertake, and expressly disclaims, any duty to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

1.   Adjusted income from operations, adjusted net income, adjusted diluted earnings per common share (EPS) and free cash flow are non-GAAP financial measures and are not intended to replace financial measures calculated in accordance with GAAP. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to their most directly comparable financial measures calculated in accordance with GAAP, is included in the tables attached to this press release.
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(in thousands, except per share amounts)
(unaudited)
           
Three Months Ended Six Months Ended
June 30, June 30,
2015 2014 2015 2014
OPERATING REVENUES $ 542,219 $ 414,563 $ 939,249 $ 790,842
OPERATING EXPENSES 442,768   304,454   767,178   605,858  
INCOME FROM OPERATIONS 99,451 110,109 172,071 184,984
INTEREST INCOME 124 241 150 1,275
INTEREST EXPENSE (17,772 ) (17,814 ) (31,280 ) (31,455 )
LOSS ON SETTLEMENT OF FOREIGN CURRENCY FORWARD PURCHASE CONTRACTS (18,686 )
OTHER INCOME, NET 334   759   648   1,395  
INCOME BEFORE INCOME TAXES 82,137 93,295 122,903 156,199
PROVISION FOR INCOME TAXES (29,300 ) (32,567 ) (46,162 ) (55,467 )
NET INCOME $ 52,837   $ 60,728   $ 76,741   $ 100,732  
BASIC EARNINGS PER COMMON SHARE $ 0.94   $ 1.10   $ 1.37   $ 1.83  
WEIGHTED AVERAGE SHARES - BASIC 55,976   55,054   55,902   54,949  
DILUTED EARNINGS PER COMMON SHARE $ 0.92   $ 1.07   $ 1.34   $ 1.77  
WEIGHTED AVERAGE SHARES - DILUTED 57,143   56,948   57,132   56,910  
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2015 AND DECEMBER 31, 2014
(in thousands)
(unaudited)
             
June 30, December 31,
2015 2014
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 30,337 $ 59,727
Accounts receivable, net 386,059 357,278
Materials and supplies 44,936 30,251
Prepaid expenses and other 43,448 24,176
Deferred income tax assets, net 51,942   76,994
Total current assets 556,722   548,426
PROPERTY AND EQUIPMENT, net 4,104,092 3,788,482
GOODWILL 964,882 628,815
INTANGIBLE ASSETS, net 1,137,170 587,663
DEFERRED INCOME TAX ASSETS, net 2,182 2,500
OTHER ASSETS, net 41,318   39,867
Total assets $ 6,806,366   $ 5,595,753
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 25,507 $ 67,398
Accounts payable 317,554 290,746
Accrued expenses 143,462   106,094
Total current liabilities 486,523   464,238
LONG-TERM DEBT, less current portion 2,341,778 1,548,051
DEFERRED INCOME TAX LIABILITIES, net 1,086,808 908,852
DEFERRED ITEMS - grants from outside parties 281,732 279,286
OTHER LONG-TERM LIABILITIES 177,235 37,346
TOTAL EQUITY 2,432,290   2,357,980
Total liabilities and equity $ 6,806,366   $ 5,595,753
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND 2014
(in thousands)
(unaudited)
    Six Months Ended
June 30,

  2015  

   

