August 1, 2016 - 6:00 AM EDT
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Genesee & Wyoming Reports Results for the Second Quarter of 2016

Genesee & Wyoming Inc. (G&W) (NYSE:GWR)

Second Quarter Consolidated Highlights

  • Operating revenues decreased 7.5% to $501.4 million from $542.2 million.
  • Reported operating income decreased 12.3% to $87.2 million; Adjusted operating income decreased 5.3% to $94.4 million.(1)
  • Reported diluted earnings per common share (EPS) decreased 9.8% to $0.83; Adjusted diluted EPS remained constant at $0.93; Adjusted diluted EPS excluding the Short Line Tax Credit decreased 12.9% to $0.81.(1)

Second Quarter Segment Highlights

  • North America (approximately 80% of G&W's annual operating income): Operating revenues from G&W's North American Operations decreased 2.1% to $304.6 million from $311.0 million. Reported operating income from G&W's North American Operations increased 3.1% to $79.0 million; Adjusted operating income from G&W's North American Operations increased 4.8% to $80.8 million.(1)
  • Australia (approximately 10% of G&W's annual operating income): Operating revenues from G&W's Australian Operations decreased 17.3% to $55.3 million from $66.8 million, primarily due to declining metallic ores shipments. Reported operating income from G&W's Australian Operations decreased 38.0% to $9.4 million; Adjusted operating income from G&W's Australian Operations decreased 31.6% to $10.2 million.(1)
  • U.K./Europe (approximately 10% of G&W's annual operating income): Operating revenues from G&W's U.K./European Operations decreased 13.9% to $141.5 million from $164.4 million primarily due to the consolidation of Continental Europe intermodal routes, a decline in coal shipments and lower minerals and stone shipments. Reported operating loss from G&W's U.K./European Operations was $1.2 million, primarily due to the restructuring of the U.K. coal business; Adjusted operating income from G&W's U.K./European Operations was $3.4 million.(1)

Jack Hellmann, President and CEO of G&W, commented, "Our financial results for the second quarter of 2016 were well ahead of our outlook, primarily due to good performance from our North American Operations. Despite a 7% decline in North American carloads, favorable revenue mix and effective management of costs led to an improvement in our reported North American operating ratio of 1.3 percentage points to 74.1%, and a modest increase in our operating income. Meanwhile, our Australian and U.K./Europe Operations performed generally in-line with our expectations and we successfully completed the restructuring of our U.K. coal business."

"While we are pleased with our second quarter results, our reported diluted EPS declined 10% and our adjusted diluted EPS excluding the Short Line Tax Credit declined 13% compared to last year. As a result, we remain focused on improving the efficiency of our operations amidst uneven business environments in each of our three segments worldwide. At the same time, this economic uncertainty continues to provide acquisition and investment opportunities that we are carefully evaluating in multiple geographies within our global footprint."(1)

Financial Results

G&W's operating revenues decreased $40.8 million, or 7.5%, to $501.4 million in the second quarter of 2016, compared with $542.2 million in the second quarter of 2015. G&W's operating income in the second quarter of 2016 was $87.2 million, compared with $99.5 million in the second quarter of 2015. G&W's adjusted operating income in the second quarter of 2016 was $94.4 million, compared with $99.8 million in the second quarter of 2015.(1)

G&W's reported net income in the second quarter of 2016 was $48.4 million, compared with reported net income of $52.8 million in the second quarter of 2015. Excluding the net impact of certain items affecting comparability between periods discussed below, G&W's adjusted net income in the second quarter of 2016 was $54.0 million, compared with $53.0 million in the second quarter of 2015.(1)

G&W's reported diluted EPS in the second quarter of 2016 were $0.83 with 58.1 million weighted average shares outstanding, compared with reported diluted EPS in the second quarter of 2015 of $0.92 with 57.1 million weighted average shares outstanding. G&W's adjusted diluted EPS in the second quarter of 2016 were $0.93 with 58.1 million weighted average shares outstanding, compared with adjusted diluted EPS in the second quarter of 2015 of $0.93 with 57.1 million weighted average shares outstanding. G&W's adjusted diluted EPS excluding the Short Line Tax Credit in the second quarter of 2016 were $0.81 with 58.1 million weighted average shares outstanding, compared with adjusted diluted EPS in the second quarter of 2015 of $0.93 with 57.1 million weighted average shares outstanding.(1)

