Genesee & Wyoming Reports Results for the Fourth Quarter of 2017

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

Fourth Quarter Consolidated Highlights

  • Operating revenues increased 10.7% to $571.6 million from $516.5 million.
  • Reported operating income increased 101.9% to $108.2 million; Adjusted operating income increased 2.2% to $105.7 million.(1)
  • Reported diluted earnings per share (EPS) were $6.81 with 62.7 million weighted average shares outstanding, compared with reported diluted EPS in the fourth quarter of 2016 of $0.15 with 58.8 million weighted average shares outstanding; Adjusted diluted EPS decreased 8.3% to $0.77.(1)
  • Reported net income and diluted EPS included a $371.9 million, or $5.94 per share, income tax benefit associated with the United States Tax Cuts & Jobs Act signed into law in December 2017.
  • Net cash provided by operating activities for the twelve months ended December 31, 2017 increased 17.7% to $479.2 million; Adjusted free cash flow attributable to G&W increased 3.6% to $250.2 million.(1)

Fourth Quarter Segment Highlights

  • North America: Operating revenues from G&W's North American Operations decreased 0.6% to $320.2 million from $322.2 million, primarily due to an $11.5 million decrease in freight-related revenues, partially offset by an increase of $9.3 million in freight revenues. Freight-related revenues in the fourth quarter of 2016 included the recognition of $10.0 million of revenues from a multi-year take-or-pay volume shortfall under a crude-by-rail contract. Reported operating income from G&W's North American Operations decreased 10.5% to $74.6 million; Adjusted operating income from G&W's North American Operations decreased 13.6% to $75.5 million.(1)
  • Australia: Operating revenues from G&W's Australian Operations increased 23.1% to $75.5 million from $61.4 million, primarily due to new operations. Reported operating income from G&W's Australian Operations increased from $2.8 million to $17.6 million. Adjusted operating income from G&W's Australian Operations increased 66.1% to $22.5 million.(1)
  • U.K./Europe: Operating revenues from G&W's U.K./European Operations increased 32.3% to $175.8 million from $133.0 million, primarily due to new operations. Fourth quarter revenues also included a $10.5 million favorable impact from foreign currency appreciation. Reported operating income from G&W's U.K./European Operations was $16.0 million, compared with an operating loss of $32.6 million in 2016; Adjusted operating income from G&W's U.K./European Operations increased from $2.4 million to $7.6 million.(1)(2)

Comments on Fourth Quarter

Jack Hellmann, President and CEO of G&W, commented, “Our reported diluted EPS for the fourth quarter of 2017 were $6.81, of which a significant portion was a $372 million benefit from new tax legislation in the United States. Excluding the tax benefit and certain other items, our adjusted diluted EPS were $0.77 in the fourth quarter, as revenues in each of our geographic segments, North America, Australia and the U.K./Europe, finished the year in-line with our expectations.(1)

“In 2017, we generated adjusted free cash flow attributable to G&W of $250 million, a 3.6% increase over 2016, as we effectively managed both expenses and capital expenditures to more than offset flat revenue. In 2018, with an improving business outlook in each of our operating regions, we expect double digit growth in both adjusted earnings per share and adjusted free cash flow attributable to G&W. At the same time, we continue to evaluate acquisition and investment opportunities across G&W’s global footprint and have approximately $400 million of borrowing capacity under our revolving credit facility.”(1)

Financial Results

G&W's operating revenues increased $55.0 million, or 10.7%, to $571.6 million, in the fourth quarter of 2017, compared with $516.5 million in the fourth quarter of 2016. G&W's operating income in the fourth quarter of 2017 was $108.2 million, compared with $53.6 million in the fourth quarter of 2016. G&W's adjusted operating income in the fourth quarter of 2017 was $105.7 million, compared with $103.4 million in the fourth quarter of 2016.(1)

Reported net income attributable to G&W in the fourth quarter of 2017 was $426.6 million, compared with $8.9 million in the fourth quarter of 2016. Excluding the net impact of certain items affecting comparability between periods as discussed below, adjusted net income attributable to G&W in the fourth quarter of 2017 was $48.6 million, compared with $49.3 million in the fourth quarter of 2016.(1)

Reported diluted EPS in the fourth quarter of 2017 were $6.81 with 62.7 million weighted average shares outstanding, compared with reported diluted EPS in the fourth quarter of 2016 of $0.15 with 58.8 million weighted average shares outstanding. Excluding the net impact of certain items affecting comparability discussed below, adjusted diluted EPS in the fourth quarter of 2017 were $0.77 with 62.7 million weighted average shares outstanding, compared with adjusted diluted EPS in the fourth quarter of 2016 of $0.84 with 58.8 million weighted average shares outstanding.(1)

Impact of Glencore Rail (NSW) Pty Limited (GRail) Acquisition on G&W Financial Presentation

In conjunction with the December 1, 2016 acquisition of GRail, G&W issued a 48.9% equity stake in G&W’s Australian subsidiary, G&W Australia Holdings LP (GWA), the holding company for all of G&W's Australian businesses, to Macquarie Infrastructure and Real Assets (MIRA). G&W retained a 51.1% interest in GWA and continues to consolidate 100% of GWA in its financial statements and reports a noncontrolling interest for MIRA’s 48.9% equity ownership. As a result, G&W’s 2017 operating income includes 100% of the Australian business, while net income attributable to G&W reflects its 51.1% ownership position in the Australian business.

Prior to the GRail acquisition, G&W's Australian Operations provided rail operator services to GRail, which were recorded as freight-related revenues. These freight-related services continued post acquisition, but are eliminated in consolidation. Revenues from the GRail acquisition are now included in G&W’s consolidated freight revenues from new operations.

Items Affecting Comparability

In the fourth quarter of 2017 and 2016, 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 Taxes

Impact

 

After-Tax Net

Income/(Loss)

Attributable

to G&W

Impact

  Diluted EPS

Three Months Ended December 31, 2017

 
Buyout of Freightliner deferred consideration agreements $ 8.9 $ 8.9 $ 0.14
Australia impairment and related costs $ (4.9 ) $ (1.8 ) $ (0.03 )
Restructuring costs $ (1.4 ) $ (1.2 ) $ (0.02 )
Corporate development and related costs $ (1.1 ) $ (0.7 ) $ (0.01 )
U.K. coal restructuring and related charges $ 1.1 $ 0.9 $ 0.01
Impact of United States Tax Cuts & Jobs Act $ $ 371.9 $ 5.94
 

Three Months Ended December 31, 2016

Restructuring costs $ (1.9 ) $ (1.4 ) $ (0.02 )
Corporate development and related costs $ (19.2 ) $ (15.9 ) $ (0.27 )
U.K. coal railcar leases $ (10.5 ) $ (8.6 ) $ (0.15 )
ERS impairment and related charges $ (21.5 ) $ (21.5 ) $ (0.37 )
Write-off of debt issuance costs $ (1.3 ) $ (0.5 ) $ (0.01 )
Q4 2016 Short Line Tax Credit $ $ 7.5 $ 0.13
 

In the fourth quarter of 2017, G&W’s results included an $8.9 million reduction to other expenses as a result of the buyout of the Freightliner acquisition deferred consideration agreements with certain former Freightliner management holders, Australia impairment and related charges of $4.9 million, which included $5.9 million related to the write down of track assets on idle branch lines in South Australia, partially offset by a $0.9 million recovery of prior year impairment and related costs associated with Arrium Limited's voluntary administration, $1.4 million of restructuring costs, $1.1 million of corporate development and related costs and a $1.1 million reduction to expense associated with a prior year accrual established for the restructuring of our U.K. coal business. The fourth quarter of 2017 also included a $371.9 million estimated income tax benefit primarily as a result of reducing the value of our net deferred tax liabilities from a 35% U.S. federal income tax rate to the newly enacted rate of 21% associated with the United States Tax Cuts & Jobs Act signed into law in December 2017.