  2014  

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 76,741 $ 100,732
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 90,265 75,853
Stock-based compensation 6,961 6,011
Excess tax benefits from share-based compensation (1,254 ) (4,182 )
Deferred income taxes 22,672 36,453
Net gain on sale of assets (807 ) (2,207 )
Loss on settlement of foreign currency forward purchase contracts 18,686
Changes in assets and liabilities which provided/(used) cash, net of effect of acquisitions:
Accounts receivable, net 35,744 (26,616 )
Materials and supplies (868 ) (1,288 )
Prepaid expenses and other 5,685 7,620
Accounts payable and accrued expenses (73,397 ) 6,454
Other assets and liabilities, net 4,255   1,233  
Net cash provided by operating activities 184,683   200,063  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (160,226 ) (174,921 )
Grant proceeds from outside parties 22,701 27,644
Cash paid for acquisitions, net of cash acquired (726,698 ) (220,542 )
Net payment from settlement of foreign currency forward purchase contracts related to an acquisition (18,686 )
Insurance proceeds for the replacement of assets 1,421 1,172
Proceeds from disposition of property and equipment 1,734   3,365  
Net cash used in investing activities (879,754 ) (363,282 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital leases (306,799 ) (187,945 )
Proceeds from issuance of long-term debt 977,867 318,171
Debt amendment/issuance costs (5,933 ) (3,880 )
Proceeds from employee stock purchases 4,183 6,928
Excess tax benefits from share-based compensation 1,254 4,182
Treasury stock acquisitions (2,992 ) (3,526 )
Net cash provided by financing activities 667,580   133,930  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (1,899 ) (555 )
DECREASE IN CASH AND CASH EQUIVALENTS (29,390 ) (29,844 )
CASH AND CASH EQUIVALENTS, beginning of period 59,727   62,876  
CASH AND CASH EQUIVALENTS, end of period $ 30,337   $ 33,032  
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
           
Three Months Ended June 30,
2015 2014
Amount % of Revenue Amount % of Revenue

Operating revenues:

Freight revenues $ 375,666 69.3 % $ 316,750 76.4 %
Freight-related revenues 142,843 26.3 % 73,371 17.7 %
All other revenues 23,710   4.4 % 24,442   5.9 %
Total operating revenues $ 542,219   100.0 % $ 414,563   100.0 %
 

Operating expenses:

Labor and benefits $ 165,296 30.4 % $ 115,871 27.9 %
Equipment rents 43,483 8.0 % 19,857 4.8 %
Purchased services 56,177 10.4 % 24,257 5.8 %
Depreciation and amortization 48,048 8.9 % 38,212 9.2 %
Diesel fuel used in train operations 37,895 7.0 % 37,379 9.0 %
Electricity used in train operations 4,977 0.9 % 404 0.1 %
Casualties and insurance 10,038 1.9 % 12,737 3.1 %
Materials 26,929 5.0 % 19,221 4.6 %
Trackage rights 22,172 4.1 % 14,021 3.4 %
Net gain on sale of assets (490 ) (0.1 )% (1,369 ) (0.3 )%
Other expenses 28,243   5.2 % 23,864   5.8 %
Total operating expenses $ 442,768   81.7 % $ 304,454   73.4 %
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
       
Three Months Ended June 30, 2015

North American
Operations

Australian
Operations

U.K./European
Operations

Total
Operations

Amount  

% of
Revenue

Amount  

% of
Revenue

Amount  

% of
Revenue

Amount  

% of
Revenue

Operating revenues:

Freight revenues $ 238,153 76.6 % $ 39,464 59.1 % $ 98,049 59.6 % $ 375,666 69.3 %
Freight-related revenues 55,989 18.0 % 25,881 38.7 % 60,973 37.1 % 142,843 26.3 %
All other revenues 16,838   5.4 % 1,463   2.2 % 5,409   3.3 % 23,710   4.4 %
Total operating revenues $ 310,980   100.0 % $ 66,808   100.0 % $ 164,431   100.0 % $ 542,219   100.0 %

Operating expenses:

Labor and benefits $ 100,297 32.3 % $ 18,750 28.0 % $ 46,249 28.1 % $ 165,296 30.4 %
Equipment rents 16,485 5.3 % 4,020 6.0 % 22,978 14.0 % 43,483 8.0 %
Purchased services 15,220 4.9 % 5,718 8.6 % 35,239 21.4 % 56,177 10.4 %
Depreciation and amortization 34,936 11.2 % 7,394 11.1 % 5,718 3.5 % 48,048 8.9 %
Diesel fuel used in train operations 19,757 6.4 % 6,218 9.3 % 11,920 7.2 % 37,895 7.0 %
Electricity used in train operations