Items Affecting Comparability

In the second quarter of 2016 and 2015, 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, 2016

Restructuring costs $ (5.0 ) $ (4.0 ) $ (0.07 )
Corporate development and related costs $ (2.6 ) $ (1.8 ) $ (0.03 )
Net gain on sale of assets $ 0.3 $ 0.2 $
Short Line Tax Credit $ $ 7.2 $ 0.12
 

Three Months Ended June 30, 2015

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

In the second quarter of 2016, G&W's results included restructuring costs of $5.0 million, primarily associated with our U.K./European Operations, corporate development and related costs of $2.6 million and a net gain on the sale of assets of $0.3 million. The second quarter of 2016 also included an income tax benefit of $7.2 million associated with the U.S. Short Line Tax Credit, which was not in effect during the second quarter of 2015. The Short Line Tax Credit was extended retroactively in the fourth quarter of 2015 for calendar years 2015 and 2016.

In the second quarter of 2015, G&W's results included corporate development and related expenses of $0.8 million, primarily related to the Freightliner integration, and a net gain on the sale of assets of $0.5 million.

Second Quarter Results by Segment

Operating revenues from G&W's North American Operations decreased $6.4 million, or 2.1%, to $304.6 million in the second quarter of 2016, compared with $311.0 million in the second quarter of 2015. Excluding a $1.2 million decrease due to the impact of foreign currency depreciation, North American Operations revenues decreased $5.2 million, or 1.7%, primarily due to declines in coal, grain and pulp and paper shipments.(2)

North American Operations traffic decreased 27,765 carloads, or 6.7%, to 386,123 carloads in the second quarter of 2016. The traffic decrease was principally due to decreases of 17,208 carloads of coal and coke traffic (primarily in the Midwest and Northeast regions), 4,360 carloads of agricultural products traffic (primarily in the Midwest and Mountain West regions), 4,174 carloads of pulp and paper traffic (primarily in the Midwest, Northeast, Southern, Canada and Pacific regions) and 3,990 carloads of minerals and stone traffic (primarily in the Northeast Region). All remaining traffic increased by a net 1,967 carloads.

G&W's North American Operations had operating income of $79.0 million in the second quarter of 2016, compared with $76.6 million in the second quarter of 2015. The operating ratio for North American Operations was 74.1% in the second quarter of 2016, compared with an operating ratio of 75.4% in the second quarter of 2015. Despite a 6.7% decline in North American carloads, favorable revenue mix and effective management of costs led to an improvement in our reported North American operating ratio and a modest increase in our operating income. Adjusted operating income from G&W's North American Operations in the second quarter of 2016 was $80.8 million, compared with adjusted operating income of $77.1 million in the second quarter of 2015. The adjusted operating ratio for North American Operations was 73.5% in the second quarter of 2016, compared with an adjusted operating ratio of 75.2% in the second quarter of 2015.(1)

Operating revenues from G&W's Australian Operations decreased $11.5 million, or 17.3%, to $55.3 million in the second quarter of 2016, compared with $66.8 million in the second quarter of 2015. Excluding a $2.7 million decrease due to the impact of foreign currency depreciation, Australian Operations revenues decreased $8.8 million, or 13.8%, primarily due to the impact of declining metallic ores shipments.(2)

Australian Operations traffic decreased 7,853 carloads, or 15.1%, to 44,251 carloads in the second quarter of 2016. The traffic decrease was principally due to a decrease of 5,119 carloads of metallic ores traffic and 4,312 carloads of agricultural products traffic, partially offset by an increase of 1,913 carloads of minerals and stone traffic. All remaining traffic decreased by a net 335 carloads.

G&W's Australian Operations had operating income of $9.4 million in the second quarter of 2016, compared with $15.1 million in the second quarter of 2015. The operating ratio for Australian Operations was 83.0% in the second quarter of 2016, compared with an operating ratio of 77.4% in the second quarter of 2015. Adjusted operating income from G&W's Australian Operations was $10.2 million in the second quarter of 2016, compared with adjusted operating income of $15.0 million in the second quarter of 2015. The adjusted operating ratio for Australian Operations was 81.5% in the second quarter of 2016, compared with an adjusted operating ratio of 77.6% in the second quarter of 2015.(1)

Operating revenues from G&W's U.K./European Operations decreased $22.9 million, or 13.9%, to $141.5 million in the second quarter of 2016, compared with $164.4 million in the second quarter of 2015. Excluding a $7.1 million decrease due to the impact of foreign currency depreciation, U.K./European revenues decreased $15.9 million, or 10.1%, primarily due to the impact of the consolidation of Continental Europe intermodal routes, declining coal shipments and lower minerals and stone shipments.(2)

U.K./European Operations traffic decreased 5,338 carloads, or 1.9%, to 276,542 carloads in the second quarter of 2016. The traffic decrease was principally due to a decrease of 14,130 carloads of coal and coke (primarily in the U.K.) and 6,010 carloads of minerals and stone, partially offset by an increase of 14,316 carloads of intermodal traffic. All remaining traffic increased by 486 carloads.