In the fourth quarter of 2016, G&W’s results included U.K./Europe impairment and related charges of $32.0 million, which included $21.5 million of charges related to ERS Railways, B.V. (ERS) and $10.5 million of charges related to leases of idle coal railcars in the U.K. The fourth quarter of 2016 also included corporate development and related costs of $19.2 million, primarily related to the GRail, Providence and Worcester Railroad Company (P&W) and Pentalver Transportation Limited (Pentalver) transactions, write-off of debt issuance costs of $1.3 million related to the termination of Australia's term loan as a result of the entry into a new Australian credit facility in conjunction with the GRail acquisition, and restructuring costs of $1.9 million. The fourth quarter of 2016 also included an income tax benefit of $7.5 million associated with the United States Short Line Tax Credit, which expired on December 31, 2016.

Fourth Quarter Results by Segment

Operating revenues from G&W's North American Operations decreased $2.0 million, or 0.6%, to $320.2 million in the fourth quarter of 2017, compared with $322.2 million in the fourth quarter of 2016. Excluding $4.0 million of revenues from new operations, North American Operations same railroad revenues decreased by $7.2 million, or 2.2%, primarily due to a decrease in freight-related revenues. The decrease in freight-related revenues was primarily due to $10.0 million of revenue recognized in the fourth quarter of 2016 associated with a four-year take-or-pay volume commitment contract.

North American Operations traffic decreased 7,517 carloads, or 1.9%, to 395,422 carloads in the fourth quarter of 2017. Excluding 5,246 carloads from new operations, same railroad traffic decreased 12,763 carloads, or 3.2%, in the fourth quarter of 2017, compared with the fourth quarter of 2016. The same railroad traffic decrease was principally due to decreases of 9,444 carloads of coal and coke traffic (primarily in the Midwest, Western and Northeast regions) and 6,239 carloads of agricultural products traffic (primarily in the Midwest and Central regions), partially offset by increases of 3,481 carloads of minerals and stone traffic (primarily in the Central and Western regions). All remaining traffic decreased by a net 561 carloads.

Operating income from G&W's North American Operations in the fourth quarter of 2017 was $74.6 million, compared with $83.4 million in the fourth quarter of 2016. The operating ratio for North American Operations was 76.7% in the fourth quarter of 2017, compared with an operating ratio of 74.1% in the fourth quarter of 2016. Adjusted operating income from G&W's North American Operations in the fourth quarter of 2017 was $75.5 million, compared with $87.4 million in the fourth quarter of 2016. The adjusted operating ratio for North American Operations was 76.4% in the fourth quarter of 2017, compared with 72.9% in the fourth quarter of 2016. Operating income and adjusted operating income in the fourth quarter of 2016 included $10.0 million of income associated with a four-year take-or-pay volume commitment contract.(1)

Operating revenues from G&W's Australian Operations increased $14.2 million, or 23.1%, to $75.5 million in the fourth quarter of 2017, compared with $61.4 million in the fourth quarter of 2016. Excluding $11.6 million of revenues from new operations and a $1.7 million increase due to the impact of foreign currency appreciation, Australian Operations same railroad revenues increased by $0.8 million, or 1.3%.(2)

Australian Operations traffic increased 50,610 carloads, or 61.4%, to 132,999 carloads in the fourth quarter of 2017. Excluding 56,366 carloads from new operations, same railroad traffic decreased 5,756 carloads, or 7.0%, in the fourth quarter of 2017 compared with the fourth quarter of 2016. The carload decrease was principally due to decreases of 3,263 carloads of coal and coke traffic and 2,556 carloads of agricultural products traffic. All remaining traffic increased by a net 63 carloads.

Operating income from G&W's Australian Operations in the fourth quarter of 2017 was $17.6 million, compared with $2.8 million in the fourth quarter of 2016. The operating ratio for Australian Operations was 76.7% in the fourth quarter of 2017, compared with an operating ratio of 95.4% in the fourth quarter of 2016. Adjusted operating income from G&W's Australian Operations in the fourth quarter of 2017 was $22.5 million, compared with $13.5 million in the fourth quarter of 2016. The adjusted operating ratio for Australian Operations was 70.2% in the fourth quarter of 2017, compared with 77.9% in the fourth quarter of 2016.(1)

Operating revenues from G&W's U.K./European Operations increased $42.9 million, or 32.3%, to $175.8 million in the fourth quarter of 2017, compared with $133.0 million in the fourth quarter of 2016. Excluding $37.8 million from new operations and a $10.5 million increase due to the impact of foreign currency appreciation, U.K./European Operations same railroad revenues decreased $5.4 million, or 3.8%, primarily due to a decrease in Continental Europe intermodal revenues following the discontinuation of certain intermodal train services as part of the restructuring of ERS, partially offset by stronger U.K. intermodal and aggregates in Poland and the U.K..(2)

U.K./European Operations traffic decreased 7,215 carloads, or 2.6%, to 274,007 carloads in the fourth quarter of 2017. The traffic decrease was principally due to decreases of 9,458 carloads of coal and coke traffic (primarily in the U.K. and Poland) and 4,209 carloads of intermodal traffic (primarily in Continental Europe), partially offset by an increase of 6,453 carloads of minerals and stone traffic (primarily in the U.K. and Poland).

Operating income from G&W's U.K./European Operations in the fourth quarter of 2017 was $16.0 million, compared with an operating loss of $32.6 million in the fourth quarter of 2016. The operating ratio for U.K./European Operations was 90.9% in the fourth quarter of 2017, compared with 124.5% in the fourth quarter of 2016. Adjusted operating income from G&W's U.K./European Operations in the fourth quarter of 2017 was $7.6 million, compared with $2.4 million in the fourth quarter of 2016. The increase was primarily due to the impact of the restructuring of ERS, improvements in the U.K. intermodal operations and the contribution from the Pentalver acquisition. The adjusted operating ratio for U.K./European Operations was 95.7% in the fourth quarter of 2017, compared with 98.2% in the fourth quarter of 2016.(1)

Consolidated Annual Results

2017 Segment Highlights

  • North America: Operating revenues from G&W's North American Operations increased 3.0% to $1,274.3 million from $1,236.8 million. Reported operating income from G&W's North American Operations decreased 4.9% to $303.9 million from $319.6 million; Adjusted operating income from G&W's North American Operations decreased 4.6% to $312.6 million from $327.6 million.(1)
  • Australia: Operating revenues from G&W's Australian Operations increased 38.2% to $307.5 million from $222.6 million. Reported operating income from G&W's Australian Operations increased to $77.3 million from $4.8 million; Adjusted operating income from G&W's Australian Operations increased to $82.2 million from $41.4 million, primarily due to new operations from the GRail acquisition.(1)
  • U.K./Europe: Operating revenues from G&W's U.K./European Operations increased 15.5% to $626.2 million from $542.2 million, primarily due to new operations from the Pentalver acquisition. Operating revenues included a $13.4 million benefit from foreign currency appreciation. Reported operating income from G&W's U.K./European Operations increased to $17.3 million from an operating loss of $34.7 million; Adjusted operating income from G&W's U.K./European Operations increased to $20.7 million from $5.2 million, primarily due to the impact of the restructuring of ERS and the contribution of the Pentalver acquisition.(1)(2)