%

% 4,977 3.0 % 4,977 0.9

%

Casualties and insurance 6,659 2.1 % 1,886 2.8 % 1,493 0.9 % 10,038 1.9 %
Materials 15,675 5.0 % 2,709 4.1 % 8,545 5.2 % 26,929 5.0 %
Trackage rights 6,249 2.0 % 3,424 5.1 % 12,499 7.6 % 22,172 4.1 %
Net gain on sale of assets (402 ) (0.1 )% (32 )

% (56 )

% (490 ) (0.1 )%
Other expenses 19,483   6.3 % 1,590   2.4 % 7,170   4.4 % 28,243   5.2 %
Total operating expenses $ 234,359   75.4 % $ 51,677   77.4 % $ 156,732   95.3 % $ 442,768   81.7 %
Income from operations $ 76,621   $ 15,131   $ 7,699   $ 99,451  
Net expenditures for additions to property & equipment $ 73,440 $ 9,159 $ 5,028 $ 87,627
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
       
Three Months Ended June 30, 2014

North American
Operations

Australian
Operations

U.K./European
Operations

Total
Operations

Amount   % of Revenue Amount   % of Revenue Amount   % of Revenue Amount   % of Revenue

Operating revenues:

Freight revenues $ 252,320 77.5 % $ 64,430 77.5 % $

% $ 316,750 76.4 %
Freight-related revenues 52,475 16.1 % 15,194 18.3 % 5,702 100.0 % 73,371 17.7 %
All other revenues 20,947   6.4 % 3,495  

4.2

%  

% 24,442   5.9 %
Total operating revenues $ 325,742   100.0 % $ 83,119  

100.0

% $ 5,702   100.0 % $ 414,563   100.0 %

Operating expenses:

Labor and benefits $ 95,044 29.2 % $ 18,882 22.7 % $ 1,945 34.1 % $ 115,871 27.9 %
Equipment rents 16,413 5.0 % 2,718 3.2 % 726 12.7 % 19,857 4.8 %
Purchased services 15,429 4.7 % 7,959 9.6 % 869 15.2 % 24,257 5.8 %
Depreciation and amortization 30,629 9.4 % 7,172 8.6 % 411 7.2 % 38,212 9.2 %
Diesel fuel used in train operations 29,302 9.0 % 7,523 9.1 % 554 9.7 % 37,379 9.0 %
Electricity used in train operations

%

%

 

404 7.1 % 404 0.1 %
Casualties and insurance 10,413 3.2 % 2,240 2.7 % 84 1.5 % 12,737 3.1 %
Materials 17,508 5.4 % 1,463 1.8 % 250 4.4 % 19,221 4.6 %
Trackage rights 7,759 2.4 % 5,449 6.6 % 813 14.3 % 14,021 3.4 %
Net gain on sale of assets (1,292 ) (0.4 )% (44 ) (0.1 )% (33 ) (0.6 )% (1,369 ) (0.3 )%
Other expenses 19,150   5.9 % 4,426   5.3 % 288   5.1 % 23,864   5.8 %
Total operating expenses $ 240,355   73.8 % $ 57,788   69.5 % $ 6,311   110.7 % $ 304,454   73.4 %
Income/(loss) from operations $ 85,387   $ 25,331   $ (609 ) $ 110,109  
Net expenditures for additions to property & equipment $ 85,315 $ 3,047 $ 97 $ 88,459
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
                       
Three Months Ended June 30, 2015 North American Operations Australian Operations U.K./European Operations Total Operations
Commodity Group