G&W's U.K./European Operations had an operating loss of $1.2 million in the second quarter of 2016, compared with operating income of $7.7 million in the second quarter of 2015. Adjusted operating income from G&W's U.K./European Operations was $3.4 million in the second quarter of 2016, compared with adjusted operating income of $7.7 million in the second quarter of 2015.(1)

Free Cash Flow (1)

G&W's free cash flow for the six months ended June 30, 2016 and 2015 was as follows (in millions):

           
Six Months Ended
June 30,
2016 2015
Net cash provided by operating activities $ 162.0 $ 184.7
Net cash used in investing activities, excluding new business investments (74.8 ) (842.7 )
Net cash used for acquisitions (a) 1.1   776.3  
Free cash flow before new business investments 88.3 118.3
New business investments, net of grants from outside parties (3.4 ) (37.0 )
Free cash flow (1) $ 85.0   $ 81.3  
 
(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 acquisitions.

Conference Call and Webcast Details

As previously announced, G&W's conference call to discuss financial results for the second quarter of 2016 will be held on Monday, August 1, 2016, at 11 a.m. EDT. The dial-in number for the teleconference in the U.S. is (800) 230-1074; outside the U.S. is (612) 288-0337, 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 1, 2016, by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 372877.

About G&W

G&W owns or leases 121 freight railroads worldwide that are organized in 10 operating regions with 7,500 employees and more than 2,800 customers. "During the second quarter of 2016, G&W's Ohio Valley Region railroads were consolidated into G&W's Northeast and Midwest regions. This consolidation reduced the number of G&W operating regions from 11 to 10."

  • G&W's eight North American regions serve 41 U.S. states and four Canadian provinces and include 114 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.

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 SEC.

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 2015 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, 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.
 
2.

Foreign exchange impact is calculated by comparing the prior 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 SIX MONTHS ENDED JUNE 30, 2016 AND 2015
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 2016 2015
OPERATING REVENUES $ 501,375 $ 542,219 $ 983,991 $ 939,249
OPERATING EXPENSES 414,181   442,768   839,801   767,178  
OPERATING INCOME 87,194 99,451 144,190 172,071
INTEREST INCOME 336 124 411 150
INTEREST EXPENSE (17,741 ) (17,772 ) (35,716 ) (31,280 )

LOSS ON SETTLEMENT OF FOREIGN CURRENCY
FORWARD PURCHASE CONTRACTS

(18,686 )
OTHER INCOME, NET 722   334   1,453   648  
INCOME BEFORE INCOME TAXES 70,511 82,137 110,338 122,903
PROVISION FOR INCOME TAXES (22,112 ) (29,300 ) (34,920 ) (46,162 )
NET INCOME $ 48,399   $ 52,837   $ 75,418   $ 76,741  
BASIC EARNINGS PER COMMON SHARE $ 0.85   $ 0.94   $ 1.32   $ 1.37  
WEIGHTED AVERAGE SHARES - BASIC 57,187   55,976   57,106   55,902  
DILUTED EARNINGS PER COMMON SHARE $ 0.83   $ 0.92   $ 1.30   $ 1.34  
WEIGHTED AVERAGE SHARES - DILUTED 58,117   57,143   58,036   57,132  
 

               
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2016 AND DECEMBER 31, 2015
(in thousands)
(unaudited)
 