Reported net income attributable to G&W for the year ended December 31, 2017 was $549.1 million, compared with $141.1 million for the year ended December 31, 2016. Excluding the impact of certain items affecting comparability listed below, adjusted net income attributable to G&W for the year ended December 31, 2017 was $182.0 million, compared with $182.4 million for the year ended December 31, 2016.(1)

G&W’s diluted EPS for the year ended December 31, 2017 were $8.79 with 62.5 million weighted average shares outstanding, compared with diluted EPS of $2.42 with 58.3 million weighted average shares outstanding for the year ended December 31, 2016. Excluding certain items affecting comparability listed below, G&W’s adjusted diluted EPS for the year ended December 31, 2017 were $2.91 with 62.5 million weighted average shares outstanding, compared with adjusted diluted EPS of $3.13 with 58.3 million weighted average shares outstanding for the year ended December 31, 2016.(1)

G&W’s 2017 and 2016 annual 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 Taxes

Impact

 

After-Tax Net

Income/(Loss)

Attributable

to G&W

Impact

  Diluted EPS

Year Ended December 31, 2017

 
Corporate development and related costs $ (11.9 ) $ (8.1 ) $ (0.13 )
Restructuring costs $ (10.2 ) $ (9.0 ) $ (0.14 )
Australia impairment and related costs $ (4.9 ) $ (1.8 ) $ (0.03 )
Buyout of Freightliner deferred consideration agreements $ 8.9 $ 8.9 $ 0.14
Gain on sale of investment $ 1.6 $ 1.0 $ 0.02
U.K. coal restructuring and related charges $ 1.1 $ 0.9 $ 0.01
Impact of United States Tax Cuts & Jobs Act $ $ 371.9 $ 5.96
Recognition of unrecognized tax benefits $ $ 3.3 $ 0.05
 

Year Ended December 31, 2016

Corporate development and related costs $ (26.6 ) $ (20.7 ) $ (0.36 )
Restructuring costs $ (8.2 ) $ (6.4 ) $ (0.11 )
Australia impairment and related costs $ (21.1 ) $ (16.8 ) $ (0.29 )
ERS impairment and related costs $ (21.5 ) $ (21.5 ) $ (0.37 )
U.K. coal railcar leases $ (10.5 ) $ (8.6 ) $ (0.15 )
Write-off of debt issuance costs $ (1.3 ) $ (0.5 ) $ (0.01 )
Impact of reduction in U.K. effective tax rate $ $ 4.3 $ 0.07
2016 Short Line Tax Credit $ $ 28.8 $ 0.50
 
 

Adjusted Free Cash Flow Measures (1)

Adjusted free cash flow measures for the twelve months ended December 31, 2017 and 2016 were as follows (in millions):

    Twelve Months Ended
2017   2016
Net cash provided by operating activities $ 479.2 $ 407.1
Allocation of adjusted cash flow to noncontrolling interest(a) (27.6 )  
Adjusted net cash provided by operating activities attributable to G&W 451.6 407.1
Core capital expenditures(b) (181.8 ) (141.1 )
Adjusted free cash flow attributable to G&W before new business investments and grant funded projects 269.8 265.9
New business investments (8.6 ) (26.1 )
Grant funded projects, net of proceeds received from outside parties(c) (11.0 ) 1.6  
Adjusted free cash flow attributable to G&W $ 250.2   $ 241.5  
(a)   Allocation of adjusted cash flow to noncontrolling interest (MIRA's 48.9% equity ownership of GWA since December 1, 2016) is calculated as 48.9% of cash flow provided by operating activities of G&W’s Australian Operations, less net purchases of property and equipment of G&W’s Australian Operations. The timing and amount of actual distributions, if any, from GWA to G&W and MIRA made in any given period will vary and could differ materially from the amounts presented. There were no such distributions made for both the twelve months ended December 31, 2017 and 2016. G&W expressly disclaims any direct correlation between the allocation of adjusted cash flow to noncontrolling interest and actual distributions made in any given period.
(b) Core capital expenditures represents purchases of property and equipment as presented on the Statement of Cash Flows less grant proceeds from outside parties, insurance proceeds for the replacement of assets and proceeds from disposition of property and equipment, each of which as presented on the Statement of Cash Flows, less new business investments and grant funded projects.
(c) Grant funded projects represents purchases of property and equipment for projects partially or entirely funded by outside parties, net of grant proceeds from outside parties as presented on the Statement of Cash Flows.
 

Conference Call and Webcast Details

As previously announced, G&W’s conference call to discuss financial results for the fourth quarter of 2017 will be held on Thursday, February 8, 2018, at 11 a.m. EST. The dial-in number for the teleconference in the U.S. is (800) 288-9626; outside the U.S. is (612) 332-0345, 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. EST on February 8, 2018 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 439193.

About G&W

G&W owns or leases 122 freight railroads organized in nine operating regions with 8,000 employees serving 3,000 customers.

  • G&W's seven North American regions serve 41 U.S. states and four Canadian provinces and include 115 short line and regional freight railroads, with more than 13,000 track-miles.
  • G&W's Australia Region serves New South Wales, the Northern Territory and South Australia and operates the 1,400-mile Tarcoola-to-Darwin rail line. The Australia Region is 51.1% owned by G&W and 48.9% owned by a consortium of funds and clients managed by Macquarie Infrastructure and Real Assets.
  • G&W's U.K./Europe Region includes the U.K.'s largest rail maritime intermodal operator and second-largest freight rail provider, as well as regional services in Continental Europe.

G&W subsidiaries and joint ventures also provide rail service at more than 40 major ports, rail-ferry service between the U.S. Southeast and Mexico, transload services, contract coal loading, and industrial railcar switching and repair.

From time to time, we may use our website as a channel of distribution of material company information. Financial and other material information regarding G&W is routinely posted on and accessible at www.gwrr.com/investors. In addition, you may automatically receive email alerts and other information about us by enrolling your email address in the "Email Alerts" section of www.gwrr.com/investors. The information contained on or connected to our Internet website is not deemed to be incorporated by reference in this press release or filed with the United States Security and Exchange Commission.

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 2016 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 operating income, adjusted operating ratio, adjusted net income attributable to G&W, adjusted diluted earnings per common share (EPS) and the adjusted free cash flow measures of adjusted net cash provided by operating activities attributable to G&W, adjusted free cash flow attributable to G&W and adjusted free cash flow attributable to G&W before new business investments and grant funded projects 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.
 
2. Foreign exchange impact is calculated by comparing the prior year period results translated from local currency to U.S. dollars using current period exchange rates to the prior period results in U.S. dollars as reported.