Freight
Revenues

Carloads*

Average
Revenues
Per
Carload

Freight
Revenues

Carloads*

Average
Revenues
Per
Carload

Freight
Revenues

Carloads*

Average
Revenues
Per
Carload

Freight
Revenues

Carloads*

Average
Revenues
Per
Carload

Agricultural Products $ 30,742 53,690 $ 573 $ 6,658 14,816 $ 449 $ 129 190 $ 679 $ 37,529 68,696 $ 546
Autos & Auto Parts 4,749 7,450 637 4,749 7,450 637
Chemicals & Plastics 35,354 45,637 775 35,354 45,637 775
Coal & Coke 22,136 63,445 349 9,039 23,380 387 31,175 86,825 359
Food & Kindred Products 8,280 14,726 562 8,280 14,726 562
Intermodal 18,917 15,657 1,208 69,999 214,227 327 88,916 229,884 387
Lumber & Forest Products 20,496 34,966 586 20,496 34,966 586
Metallic Ores 4,910 6,114 803 11,865 7,137 1,662 16,775 13,251 1,266
Metals 27,015 35,136 769 27,015 35,136 769
Minerals & Stone 30,653 55,872 549 1,716 14,424 119 17,435 44,083 396 49,804 114,379 435
Petroleum Products 15,194 23,855 637 308 70 4,400 15,502 23,925 648
Pulp & Paper 28,952 45,302 639 28,952 45,302 639
Waste 4,709 10,224 461 4,709 10,224 461
Other 4,963   17,471   284     1,447   3,015   480 6,410   20,486   313
Totals $ 238,153   413,888   $ 575 $ 39,464   52,104   $ 757 $ 98,049   284,895   $ 344 $ 375,666   750,887   $ 500
 
Three Months Ended June 30, 2014   North American Operations   Australian Operations   U.K./European Operations   Total Operations
Commodity Group

Freight
Revenues

  Carloads*  

Average
Revenues
Per
Carload

Freight
Revenues

  Carloads*  

Average
Revenues
Per
Carload

Freight
Revenues

  Carloads*  

Average
Revenues
Per
Carload

Freight
Revenues

  Carloads*  

Average
Revenues
Per
Carload

Agricultural Products $ 28,699 53,312 $ 538 $ 9,403 15,674 $ 600 $ $ $ 38,102 68,986 $ 552
Autos & Auto Parts 5,889 7,969 739 5,889 7,969 739
Chemicals & Plastics 34,393 42,443 810 34,393 42,443 810
Coal & Coke 31,887 89,401 357 31,887 89,401 357
Food & Kindred Products 8,981 15,463 581 8,981 15,463 581
Intermodal 24,138 15,953 1,513 24,138 15,953 1,513
Lumber & Forest Products 21,313 35,296 604 21,313 35,296 604
Metallic Ores 4,302 5,287 814 28,418 14,553 1,953 32,720 19,840 1,649
Metals 34,445 48,484 710 34,445 48,484 710
Minerals & Stone 28,117 50,584 556 2,078 11,882 175 30,195 62,466 483
Petroleum Products 15,353 24,912 616 393 76 5,171 15,746 24,988 630
Pulp & Paper 29,144 42,916 679 29,144 42,916 679
Waste 4,069 9,633 422 4,069 9,633 422
Other 5,728   25,793   222         5,728   25,793   222
Totals $ 252,320   451,493   $ 559 $ 64,430   58,138   $ 1,108 $     $ $ 316,750   509,631   $ 622

* Represents physical railcars and the estimated railcar equivalents of commodities transported by metric ton or other measure, as well as intermodal units.

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
               
Six Months Ended June 30,
2015 2014
Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 673,875 71.7 % $ 604,484 76.4 %
Freight-related revenues 222,524 23.7 % 140,664 17.8 %
All other revenues 42,850   4.6 % 45,694   5.8 %
Total operating revenues $ 939,249   100.0 % $ 790,842   100.0 %
 

Operating expenses:

Labor and benefits $ 297,414 31.6 % $ 232,027 29.4 %
Equipment rents 65,515 6.9 % 38,932 4.9 %
Purchased services 80,558 8.6 % 52,396 6.6 %
Depreciation and amortization 90,265 9.6 % 75,853 9.6 %
Diesel fuel used in train operations 67,592 7.2 % 79,314 10.0 %
Electricity used in train operations 5,366 0.6 % 472 0.1 %
Casualties and insurance 18,561 2.0 % 22,369 2.8 %
Materials 45,624 4.9 % 35,515 4.5 %
Trackage rights 35,505 3.8 % 26,287 3.3 %
Net gain on sale of assets (807 ) (0.1 )% (2,207 ) (0.3 )%
Other expenses 61,585   6.6 % 44,900   5.7 %
Total operating expenses $ 767,178   81.7 % $ 605,858   76.6 %
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
       