June 30, December 31,
2016 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 24,971 $ 35,941
Accounts receivable, net 368,704 382,458
Materials and supplies 45,873 45,790
Prepaid expenses and other 47,277 43,197
Total current assets 486,825 507,386
PROPERTY AND EQUIPMENT, net 4,208,706 4,215,063
GOODWILL 815,532 826,575
INTANGIBLE ASSETS, net 1,069,017 1,128,952
DEFERRED INCOME TAX ASSETS, net 2,591 2,270
OTHER ASSETS, net 37,350 22,836
Total assets $ 6,620,021 $ 6,703,082
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 130,450 $ 75,966
Accounts payable 238,181 282,275
Accrued expenses 188,013 169,586
Total current liabilities 556,644 527,827
LONG-TERM DEBT, less current portion 2,035,589 2,205,785
DEFERRED INCOME TAX LIABILITIES, net 983,383 983,136
DEFERRED ITEMS - grants from outside parties 302,269 292,198
OTHER LONG-TERM LIABILITIES 150,312 174,675
TOTAL EQUITY 2,591,824 2,519,461
Total liabilities and equity $ 6,620,021 $ 6,703,082
 

           
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2016 AND 2015
(in thousands)
(unaudited)
Six Months Ended
June 30,
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 75,418 $ 76,741
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 100,254 90,265
Stock-based compensation 9,525 6,961
Excess tax benefits from share-based compensation (1,254 )
Deferred income taxes 16,336 22,672
Net loss/(gain) on sale and impairment of assets 12,517 (807 )
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 (11,472 ) 35,744
Materials and supplies (1,071 ) (868 )
Prepaid expenses and other (2,078 ) 5,685
Accounts payable and accrued expenses (46,236 ) (73,397 )
Other assets and liabilities, net 8,808   4,255  
Net cash provided by operating activities 162,001   184,683  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (113,321 ) (160,226 )
Grant proceeds from outside parties 25,990 22,701
Cash paid for acquisitions, net of cash acquired (726,698 )
Net payment from settlement of foreign currency forward purchase contracts related to an acquisition (18,686 )
Insurance proceeds for the replacement of assets 7,741 1,421
Proceeds from disposition of property and equipment 1,458   1,734  
Net cash used in investing activities (78,132 ) (879,754 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on revolving line-of-credit, long-term debt and capital lease obligations (311,930 ) (306,799 )
Proceeds from revolving line-of-credit and long-term borrowings 215,434 977,867
Debt amendment/issuance costs (5,933 )
Proceeds from employee stock purchases 3,135 4,183
Excess tax benefits from share-based compensation 1,254
Treasury stock acquisitions (2,593 ) (2,992 )
Net cash (used in)/provided by financing activities (95,954 ) 667,580  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 1,115   (1,899 )
DECREASE IN CASH AND CASH EQUIVALENTS (10,970 ) (29,390 )
CASH AND CASH EQUIVALENTS, beginning of period 35,941   59,727  
CASH AND CASH EQUIVALENTS, end of period $ 24,971   $ 30,337  
 

                                               
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 340,782 67.9 % $ 374,615 69.1 % $ 667,196 67.9 % $ 672,824 71.6 %
Freight-related revenues 133,688 26.7 % 137,891 25.4 % 267,146 27.1 % 216,016 23.0 %
All other revenues 26,905   5.4 % 29,713   5.5 % 49,649   5.0 % 50,409   5.4 %
Total operating revenues $ 501,375   100.0 % $ 542,219   100.0 % $ 983,991   100.0 % $ 939,249   100.0 %
 

Operating expenses:

Labor and benefits(a) $ 155,948 31.1 % $ 165,296 30.4 % $ 319,062 32.4 % $ 297,414 31.6 %
Equipment rents 38,426 7.7 % 43,483 8.0 % 76,856 7.8 % 65,515 6.9 %
Purchased services(b) 51,632 10.3 % 56,177 10.4 % 98,134 10.0 % 80,558 8.6 %
Depreciation and amortization 50,924 10.2 % 48,048 8.9 % 100,254 10.2 % 90,265 9.6 %
Diesel fuel used in train operations 28,251 5.5 % 37,895 7.0 % 53,717 5.4 % 67,592 7.2 %
Electricity used in train operations 3,304 0.7 % 4,977 0.9 % 6,669 0.7 % 5,366 0.6 %
Casualties and insurance 9,442 1.9 % 10,038 1.9 % 19,562 2.0 % 18,561 2.0 %
Materials 21,393 4.3 % 26,929 5.0 % 42,984 4.4 % 45,624 4.9 %
Trackage rights 21,152 4.2 % 22,172 4.1 % 41,728 4.2 % 35,505 3.8 %
Net (gain)/loss on sale and impairment of assets(c) (308 ) (0.1 )% (490 ) (0.1 )% 12,517 1.3 % (807 ) (0.1 )%
Restructuring costs 4,970 1.0 % % 6,097 0.6 % %
Other expenses(d) 29,047   5.8 % 28,243   5.2 % 62,221   6.3 % 61,585   6.6 %
Total operating expenses $ 414,181   82.6 % $ 442,768   81.7 % $ 839,801   85.3 % $ 767,178   81.7 %
(a)   Includes $0.1 million corporate development and related costs for the three months ended June 30, 2016. Includes $1.7 million of severance costs for the six months ended June 30, 2015.
(b) Includes $0.1 million and $0.2 million corporate development and related costs for the three and six months ended June 30, 2016, respectively.
(c)