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016
(in thousands, except per share amounts)
(unaudited)
         
Three Months Ended Twelve Months Ended
December 31, December 31,
2017 2016 2017 2016
OPERATING REVENUES $ 571,576 $ 516,534 $ 2,208,044 $ 2,001,527
OPERATING EXPENSES   463,397     462,963     1,809,582     1,711,915  
OPERATING INCOME 108,179 53,571 398,462 289,612
INTEREST INCOME 811 280 2,082 1,107
INTEREST EXPENSE (26,860 ) (22,592 ) (107,291 ) (75,641 )
OTHER INCOME/(EXPENSE), NET   2,555     (2,534 )   2,266     413  
INCOME BEFORE INCOME TAXES 84,685 28,725 295,519 215,491
BENEFIT FROM/(PROVISION FOR) INCOME TAXES   343,291     (19,832 )   261,259     (74,395 )
NET INCOME 427,976 8,893 556,778 141,096

LESS: NET INCOME/(LOSS) ATTRIBUTABLE TO
           NONCONTROLLING INTEREST

  1,410     (41 )   7,727     (41 )
NET INCOME ATTRIBUTABLE TO GENESEE & WYOMING INC. $ 426,566   $ 8,934   $ 549,051   $ 141,137  

BASIC EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO GENESEE & WYOMING INC.
COMMON STOCKHOLDERS

$ 6.90   $ 0.15   $ 8.92   $ 2.46  
WEIGHTED AVERAGE SHARES - BASIC   61,780     57,832     61,579     57,324  

DILUTED EARNINGS PER COMMON SHARE
ATTRIBUTABLE TO GENESEE & WYOMING INC.
COMMON STOCKHOLDERS

$ 6.81   $ 0.15   $ 8.79   $ 2.42  
WEIGHTED AVERAGE SHARES - DILUTED   62,676     58,785     62,464     58,256  

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2017 AND 2016
(in thousands)
(unaudited)
               
December 31,

       2017       

       2016       

ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 80,472 $ 32,319
Accounts receivable, net 416,705 363,923
Materials and supplies 57,750 43,621
Prepaid expenses and other 34,606 45,475
Total current assets 589,533 485,338
PROPERTY AND EQUIPMENT, net 4,656,921 4,503,319
GOODWILL 1,165,587 1,125,596
INTANGIBLE ASSETS, net 1,567,038 1,472,376
DEFERRED INCOME TAX ASSETS, net 3,343 2,671
OTHER ASSETS, net 52,475 45,658
Total assets $ 8,034,897 $ 7,634,958
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 27,853 $ 52,538
Accounts payable 253,993 266,867
Accrued expenses 185,935 159,705
Total current liabilities 467,781 479,110
LONG-TERM DEBT, less current portion 2,303,442 2,306,915
DEFERRED INCOME TAX LIABILITIES, net 873,194 1,162,221
DEFERRED ITEMS - grants from outside parties 321,592 301,383
OTHER LONG-TERM LIABILITIES 172,796 198,208
TOTAL EQUITY 3,896,092 3,187,121
Total liabilities and equity $ 8,034,897 $ 7,634,958

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2017 AND 2016
(in thousands)
(unaudited)
      Twelve Months Ended
December 31,

       2017       

 

       2016       

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 556,778 $ 141,096
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 250,457 205,188
Stock-based compensation 17,554 17,976
Deferred income taxes (319,249 ) 33,442
Net loss on sale and impairment of assets 4,254 32,484
Changes in assets and liabilities which (used) provided cash, net of effect of acquisitions:
Accounts receivable, net (12,969 ) (15,952 )
Materials and supplies 2,474 750
Prepaid expenses and other 23,973 836
Accounts payable and accrued expenses (35,341 ) (20,468 )
Other assets and liabilities, net (8,725 ) 11,715  
Net cash provided by operating activities 479,206   407,067  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (228,472 ) (219,544 )
Grant proceeds from outside parties 20,249 36,094
Cash paid for acquisitions, net of cash acquired (107,586 ) (969,476 )
Proceeds from the sale of investments 2,100
Insurance proceeds for the replacement of assets 1,590 15,201
Proceeds from disposition of property and equipment 5,225   2,691  
Net cash used in investing activities (306,894 ) (1,135,034 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on revolving line-of-credit, long-term debt and capital lease obligations (661,561 ) (1,104,222 )
Proceeds from revolving line-of-credit and long-term borrowings 523,672 1,074,516
Proceeds from noncontrolling interest 476,828
Proceeds from Class A common stock issuance 286,500
Stock issuance costs (743 )
Debt amendment/issuance costs (17,731 )
Proceeds from employee stock purchases 11,583 9,317
Treasury stock acquisitions (4,603 ) (4,541 )
Net cash (used in)/provided by financing activities (130,909 ) 719,924  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 6,750   4,421  
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 48,153 (3,622 )
CASH AND CASH EQUIVALENTS, beginning of period 32,319   35,941  
CASH AND CASH EQUIVALENTS, end of period $ 80,472   $ 32,319  

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                 
Three Months Ended December 31, Twelve Months Ended December 31,
2017 2016 2017 2016
Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Operating revenues:

Freight revenues $ 392,240 68.6% $ 354,563 68.7% $ 1,553,875 70.4% $ 1,371,566 68.5%
Freight-related revenues 145,770 25.5% 139,693 27.0% 533,651 24.1% 536,359 26.8%
All other revenues 33,566 5.9% 22,278 4.3% 120,518 5.5% 93,602 4.7%
Total operating revenues $ 571,576 100.0% $ 516,534 100.0% $ 2,208,044 100.0% $ 2,001,527 100.0%
 

Operating expenses:

Labor and benefits(a) $ 164,156 28.7% $ 157,817 30.5% $ 660,284 29.9% $ 633,114 31.5%
Equipment rents(b) 32,504 5.7% 45,738 8.8% 132,903 6.0% 159,372 8.0%
Purchased services(c) 67,761 11.9% 48,921 9.5% 244,119 11.1% 198,046 9.9%
Depreciation and amortization(d) 63,948 11.2% 54,093 10.5% 250,457 11.3% 205,188 10.3%
Diesel fuel used in train operations 41,709 7.3% 34,352 6.7% 147,427 6.7% 118,203 5.9%
Electricity used in train operations 1,449 0.3% 3,451 0.7% 7,521 0.3% 13,346 0.7%
Casualties and insurance 13,647 2.4% 10,070 1.9% 46,993 2.1% 38,884 1.9%
Materials 29,658 5.2% 19,860 3.8% 107,519 4.9% 82,522 4.1%
Trackage rights 20,838 3.6% 22,685 4.4% 87,490 4.0% 87,194 4.4%
Net loss on sale and impairment of assets(d) 5,350 0.9% 20,491 4.0% 4,254 0.2% 32,484 1.6%
Restructuring costs 1,416 0.2% 1,862 0.4% 10,160 0.5% 8,182 0.4%
Other expenses(e) 20,961 3.7% 43,623 8.4% 110,455 5.0% 135,380 6.8%
Total operating expenses $ 463,397 81.1% $ 462,963 89.6% $ 1,809,582 82.0% $ 1,711,915 85.5%
Operating income $ 108,179 $ 53,571 $ 398,462 $ 289,612
Expenditures for additions to property & equipment, net of grants from outside parties $ 75,116 $ 53,879 $ 208,223 $ 183,450
 
(a) Includes $3.2 million of corporate development and related costs for the twelve months ended December 31, 2017. Includes $2.4 million and $2.8 million of corporate development and related costs for the three and twelve months ended December 31, 2016, respectively.
(b)

Includes $1.1 million reduction to expense related to U.K. coal restructuring and related charges for both the three and twelve months ended December 31, 2017. Includes $9.9 million related to leases of idle excess U.K. coal railcars for both the three and twelve months ended December 31, 2016.