Six Months Ended June 30, 2015

North American
Operations

Australian
Operations

U.K./European
Operations

Total
Operations

Amount  

% of
Revenue

Amount  

% of
Revenue

Amount  

% of
Revenue

Amount  

% of
Revenue

Operating revenues:

Freight revenues $ 481,183 76.5 % $ 85,822 67.7 % $ 106,870 58.1 % $ 673,875 71.7 %
Freight-related revenues 114,323 18.2 % 37,072 29.3 % 71,129 38.7 % 222,524 23.7 %
All other revenues 33,098   5.3 % 3,856   3.0 % 5,896   3.2 % 42,850   4.6 %
Total operating revenues $ 628,604   100.0 % $ 126,750   100.0 % $ 183,895   100.0 % $ 939,249   100.0 %

Operating expenses:

Labor and benefits $ 209,748 33.3 % $ 36,134 28.5 % $ 51,532 27.9 % $ 297,414 31.6 %
Equipment rents 34,271 5.4 % 6,206 4.9 % 25,038 13.6 % 65,515 6.9 %
Purchased services 29,349 4.7 % 10,758 8.5 % 40,451 22.0 % 80,558 8.6 %
Depreciation and amortization 70,241 11.2 % 13,620 10.7 % 6,404 3.5 % 90,265 9.6 %
Diesel fuel used in train operations 43,782 7.0 % 9,899 7.8 % 13,911 7.6 % 67,592 7.2 %
Electricity used in train operations %

%

5,366 2.9 % 5,366 0.6 %
Casualties and insurance 13,114 2.1 % 3,767 3.0 % 1,680 0.9 % 18,561 2.0 %
Materials 31,685 5.0 % 4,934 3.9 % 9,005 4.9 % 45,624 4.9 %
Trackage rights 12,793 2.0 % 8,420 6.6 % 14,292 7.8 % 35,505 3.8 %
Net gain on sale of assets (699 ) (0.1 )% (38 ) % (70 ) % (807 ) (0.1 )%
Other expenses 50,618   8.1 % 3,683   2.9 % 7,284   4.0 % 61,585   6.6 %
Total operating expenses $ 494,902   78.7 % $ 97,383   76.8 % $ 174,893   95.1 % $ 767,178   81.7 %
Income from operations $ 133,702   $ 29,367   $ 9,002   $ 172,071  
Net expenditures for additions to property & equipment $ 118,710 $ 13,774 $ 5,041 $ 137,525
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
       
Six Months Ended June 30, 2014

North American
Operations

Australian
Operations

U.K./European
Operations

Total
Operations

Amount  

% of
Revenue

Amount  

% of
Revenue

Amount  

% of
Revenue

Amount  

% of
Revenue

Operating revenues:

 
Freight revenues $ 481,307 77.5 % $ 123,177 77.3 % $ % $ 604,484 76.4 %
Freight-related revenues 100,816 16.2 % 29,801 18.7 % 10,047 100.0 % 140,664 17.8 %
All other revenues 39,261   6.3 % 6,433   4.0 %   % 45,694   5.8 %
Total operating revenues $ 621,384   100.0 % $ 159,411   100.0 % $ 10,047   100.0 % $ 790,842   100.0 %

Operating expenses:

Labor and benefits $ 193,147 31.1 % $ 35,017 22.0 % $ 3,863 38.5 % $ 232,027 29.4 %
Equipment rents 32,699 5.3 % 5,021 3.2 % 1,212 12.1 % 38,932 4.9 %
Purchased services 30,546 4.9 % 20,151 12.6 % 1,699 16.9 % 52,396 6.6 %
Depreciation and amortization 60,824 9.8 % 14,234 8.9 % 795 7.9 % 75,853 9.6 %
Diesel fuel used in train operations 63,645 10.2 % 14,724 9.2 % 945 9.4 % 79,314 10.0 %
Electricity used in train operations % % 472 4.7 % 472 0.1 %
Casualties and insurance 17,477 2.8 % 4,741 3.0 % 151 1.5 % 22,369 2.8 %
Materials 32,919 5.3 % 2,120 1.3 % 476 4.7 % 35,515 4.5 %
Trackage rights 14,135 2.3 % 10,958 6.9 % 1,194 11.9 % 26,287 3.3 %
Net gain on sale of assets (2,014 ) (0.3 )% (162 ) (0.1 )% (31 ) (0.3 )% (2,207 ) (0.3 )%
Other expenses 36,027   5.8 % 8,341   5.2 % 532   5.3 % 44,900   5.7 %
Total operating expenses $ 479,405   77.2 % $ 115,145   72.2 % $ 11,308   112.6 % $ 605,858   76.6 %
Income/(loss) from operations $ 141,979   $ 44,266   $ (1,261 ) $ 184,984  
Net expenditures for additions to property & equipment $ 138,899 $ 7,880 $ 498 $ 147,277
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
                       
Six Months Ended June 30, 2015 North American Operations Australian Operations U.K./European Operations Total Operations
Commodity Group

Freight
Revenues

Carloads*

Average
Revenues
Per
Carload

Freight
Revenues

Carloads*

Average
Revenues
Per
Carload

Freight
Revenues

Carloads*

Average
Revenues
Per
Carload

Freight
Revenues

Carloads*

Average
Revenues
Per
Carload

Agricultural Products $ 65,119 112,027 $ 581 $ 13,426 29,412 $ 456 $ 141 207 $ 681 $ 78,686 141,646 $ 556
Autos & Auto Parts 9,373 14,673 639 9,373 14,673 639
Chemicals & Plastics 71,239 91,680 777 71,239 91,680 777
Coal & Coke 49,104 143,057 343 9,852 25,484 387 58,956 168,541 350
Food & Kindred Products 17,523 30,614 572 17,523 30,614 572
Intermodal 36,160 30,006 1,205 76,296 233,499 327 112,456 263,505 427
Lumber & Forest Products 39,993 67,555 592 39,993 67,555 592
Metallic Ores 10,121 12,479 811 31,980 17,883 1,788 42,101 30,362 1,387
Metals 53,413 69,725 766 53,413 69,725 766
Minerals & Stone 58,130 103,256 563 3,665 28,694 128 19,004 48,046 396 80,799 179,996 449
Petroleum Products 33,052 50,912 649 591 133 4,444 33,643 51,045 659
Pulp & Paper 56,374 88,067 640 56,374 88,067 640
Waste 8,004 17,517 457 8,004 17,517 457
Other 9,738   35,039   278     1,577   3,286   480 11,315   38,325   295
Totals $ 481,183   836,601   $ 575 $ 85,822   106,128   $ 809 $ 106,870   310,522   $ 344 $ 673,875   1,253,251   $ 538
 
Six Months Ended June 30, 2014   North American Operations   Australian Operations   U.K./European Operations   Total Operations
Commodity Group