Includes an impairment charge of $13.0 million associated with an Australia iron ore customer entering into voluntary administration for the six months ended June 30, 2016.

(d)

Includes the write-off of accounts receivable of $8.1 million associated with an Australia iron ore customer entering into voluntary administration for the six months ended June 30, 2016. Includes $2.4 million and $2.9 million corporate development and related costs for the three and six months ended June 30, 2016, respectively. Includes $0.9 million corporate development and related costs for the three and six months ended June 30, 2015. Includes $12.6 million in Freightliner acquisition costs for the six months ended June 30, 2015.

 

                                         
GENESEE & WYOMING INC. AND SUBSIDIARIES
NORTH AMERICAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
     
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 227,082 74.6 % $ 238,153 76.6 % $ 448,907 74.2 % $ 481,183 76.5 %
Freight-related revenues 60,978 20.0 % 55,589 17.9 % 122,503 20.3 % 113,650 18.1 %
All other revenues 16,515   5.4 % 17,238   5.5 % 32,943   5.5 % 33,771   5.4 %
Total operating revenues $ 304,575   100.0 % $ 310,980   100.0 % $ 604,353   100.0 % $ 628,604   100.0 %
 

Operating expenses:

Labor and benefits(a) $ 95,587 31.4 % $ 100,297 32.3 % $ 198,177 32.8 % $ 209,748 33.3 %
Equipment rents 14,218 4.7 % 16,485 5.3 % 29,274 4.9 % 34,271 5.4 %
Purchased services(b) 16,263 5.3 % 15,220 4.9 % 31,964 5.3 % 29,349 4.7 %
Depreciation and amortization 37,124 12.2 % 34,936 11.2 % 73,313 12.1 % 70,241 11.2 %
Diesel fuel used in train operations 13,837 4.5 % 19,757 6.4 % 27,361 4.5 % 43,782 7.0 %
Casualties and insurance 7,013 2.3 % 6,659 2.1 % 14,253 2.4 % 13,114 2.1 %
Materials 12,946 4.4 % 15,675 5.0 % 25,946 4.3 % 31,685 5.0 %
Trackage rights 8,885 2.9 % 6,249 2.0 % 17,752 2.9 % 12,793 2.0 %
Net gain on sale and impairment of assets (236 ) (0.1 )% (402 ) (0.1 )% (395 ) (0.1 )% (699 ) (0.1 )%
Restructuring costs 335 0.1 % % 694 0.1 % %
Other expenses(c) 19,580   6.4 % 19,483   6.3 % 37,013   6.1 % 50,618   8.1 %
Total operating expenses $ 225,552   74.1 % $ 234,359   75.4 % $ 455,352   75.3 % $ 494,902   78.7 %
Operating income $ 79,023   $ 76,621   $ 149,001   $ 133,702  

Expenditures for
additions to property &
equipment, net of grants
from outside parties

$ 39,523 $ 73,440 $ 64,939 $ 118,710
(a)   Includes $0.2 million corporate development and related costs for the three and six months ended June 30, 2016, respectively.
(b) Includes $0.1 million and $0.2 million corporate development and related costs for the three and six months ended June 30, 2016, respectively.
(c) Includes $1.5 million and $0.9 million corporate development and related costs for the three months ended June 30, 2016 and 2015, respectively. Includes $1.8 million and $0.9 million corporate development and related costs for the six months ended June 30, 2016 and 2015, respectively. Includes $12.6 million of Freightliner acquisition costs for the six months ended June 30, 2015.
 