(c) Includes $0.1 million and $0.5 million of corporate development and related costs for the three and twelve months ended December 31, 2017, respectively.
(d) Includes an impairment charge of $5.8 million associated with our Australia business for both the three and twelve months ended December 31, 2017. Includes an impairment charge of $18.9 million associated with our ERS business and $0.5 million related to leasehold improvements associated with leases of idle excess U.K. coal railcars for both the three and twelve months ended December 31, 2016. Includes an impairment charge of $13.0 million associated with an Australia iron ore customer entering into voluntary administration for the twelve months ended December 31, 2016.
(e) Includes $0.9 million and $8.2 million of corporate development and related costs for the three and twelve months ended December 31, 2017, respectively. Includes $0.9 million recovery of prior year impairment and related costs associated with Arrium's voluntary administration for the three and twelve months ended December 31, 2017. Includes an $8.9 million reduction to expense as a result of a buyout of the deferred consideration agreements for both the three and twelve months ended December 31, 2017. Includes a $2.6 million write-down of accounts receivable associated with our ERS business for both the three and twelve months ended December 31, 2016. Includes the write-down of accounts receivable of $8.1 million associated with an Australia iron ore customer for the twelve months ended December 31, 2016. Includes $13.6 million and $20.5 million of corporate development and related costs for the three and twelve months ended December 31, 2016, respectively.

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
NORTH AMERICAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                 
Three Months Ended December 31, Twelve Months Ended December 31,
2017 2016 2017 2016
Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Operating revenues:

Freight revenues $ 241,734 75.5% $ 232,465 72.1% $ 961,356 75.4% $ 913,619 73.9%
Freight-related revenues 62,809 19.6% 74,295 23.1% 249,623 19.6% 258,922 20.9%
All other revenues 15,665 4.9% 15,457 4.8% 63,306 5.0% 64,223 5.2%
Total operating revenues $ 320,208 100.0% $ 322,217 100.0% $ 1,274,285 100.0% $ 1,236,764 100.0%
 

Operating expenses:

Labor and benefits(a) $ 101,258 31.7% $ 101,526 31.5% $ 416,468 32.8% $ 397,129 32.1%
Equipment rents 13,146 4.1% 14,199 4.4% 53,139 4.2% 57,680 4.7%
Purchased services(b) 14,465 4.5% 15,198 4.7% 59,815 4.7% 62,369 5.0%
Depreciation and amortization 40,184 12.5% 37,129 11.5% 158,006 12.4% 147,527 11.9%
Diesel fuel used in train operations 22,814 7.1% 17,445 5.4% 76,852 6.0% 59,023 4.8%
Casualties and insurance 10,730 3.5% 8,705 2.7% 37,262 2.9% 29,103 2.4%
Materials 11,344 3.5% 11,927 3.7% 49,757 3.9% 50,095 4.0%
Trackage rights 9,905 3.1% 9,846 3.1% 38,637 3.0% 36,645 3.0%
Net (gain)/loss on sale and impairment of assets (586) (0.2)% 642 0.2% (1,456) (0.1)% (209) —%
Restructuring costs 83 —% 79 —% 467 —% 884 0.1%
Other expenses(c) 22,250 6.9% 22,124 6.9% 81,456 6.4% 76,967 6.2%
Total operating expenses $ 245,593 76.7% $ 238,820 74.1% $ 970,403 76.2% $ 917,213 74.2%
Operating income $ 74,615 $ 83,397 $ 303,882 $ 319,551
Expenditures for additions to property & equipment, net of grants from outside parties $ 60,745 $ 42,052 $ 166,685 $ 137,334
 
(a) Includes $3.1 million of corporate development and related costs for the twelve months ended December 31, 2017, primarily associated with severance costs related to the integration of the P&W. Includes $1.7 million and $1.9 million of corporate development and related costs for the three and twelve months ended December 31, 2016, respectively.
(b) Includes $0.1 million of corporate development and related costs for the twelve months ended December 31, 2017.
(c) Includes $0.8 million and $5.0 million of corporate development and related costs for the three and twelve months ended December 31, 2017, respectively, primarily associated with ongoing corporate and development projects as well as projects that are no longer active. Includes $2.3 million and $5.3 million of corporate development and related costs for the three and twelve months ended December 31, 2016, respectively.

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
AUSTRALIAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION*
(dollars in thousands)
(unaudited)
                 
Three Months Ended December 31, Twelve Months Ended December 31,
2017 2016 2017 2016
Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Operating revenues:

Freight revenues $ 63,622 84.3% $ 40,232 65.6% $ 254,653 82.8% $ 120,622 54.2%
Freight-related revenues 10,607 14.0% 19,634 32.0% 46,696 15.2% 95,776 43.0%
All other revenues 1,295 1.7% 1,489 2.4% 6,161 2.0% 6,188 2.8%
Total operating revenues $ 75,524 100.0% $ 61,355 100.0% $ 307,510 100.0% $ 222,586 100.0%
 

Operating expenses:

Labor and benefits(a) $ 16,488 21.7% $ 17,226 28.1% $ 68,935 22.4% $ 66,547 29.9%
Equipment rents 1,362 1.8% 1,630 2.7% 5,577 1.8% 6,514 2.9%
Purchased services 6,448 8.5% 5,997 9.8% 26,269 8.6% 23,429 10.5%
Depreciation and amortization 15,227 20.2% 9,845 16.0% 61,142 19.9% 30,863 13.9%
Diesel fuel used in train operations 6,323 8.3% 5,701 9.3% 25,236 8.2% 19,743 8.9%
Casualties and insurance 1,283 1.7% 347 0.6% 5,502 1.8% 5,373 2.4%
Materials 2,077 2.8% 2,526 4.1% 10,706 3.5% 10,559 4.7%
Trackage rights 2,241 3.0% 2,846 4.6% 12,633 4.1% 10,047 4.5%
Net loss on sale and impairment of assets(b) 5,856 7.8% 349 0.6% 5,797 1.9% 13,341 6.0%
Restructuring costs —% —% 338 0.1% 789 0.4%
Other expenses(c) 653 0.9% 12,080 19.6% 8,124 2.6% 30,571 13.7%
Total operating expenses $ 57,958 76.7% $ 58,547 95.4% $ 230,259 74.9% $ 217,776 97.8%
Operating income $ 17,566 $ 2,808 $ 77,251 $ 4,810
Expenditures for additions to property & equipment, net of grants from outside parties $ 6,355 $ 3,191 $ 16,076 $ 11,285
 
* Amounts shown represent 100% of our Australian Operations, which is 51.1% owned by G&W as of December 1, 2016.
(a) Includes $0.7 million and $0.8 million of corporate development and related costs for the three and twelve months ended December 31, 2016, respectively.
(b) Includes the write down of track assets on idle branch lines in South Australia of $5.8 million for the three and twelve months ended December 31, 2017. Includes an impairment charge of $13.0 million associated with an iron ore customer entering into voluntary administration for the twelve months ended December 31, 2016.
(c) Includes a $0.3 million reduction of corporate development and related costs for the twelve months ended December 31, 2017 associated with a refund. Includes a $0.9 million recovery of prior year impairment and related costs associated with Arrium's voluntary administration for the three and twelve months ended December 31, 2017. Includes $10.0 million and $13.9 million of corporate development and related costs for the three and twelve months ended December 31, 2016, respectively. Includes the write-down of accounts receivable of $8.1 million associated with an iron ore customer entering into voluntary administration for the twelve months ended December 31, 2016.