Freight
Revenues

  Carloads*  

Average
Revenues
Per
Carload

Freight
Revenues

  Carloads*  

Average
Revenues
Per
Carload

Freight
Revenues

  Carloads*  

Average
Revenues
Per
Carload

Freight
Revenues

  Carloads*  

Average
Revenues
Per
Carload

Agricultural Products $ 54,601 101,367 $ 539 $ 19,168 32,653 $ 587 $ $ $ 73,769 134,020 $ 550
Autos & Auto Parts 11,347 15,705 723 11,347 15,705 723
Chemicals & Plastics 67,142 82,715 812 67,142 82,715 812
Coal & Coke 63,137 175,704 359 63,137 175,704 359
Food & Kindred Products 17,042 29,310 581 17,042 29,310 581
Intermodal 45,509 30,665 1,484 45,509 30,665 1,484
Lumber & Forest Products 40,492 67,843 597 40,492 67,843 597
Metallic Ores 8,796 10,866 809 53,597 27,848 1,925 62,393 38,714 1,612
Metals 64,027 89,813 713 64,027 89,813 713
Minerals & Stone 47,637 86,824 549 4,218 24,679 171 51,855 111,503 465
Petroleum Products 31,647 52,688 601 685 135 5,074 32,332 52,823 612
Pulp & Paper 56,806 85,127 667 56,806 85,127 667
Waste 8,402 19,079 440 8,402 19,079 440
Other 10,231   43,989   233         10,231   43,989   233
Totals $ 481,307   861,030   $ 559 $ 123,177   115,980   $ 1,062 $     $ $ 604,484   977,010   $ 619

* Represents physical railcars and the estimated railcar equivalents of commodities transported by metric ton or other measure, as well as intermodal units.


Non-GAAP Financial Measures

This earnings release contains references to adjusted income from operations, adjusted net income, adjusted diluted earnings per common share (EPS) and free cash flow, which are “non-GAAP financial measures” as this term is defined in Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934. In accordance with these rules, G&W has reconciled these non-GAAP financial measures to their most directly comparable U.S. GAAP measures.

Management views these non-GAAP financial measures as important measures of G&W’s operating performance or, in the case of free cash flow, an important financial measure of how well G&W is managing its assets and a useful indicator of cash flow that may be available for discretionary use by G&W. Management also views these non-GAAP financial measures as a way to assess comparability between periods. Key limitations of the free cash flow measure include the assumptions that G&W 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.

These non-GAAP financial measures are not intended to represent, and should not be considered more meaningful than, or as an alternative to, their most directly comparable GAAP measures. These non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of each of these non-GAAP financial measures to their most directly comparable GAAP measure (in millions, except percentages and per share amounts).

Reconciliations of Non-GAAP Financial Measures

Adjusted Income from Operations

Three Months Ended
June 30,
2015     2014
Operating revenues $ 542.2 $ 414.6
Operating expenses 442.8   304.5  
Income from operations (a) $ 99.5   $ 110.1  
 
Operating expenses $ 442.8 $ 304.5
Business development and related costs (0.8 ) (1.7 )
Net gain on sale of assets 0.5   1.4  
Adjusted operating expenses $ 442.5   $ 304.2  
 
Adjusted income from operations $ 99.8   $ 110.4  

(a) Income from operations is calculated as operating revenues less operating expenses.

 

     

Adjusted Net Income and Adjusted Diluted Earnings Per Common Share

Three Months Ended June 30, 2015 Net Income

Diluted
Earnings/
(Loss) Per
Common
Share

As reported $ 52.8 $ 0.92
Add back certain items, net of tax:
Business development and related costs 0.5 0.01
Net gain on sale of assets (0.3 ) (0.01 )
As adjusted $ 53.0   $ 0.93  
 
Three Months Ended June 30, 2014 Net Income

Diluted
Earnings/
(Loss) Per
Common
Share

As reported $ 60.7 $ 1.07
Add back certain items, net of tax:
Credit facility refinancing-related costs 2.9 0.05
Business development and related costs 1.0 0.02
Net gain on sale of assets (1.0 ) (0.02 )
As adjusted $ 63.7   $ 1.12  
 
 

Free Cash Flow

Six Months Ended
June 30,
2015 2014
Net cash provided by operating activities $ 184.7 $ 200.1
Net cash used in investing activities (879.8 ) (363.3 )
Net cash used for acquisitions 776.3   220.5  
Free cash flow $ 81.3 $ 57.3
New business investments 37.0   61.0  
Free cash flow before new business investments $ 118.3   $ 118.3  

Contacts

G&W Corporate Communications
Michael Williams, 1-203-202-8900
mwilliams@gwrr.com

Release Summary

Genesee & Wyoming Reports Results for the Second Quarter of 2015

Contacts

G&W Corporate Communications
Michael Williams, 1-203-202-8900
mwilliams@gwrr.com