                                               
GENESEE & WYOMING INC. AND SUBSIDIARIES
AUSTRALIAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 26,394 47.7 % $ 39,464 59.1 % $ 51,171 47.8 % $ 85,822 67.7 %
Freight-related revenues 27,129 49.1 % 25,173 37.7 % 52,619 49.1 % 36,037 28.4 %
All other revenues 1,760   3.2 % 2,171   3.2 % 3,291   3.1 % 4,891   3.9 %
Total operating revenues $ 55,283   100.0 % $ 66,808   100.0 % $ 107,081   100.0 % $ 126,750   100.0 %
 

Operating expenses:

Labor and benefits(a) $ 16,800 30.4 % $ 18,750 28.0 % $ 32,568 30.4 % $ 36,134 28.5 %
Equipment rents 1,630 2.9 % 4,020 6.0 % 3,325 3.1 % 6,206 4.9 %
Purchased services 6,098 11.0 % 5,718 8.6 % 11,349 10.6 % 10,758 8.5 %
Depreciation and amortization 7,233 13.1 % 7,394 11.1 % 13,889 13.0 % 13,620 10.7 %
Diesel fuel used in train operations 4,538 8.2 % 6,218 9.3 % 8,575 8.0 % 9,899 7.8 %
Casualties and insurance 1,553 2.8 % 1,886 2.8 % 3,088 2.9 % 3,767 3.0 %
Materials 2,870 5.2 % 2,709 4.1 % 5,289 4.9 % 4,934 3.9 %
Trackage rights 2,028 3.7 % 3,424 5.1 % 4,317 4.0 % 8,420 6.6 %
Net (gain)/loss on sale and impairment of assets(b) % (32 ) % 12,982 12.1 % (38 ) %
Restructuring costs 23 % % 716 0.7 % %
Other expenses(c) 3,129   5.7 % 1,590   2.4 % 13,353   12.5 % 3,683   2.9 %
Total operating expenses $ 45,902   83.0 % $ 51,677   77.4 % $ 109,451   102.2 % $ 97,383   76.8 %
Operating income/(loss) $ 9,381   $ 15,131   $ (2,370 ) $ 29,367  

Expenditures for
additions to property &
equipment, net of grants
from outside parties

$ 4,787 $ 9,159 $ 5,654 $ 13,774
(a)   Includes $1.7 million of severance costs for the six months ended June 30, 2015.
(b)

Includes an impairment charge of $13.0 million associated with an iron ore customer entering into voluntary administration for the six months ended June 30, 2016.

(c)

Includes $0.8 million and $1.0 million corporate development and related costs for the three months and six months ended June 30, 2016, respectively. Includes the write-off of accounts receivable of $8.1 million associated with an iron ore customer entering into voluntary administration for the six months ended June 30, 2016.

 

                                               
GENESEE & WYOMING INC. AND SUBSIDIARIES
U.K./EUROPEAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
 
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 87,306 61.7 % $ 96,998 59.0 % $ 167,118 61.3 % $ 105,819 57.5 %
Freight-related revenues 45,581 32.2 % 57,129 34.7 % 92,024 33.8 % 66,329 36.1 %
All other revenues 8,630   6.1 % 10,304   6.3 % 13,415   4.9 % 11,747   6.4 %
Total operating revenues $ 141,517   100.0 % $ 164,431   100.0 % $ 272,557   100.0 % $ 183,895   100.0 %
 

Operating expenses:

Labor and benefits $ 43,561 30.8 % $ 46,249 28.1 % $ 88,317 32.4 % $ 51,532 27.9 %
Equipment rents 22,578 16.0 % 22,978 14.0 % 44,257 16.2 % 25,038 13.6 %
Purchased services 29,271 20.7 % 35,239 21.4 % 54,821 20.1 % 40,451 22.0 %
Depreciation and amortization 6,567 4.6 % 5,718 3.5 % 13,052 4.9 % 6,404 3.5 %
Diesel fuel used in train operations 9,876 7.0 % 11,920 7.2 % 17,781 6.5 % 13,911 7.6 %
Electricity used in train operations 3,304 2.3 % 4,977 3.0 % 6,669 2.4 % 5,366 2.9 %
Casualties and insurance 876 0.6 % 1,493 0.9 % 2,221 0.8 % 1,680 0.9 %
Materials 5,577 3.9 % 8,545 5.2 % 11,749 4.3 % 9,005 4.9 %
Trackage rights 10,239 7.3 % 12,499 7.6 % 19,659 7.2 % 14,292 7.8 %
Net gain on sale and impairment of assets (72 ) (0.1 )% (56 ) % (70 ) % (70 ) %
Restructuring costs 4,612 3.3 % % 4,687 1.7 % %
Other expenses 6,338   4.5 % 7,170   4.4 % 11,855   4.4 % 7,284   4.0 %
Total operating expenses $ 142,727   100.9 % $ 156,732   95.3 % $ 274,998   100.9 % $ 174,893   95.1 %
Operating (loss)/income $ (1,210 ) $ 7,699   $ (2,441 ) $ 9,002  