 
 
GENESEE & WYOMING INC. AND SUBSIDIARIES
U.K./EUROPEAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                 
Three Months Ended December 31, Twelve Months Ended December 31,
2017 2016 2017 2016
Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Amount

% of

Revenue

Operating revenues:

Freight revenues $ 86,884 49.5% $ 81,866 61.6% $ 337,866 53.9% $ 337,325 62.2%
Freight-related revenues 72,354 41.1% 45,764 34.4% 237,332 37.9% 181,661 33.5%
All other revenues 16,606 9.4% 5,332 4.0% 51,051 8.2% 23,191 4.3%
Total operating revenues $ 175,844 100.0% $ 132,962 100.0% $ 626,249 100.0% $ 542,177 100.0%
 

Operating expenses:

Labor and benefits(a) $ 46,410 26.5% $ 39,065 29.4% $ 174,881 27.9% $ 169,438 31.3%
Equipment rents (b) 17,996 10.3% 29,909 22.4% 74,187 11.9% 95,178 17.5%
Purchased services(c) 46,848 26.6% 27,726 20.8% 158,035 25.2% 112,248 20.7%
Depreciation and amortization 8,537 4.9% 7,119 5.4% 31,309 5.0% 26,798 4.9%
Diesel fuel used in train operations 12,572 7.1% 11,206 8.4% 45,339 7.2% 39,437 7.3%
Electricity used in train operations 1,449 0.8% 3,451 2.6% 7,521 1.2% 13,346 2.5%
Casualties and insurance 1,634 0.9% 1,018 0.8% 4,229 0.7% 4,408 0.8%
Materials 16,237 9.2% 5,407 4.1% 47,056 7.5% 21,868 4.0%
Trackage rights 8,692 4.9% 9,993 7.5% 36,220 5.8% 40,502 7.5%
Net loss/(gain) on sale and impairment of assets (d) 80 —% 19,500 14.7% (87) —% 19,352 3.6%
Restructuring costs 1,333 0.8% 1,783 1.3% 9,355 1.5% 6,509 1.2%
Other expenses (e) (1,942) (1.1)% 9,419 7.1% 20,875 3.3% 27,842 5.1%
Total operating expenses $ 159,846 90.9% $ 165,596 124.5% $ 608,920 97.2% $ 576,926 106.4%
Operating income/(loss) $ 15,998 $ (32,634) $ 17,329 $ (34,749)
Expenditures for additions to property & equipment, net of grants from outside parties $ 8,016 $ 8,636 $ 25,462 $ 34,831
 
(a) Includes $0.1 million of corporate development and related costs for the twelve months ended December 31, 2017, associated with severance costs related to the integration of Pentalver. Includes $0.2 million of corporate development and related costs for the twelve months ended December 31, 2016.
(b)

Includes a $1.1 million reduction to expense related to U.K. coal restructuring and related charges for the three and twelve months ended December 31, 2017. Includes $9.9 million related to leases of idle excess U.K. coal railcars for both the three and twelve months ended December 31, 2016.

(c) Includes $0.1 million and 0.4 million of corporate development and related costs for the three and twelve months ended December 31, 2017, respectively, associated with the acquisition and integration of Pentalver.
(d) Includes an impairment charge of $18.9 million associated with our ERS business and $0.5 million related to leasehold improvements associated with leases of idle excess U.K. coal railcars for both the three and twelve months ended December 31, 2016.
(e) Includes $0.1 million and $3.4 million of corporate development and related costs for the three and twelve months ended December 31, 2017, respectively, associated with the acquisition and integration of Pentalver. Includes an $8.9 million reduction to expense as a result of a buyout of the deferred consideration agreements for the three and twelve months ended December 31, 2017. Includes $2.6 million write-down of accounts receivable associated with our ERS business for both the three and twelve months ended December 31, 2016. Includes $1.3 million of corporate development and related costs for the both the three and twelve months ended December 31, 2016.

 
 
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

December 31, 2017

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 $ 31,329 51,679 $ 606 $ 4,825 8,105 $ 595 $ 1,748 1,323 $ 1,321 $ 37,902 61,107 $ 620
Autos & Auto Parts 5,882 9,541 616 5,882 9,541 616
Chemicals & Plastics 36,592 43,041 850 36,592 43,041 850
Coal & Coke 18,812 53,614 351 31,386 88,306 355 2,508 4,070 616 52,706 145,990 361
Food & Kindred Products 8,568 15,216 563 8,568 15,216 563
Intermodal 254 2,525 101 17,320 14,695 1,179 63,691 220,881 288 81,265 238,101 341
Lumber & Forest Products 22,297 35,836 622 22,297 35,836 622
Metallic Ores 2,872 4,085 703 7,820 5,344 1,463 10,692 9,429 1,134
Metals 25,182 32,392 777 25,182 32,392 777
Minerals & Stone 33,065 53,552 617 2,091 16,478 127 18,937 47,733 397 54,093 117,763 459
Petroleum Products 17,692 24,593 719 180 71 2,535 17,872 24,664 725
Pulp & Paper 27,763 41,041 676 27,763 41,041 676
Waste 6,063 12,620 480 6,063 12,620 480
Other   5,363 15,687 342       5,363 15,687 342
Totals $ 241,734 395,422 $ 611 $ 63,622 132,999 $ 478 $ 86,884 274,007 $ 317 $ 392,240 802,428 $ 489
 

Three Months Ended

December 31, 2016

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 $ 31,026 57,669 $ 538 $ 4,192 10,661 $ 393 $ 1,101 1,058 $ 1,041 $ 36,319 69,388 $ 523
Autos & Auto Parts 4,886 8,321 587 4,886 8,321 587
Chemicals & Plastics 34,143 43,680 782 34,143 43,680 782
Coal & Coke 21,353 63,058 339 11,112 35,203 316 4,031 13,528 298 36,496 111,789 326
Food & Kindred Products 8,593 15,905 540 8,593 15,905 540
Intermodal 87 1,246 70 17,456 15,328 1,139 61,976 225,090 275 79,519 241,664 329
Lumber & Forest Products 20,496 33,450 613 44 158 278 20,540 33,608 611
Metallic Ores 3,741 4,814 777 5,384 4,625 1,164 60 108 556 9,185 9,547 962
Metals 25,472 34,134 746 25,472 34,134 746
Minerals & Stone 28,745 48,756 590 1,936 16,508 117 14,654 41,280 355 45,335 106,544 426
Petroleum Products 18,184 26,308 691 152 64 2,375 18,336 26,372 695
Pulp & Paper 25,436 39,578 643 25,436 39,578 643
Waste 5,283 11,696 452 5,283 11,696 452
Other   5,020 14,324 350       5,020 14,324 350
Totals $ 232,465 402,939 $ 577 $ 40,232 82,389 $ 488 $ 81,866 281,222 $ 291 $ 354,563 766,550 $ 463
 

* Australian Operations is 51.1% owned by G&W as of December 1, 2016.