Expenditures for
additions to property &
equipment, net of grants
from outside parties

$ 11,338 $ 5,028 $ 16,738 $ 5,041
 

                                                                       
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, 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 $ 27,178 49,330 $ 551 $ 4,411 10,504 $ 420 $ 393 448 $ 877 $ 31,982 60,282 $ 531
Autos & Auto Parts 4,980 8,146 611 4,980 8,146 611
Chemicals & Plastics 35,743 44,875 797 35,743 44,875 797
Coal & Coke 15,051 46,237 326 3,408 9,250 368 18,459 55,487 333
Food & Kindred Products 7,973 14,448 552 7,973 14,448 552
Intermodal 1 12 83 17,044 15,320 1,113 68,919 228,543 302 85,964 243,875 352
Lumber & Forest Products 20,842 34,561 603 59 135 437 20,901 34,696 602
Metallic Ores 4,615 6,122 754 2,867 2,018 1,421 40 93 430 7,522 8,233 914
Metals 27,157 35,881 757 27,157 35,881 757
Minerals & Stone 29,502 51,882 569 1,901 16,337 116 14,487 38,073 381 45,890 106,292 432
Petroleum Products 17,180 25,462 675 171 72 2,375 17,351 25,534 680
Pulp & Paper 26,062 41,128 634 26,062 41,128 634
Waste 5,551 11,520 482

5,551 11,520 482
Other 5,247   16,519   318    

 

  5,247   16,519   318
Totals $ 227,082   386,123   $ 588 $ 26,394   44,251   $ 596 $ 87,306   276,542   $ 316 $ 340,782   706,916   $ 482
 
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 1 12 83 18,917 15,657 1,208 70,395 214,227 329 89,313 229,896 388
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 4,962   17,459   284         4,962   17,459   284
Totals $ 238,153   413,888   $ 575 $ 39,464   52,104   $ 757 $ 96,998   281,880   $ 344 $ 374,615   747,872   $ 501

* 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)
 
Six Months Ended June 30, 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 $ 55,234 105,345 $ 524 $ 9,410 24,077 $ 391 $ 736 842 $ 874

$

65,380 130,264 $ 502
Autos & Auto Parts 9,015 14,952 603 9,015 14,952 603
Chemicals & Plastics 69,491 89,234 779 69,491 89,234 779
Coal & Coke 31,877 94,915 336 7,752 17,313 448 39,629 112,228 353
Food & Kindred Products 16,407 29,412 558 16,407 29,412 558
Intermodal 2 24 83 31,617 28,943 1,092 133,448 440,638 303 165,067 469,605 352
Lumber & Forest Products 41,712 69,393 601 126 315 400 41,838 69,708 600
Metallic Ores 9,677 12,347 784 5,974 4,336 1,378 40 93 430 15,691 16,776 935
Metals 54,200 71,786 755 54,200 71,786 755
Minerals & Stone 54,296 95,563 568 3,780 32,985 115 25,016 69,310 361 83,092 197,858 420
Petroleum Products 35,453 51,451 689 390 133 2,932 35,843 51,584 695
Pulp & Paper 52,190 82,296 634 52,190 82,296 634
Waste 9,339 19,806 472 9,339 19,806 472
Other 10,014   32,791   305      

  10,014   32,791   305
Totals $ 448,907   769,315   $ 584 $ 51,171   90,474   $ 566 $ 167,118   528,511   $ 316 $ 667,196   1,388,300   $ 481
 
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 9,982 25,755 388 59,086 168,812 350
Food & Kindred Products 17,523 30,614 572 17,523 30,614 572
Intermodal 1 12 83 36,160 30,006 1,205 76,692 233,499 328 112,853 263,517 428
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 9,737   35,027   278    

 

  9,737   35,027   278
Totals $ 481,183   836,601   $ 575 $ 85,822   106,128   $ 809 $ 105,819   307,507   $ 344 $ 672,824   1,250,236   $ 538

* 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 operating ratio, 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 per share amounts).