** 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
FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
                             

Twelve Months Ended

December 31, 2017

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 $ 124,285 209,471 $ 593 $ 22,562 51,909 $ 435 $ 5,280 4,359 $ 1,211 $ 152,127 265,739 $ 572
Autos & Auto Parts 22,901 37,246 615 22,901 37,246 615
Chemicals & Plastics 148,252 177,602 835 148,252 177,602 835
Coal & Coke 75,935 224,278 339 117,678 359,791 327 9,972 22,403 445 203,585 606,472 336
Food & Kindred Products 33,424 59,307 564 33,424 59,307 564
Intermodal 980 9,838 100 69,433 58,848 1,180 253,854 890,844 285 324,267 959,530 338
Lumber & Forest Products 87,200 140,856 619 87,200 140,856 619
Metallic Ores 13,391 17,925 747 37,415 29,458 1,270 50,806 47,383 1,072
Metals 103,863 136,888 759 103,863 136,888 759
Minerals & Stone 130,511 214,469 609 6,878 51,872 133 68,760 174,943 393 206,149 441,284 467
Petroleum Products 68,388 98,414 695 687 277 2,480 69,075 98,691 700
Pulp & Paper 107,453 161,872 664 107,453 161,872 664
Waste 25,063 52,081 481 25,063 52,081 481
Other 19,710 62,935 313 19,710 62,935 313
Totals $ 961,356 1,603,182 $ 600 $ 254,653 552,155 $ 461 $ 337,866 1,092,549 $ 309 $ 1,553,875 3,247,886 $ 478
           

Twelve Months Ended

December 31, 2016

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 $ 115,627 217,038 $ 533 $ 17,511 43,362 $ 404 $ 2,465 2,552 $ 966 $ 135,603 262,952 $ 516
Autos & Auto Parts 18,259 30,308 602 18,259 30,308 602
Chemicals & Plastics 137,712 175,316 786 137,712 175,316 786
Coal & Coke 74,664 221,001 338 11,112 35,203 316 14,982 40,117 373 100,758 296,321 340
Food & Kindred Products 33,549 60,874 551 33,549 60,874 551
Intermodal 99 1,382 72 66,761 59,688 1,118 262,977 904,783 291 329,837 965,853 341
Lumber & Forest Products 83,509 138,096 605 170 473 359 83,679 138,569 604
Metallic Ores 16,819 21,697 775 16,874 13,807 1,222 100 201 498 33,793 35,705 946
Metals 103,799 137,898 753 103,799 137,898 753
Minerals & Stone 114,185 197,849 577 7,634 64,060 119 56,631 155,890 363 178,450 417,799 427
Petroleum Products 70,519 102,718 687 730 275 2,655 71,249 102,993 692
Pulp & Paper 104,523 163,595 639 104,523 163,595 639
Waste 20,835 44,922 464 20,835 44,922 464
Other   19,520 61,559 317       19,520 61,559 317
Totals $ 913,619 1,574,253 $ 580 $ 120,622 216,395 $ 557 $ 337,325 1,104,016 $ 306 $ 1,371,566 2,894,664 $ 474
 
* Australian Operations is 51.1% owned by G&W as of December 1, 2016.

** 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 operating income, adjusted net income attributable to G&W, adjusted diluted earnings per common share (EPS) and the adjusted free cash flow measures of adjusted net cash provided by operating activities attributable to G&W, adjusted free cash flow attributable to G&W and adjusted free cash flow attributable to G&W before new business investments and grant funded projects, 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 the adjusted free cash flow measures, 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 adjusted free cash flow measures 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 Operating Income

        Three Months Ended
December 31, 2017

North

American

Operations

 

Australian

Operations

 

U.K./

European

Operations

 

Total

Operations

Operating revenues $ 320.2 $ 75.5 $ 175.8 $ 571.6
Operating expenses   245.6     58.0     159.8     463.4  
Operating income(a) $ 74.6   $ 17.6   $ 16.0   $ 108.2  
Operating ratio(b) 76.7 % 76.7 % 90.9 % 81.1 %
 
Operating expenses $ 245.6 $ 58.0 $ 159.8 $ 463.4
Corporate development and related costs (0.9 ) (0.3 ) (1.1 )
Restructuring costs (0.1 ) (1.3 ) (1.4 )
Australia impairment and related costs (4.9 ) (4.9 )
Buyout of Freightliner deferred consideration agreements 8.9 8.9
U.K. coal restructuring and related charges           1.1     1.1  
Adjusted operating expenses $ 244.7   $ 53.0   $ 168.2   $ 465.9  
Adjusted operating income $ 75.5   $ 22.5   $ 7.6   $ 105.7  
Adjusted operating ratio 76.4 % 70.2 % 95.7 % 81.5 %
 
Three Months Ended

December 31, 2016

North

American

Operations

Australian

Operations

U.K./

European

Operations

Total

Operations

Operating revenues $ 322.2 $ 61.4 $ 133.0 $ 516.5
Operating expenses   238.8     58.5     165.6     463.0  
Operating income/(loss)(a) $ 83.4   $ 2.8   $ (32.6 ) $ 53.6  
Operating ratio(b) 74.1 % 95.4 % 124.5 % 89.6 %
 
Operating expenses $ 238.8 $ 58.5 $ 165.6 $ 463.0
ERS impairment and related costs (21.5 ) (21.5 )
U.K. coal railcar leases (10.5 ) (10.5 )
Corporate development and related costs (4.0 ) (10.7 ) (1.3 ) (16.0 )
Restructuring costs   (0.1 )       (1.8 )   (1.9 )
Adjusted operating expenses $ 234.8   $ 47.8   $ 130.6   $ 413.1  
Adjusted operating income $ 87.4   $ 13.5   $ 2.4   $ 103.4  
Adjusted operating ratio 72.9 % 77.9 % 98.2 % 80.0 %
 
Twelve Months Ended
December 31, 2017

North

American

Operations

Australian

Operations

U.K./

European

Operations

Total

Operations

Operating revenues $ 1,274.3 $ 307.5 $ 626.2 $ 2,208.0
Operating expenses   970.4     230.3     608.9     1,809.6  
Operating income(a) $ 303.9   $ 77.3   $ 17.3   $ 398.5  
Operating ratio(b) 76.2 % 74.9 % 97.2 % 82.0 %
 
Operating expenses $ 970.4 $ 230.3 $ 608.9 $ 1,809.6
Corporate development and related costs (8.2 ) 0.3 (4.0 ) (11.9 )
Restructuring costs (0.5 ) (0.3 ) (9.4 ) (10.2 )
Australia impairment and related costs

(4.9 )

(4.9 )
Buyout of Freightliner deferred consideration agreements

8.9 8.9
U.K. coal restructuring and related charges           1.1     1.1  
Adjusted operating expenses $ 961.7   $ 225.3   $ 605.5   $ 1,792.5  
Adjusted operating income $ 312.6   $ 82.2   $ 20.7   $ 415.5  
Adjusted operating ratio 75.5 % 73.3 % 96.7 % 81.2 %
 
Twelve Months Ended
December 31, 2016

North

American

Operations

Australian

Operations

U.K./

European

Operations

Total

Operations

Operating revenues $ 1,236.8 $ 222.6 $ 542.2 $ 2,001.5
Operating expenses   917.2     217.8     576.9     1,711.9  
Operating income/(loss)(a) $ 319.6   $ 4.8   $ (34.7 ) $ 289.6  
Operating ratio(b) 74.2 % 97.8 % 106.4 % 85.5 %
 
Operating expenses $ 917.2 $ 217.8 $ 576.9 $ 1,711.9
Corporate development and related costs (7.2 ) (14.7 ) (1.5 ) (23.3 )
Australia impairment and related costs (21.1 ) (21.1 )
ERS impairment and related costs (21.5 ) (21.5 )
U.K. coal railcar leases (10.5 ) (10.5 )
Restructuring costs   (0.9 )   (0.8 )   (6.5 )   (8.2 )
Adjusted operating expenses $ 909.1   $ 181.2   $ 537.0   $ 1,627.3  
Adjusted operating income $ 327.6   $ 41.4   $ 5.2   $ 374.2  
Adjusted operating ratio(b) 73.5 % 81.4 % 99.0 % 81.3 %
 
(a) Operating income/(loss) is calculated as operating revenues less operating expenses.
(b) Operating ratio is calculated as operating expenses divided by operating revenues.
 