Reconciliations of Non-GAAP Financial Measures

     

Adjusted Operating Income and Adjusted Operating Ratio

Three Months Ended
June 30, 2016

North
American
Operations

     

Australian
Operations

     

U.K./European
Operations

     

Total
Operations

Operating revenues $ 304.6 $ 55.3 $ 141.5 $ 501.4
Operating expenses 225.6   45.9   142.7   414.2  
Operating income/(loss)(a) $ 79.0   $ 9.4   $ (1.2 ) $ 87.2  
Operating ratio (b) 74.1 % 83.0 % 100.9 % 82.6 %
 
Operating expenses $ 225.6 $ 45.9 $ 142.7 $ 414.2
Corporate development and related costs (1.7 ) (0.8 ) (2.6 )
Restructuring costs (0.3 ) (4.6 ) (5.0 )
Net gain on sale of assets 0.2     0.1   0.3  
Adjusted operating expenses $ 223.7   $ 45.1   $ 138.2   $ 406.9  
 
Adjusted operating income $ 80.8   $ 10.2   $ 3.4   $ 94.4  
Adjusted operating ratio 73.5 % 81.5 % 97.6 % 81.2 %
      Three Months Ended
June 30, 2015

North
American
Operations

     

Australian
Operations

     

U.K./European
Operations

     

Total
Operations

Operating revenues $ 311.0 $ 66.8 $ 164.4 $ 542.2
Operating expenses 234.4   51.7   156.7   442.8  
Operating income (a) $ 76.6   $ 15.1   $ 7.7   $ 99.5  
Operating ratio (b) 75.4 % 77.4 % 95.3 % 81.7 %
 
Operating expenses $ 234.4 $ 51.7

$

156.7 $ 442.8
Corporate development and related costs (0.9 ) 0.1 (0.8 )
Net gain on sale of assets 0.4     0.1   0.5  
Adjusted operating expenses $ 233.8   $ 51.9   $ 156.8   $ 442.5  
 
Adjusted operating income $ 77.1   $ 15.0   $ 7.7   $ 99.8  
Adjusted operating ratio 75.2 % 77.6 % 95.3 % 81.6 %
 
(a)   Operating income 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 June 30, 2016

Income
Before
Income Taxes

Provision for
Income Taxes

 

Net Income

Diluted
Earnings Per
Common
Share

As reported $ 70.5 $ (22.1 ) $ 48.4 $ 0.83
Add back certain items:
Corporate development and related costs 2.6 (0.8 ) 1.8 0.03
Restructuring costs 5.0 (0.9 ) 4.0 0.07
Net gain on sale of assets (0.3 ) 0.1   (0.2 )  
Adjusted $ 77.8 $ (23.7 ) $ 54.0 $ 0.93
Short Line Tax Credit   (7.2 ) (7.2 ) (0.12 )
Adjusted (excluding Short Line Tax Credit) $ 77.8   $ (30.9 ) $ 46.8   $ 0.81  
Three Months Ended June 30, 2015      

Income
Before
Income Taxes

     

Provision for
Income Taxes

      Net Income      

Diluted
Earnings Per
Common
Share

As reported $ 82.1 $ (29.3 ) $ 52.8 $ 0.92
Add back certain items:
Corporate development and related costs 0.8 (0.3 ) 0.5 0.01
Net gain on sale of assets (0.5 ) 0.2   (0.3 ) (0.01 )
As adjusted $ 82.4 $ (29.5 ) $ 53.0 $ 0.93
Foreign exchange impact (a) (0.7 ) 0.2   (0.4 ) (0.01 )
As adjusted (excluding foreign exchange) $ 81.8   $ (29.3 ) $ 52.5   $ 0.92  
(a)  

Foreign exchange impact is calculated by comparing the prior 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.

 

     

Free Cash Flow

Six Months Ended
June 30,
2016       2015
Net cash provided by operating activities $ 162.0 $ 184.7
Net cash used in investing activities (78.1 ) (879.8 )
Net cash used for acquisitions 1.1   776.3  
Free cash flow $ 85.0 $ 81.3
New business investments, net of grants from outside parties 3.4   37.0  
Free cash flow before new business investments $ 88.3   $ 118.3  
 

G&W Corporate Communications
Michael Williams, 1-203-202-8900
[email protected]


Source: Business Wire (August 1, 2016 - 6:00 AM EDT)

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