 

Adjusted Net Income and Adjusted Diluted Earnings Per Common Share

Three Months Ended December 31, 2017  

Income Before

Income Taxes

 

Benefit from/

(Provision for)

Income Taxes

 

Net Income

Attributable

to G&W

  Diluted EPS
As reported $ 84.7 $ 343.3 $ 426.6 $ 6.81
Adjusted for:
Corporate development and related costs 1.1 (0.4 ) 0.7 0.01
Restructuring costs 1.4 (0.2 ) 1.2 0.02
Australia impairment and related costs 4.9 (1.5 ) 1.8 0.03
Buyout of Freightliner deferred consideration agreements (8.9 ) (8.9 ) (0.14 )
U.K. coal restructuring and related charges (1.1 ) 0.2 (0.9 ) (0.01 )
Impact of United States Tax Cuts & Jobs Act       (371.9 )   (371.9 )   (5.94 )
As adjusted $ 82.2   $ (30.5 ) $ 48.6   $ 0.77  
 
Three Months Ended December 31, 2016

Income Before

Income Taxes

Provision for

Income Taxes

Net Income

Attributable

to G&W

Diluted EPS
As reported $ 28.7 $ (19.8 ) $ 8.9 $ 0.15
Adjusted for:
ERS impairment and related charges 21.5 21.5 0.37
U.K. coal railcar leases 10.5 (1.9 ) 8.6 0.15
Corporate development and related costs 19.2 (3.4 ) 15.9 0.27
Write-off of debt issuance costs 1.9 (0.4 ) 1.4 0.02
Restructuring costs 1.3 (0.4 ) 0.5 0.01
Q4 2016 Short Line Tax Credit       (7.5 )   (7.5 )   (0.13 )
As adjusted $ 83.1   $ (33.4 ) $ 49.3   $ 0.84  
 
Twelve Months Ended December 31, 2017

Income Before

Income Taxes

Benefit from/

(Provision for)

Income Taxes

Net Income

Attributable

to G&W

Diluted EPS
As reported $ 295.5 $ 261.3 $ 549.1 $ 8.79
Adjusted for:
Corporate development and related costs 11.9 (4.3 ) 8.1 0.13
Restructuring costs 10.2 (1.0 ) 9.0 0.14
Australia impairment and related costs 4.9 (1.5 ) 1.8 0.03
Buyout of Freightliner deferred consideration agreements (8.9 ) (8.9 ) (0.14 )
Gain on sale of investment (1.6 ) 0.7 (1.0 ) (0.02 )
U.K. coal restructuring and related charges (1.1 ) 0.2 (0.9 ) (0.01 )
Recognition of unrecognized tax benefits (3.3 ) (3.3 ) (0.05 )
Impact of United States Tax Cuts & Jobs Act       (371.9 )   (371.9 )   (5.96 )
As adjusted $ 310.9   $ (119.8 ) $ 182.0   $ 2.91  
 
Twelve Months Ended December 31, 2016

Income Before

Income Taxes

Provision for

Income Taxes

Net Income

Attributable

to G&W

Diluted EPS
As reported $ 215.5 $ (74.4 ) $ 141.1 $ 2.42
Adjusted for:
Corporate development and related costs 26.6 (5.9 ) 20.7 0.36
ERS impairment and related costs 21.5 21.5 0.37
Australia impairment and related costs 21.1 (4.4 ) 16.8 0.29
U.K. coal railcar leases 10.5 (1.9 ) 8.6 0.15
Restructuring costs 8.2 (1.8 ) 6.4 0.11
Write-off of debt issuance costs 1.3 (0.4 ) 0.5 0.01
Impact of reduction in U.K. effective tax rate (4.3 ) (4.3 ) (0.07 )
2016 Short Line Tax Credit       (28.8 )   (28.8 )   (0.50 )
As adjusted $ 304.7   $ (121.9 ) $ 182.4   $ 3.13  
 
 

Adjusted Free Cash Flow Measures

     

Twelve Months Ended
December 31,

2017   2016
Net cash provided by operating activities $ 479.2 $ 407.1
Allocation of adjusted cash flow to noncontrolling interest(a) (27.6 )  
Adjusted net cash provided by operating activities attributable to G&W 451.6 407.1
Purchase of property and equipment, net(b) (201.4 ) (165.6 )
Adjusted free cash flow attributable to G&W $ 250.2 $ 241.5
Net cash paid for new business investments(b) 8.6 26.1
Net cash paid for/(received from) grant funded projects(b) 11.0   (1.6 )
Adjusted free cash flow attributable to G&W before new business investments and grant funded projects $ 269.8   $ 265.9  
 
(a)   Allocation of adjusted cash flow to noncontrolling interest (MIRA's 48.9% equity ownership of GWA since December 1, 2016) is calculated as 48.9% of cash flow provided by operating activities of G&W’s Australian Operations, less net purchases of property and equipment of G&W’s Australian Operations. The timing and amount of actual distributions, if any, from GWA to G&W and MIRA made in any given period will vary and could differ materially from the amounts presented. There were no such distributions made for both the twelve months ended December 31, 2017 and 2016. G&W expressly disclaims any direct correlation between the allocation of adjusted cash flow to noncontrolling interest and actual distributions made in any given period.
(b) See breakout below.
 

   

Twelve Months Ended December 31, 2017

Core
Capital(c)

 

New Business
Investments

 

Grant
Funded
Projects(d)

  Total
Purchase of property and equipment (188.6 ) (8.7 ) (31.2 ) (228.5 )
Grant proceeds from outside parties 0.1 20.2 20.2
Insurance proceeds for the replacement of assets 1.6 1.6
Proceeds from disposition of property and equipment 5.2       5.2  
Purchase of property and equipment, net (181.8 ) (8.6 ) (11.0 ) (201.4 )
 
Twelve Months Ended December 31, 2016

Core
Capital(c)

New Business
Investments

Grant
Funded
Projects(d)

Total
Purchase of property and equipment (159.0 ) (26.1 ) (34.5 ) (219.5 )
Grant proceeds from outside parties 36.1 36.1
Insurance proceeds for the replacement of assets 15.2 15.2
Proceeds from disposition of property and equipment 2.7       2.7  
Purchase of property and equipment, net (141.1 ) (26.1 ) 1.6   (165.6 )
(c)   Core capital expenditures represents purchases of property and equipment as presented on the Statement of Cash Flows less grant proceeds from outside parties, insurance proceeds for the replacement of assets and proceeds from disposition of property and equipment, each of which as presented on the Statement of Cash Flows, less new business investments and grant funded projects.
(d) Grant funded projects represents purchases of property and equipment for projects partially or entirely funded by outside parties, net of grant proceeds from outside parties as presented on the Statement of Cash Flows.
 

Contacts

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

Release Summary

Genesee & Wyoming Reports Results for the Fourth Quarter

Contacts

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