RailAmerica, Inc. Reports Second Quarter 2012 Results

Jul 25, 2012, 07:00 ET from RailAmerica, Inc.

JACKSONVILLE, Fla., July 25, 2012 /PRNewswire/ --

Second Quarter Highlights

  • Revenue increased 12% versus second quarter 2011.
  • Operating income up 19%; (up 28% excluding 45G benefit, asset sales and impairments(1)).
  • Net income of $0.23 per share.
  • Adjusted net income per share(1) of $0.34.

RailAmerica, Inc. (NYSE: RA) today reported financial results for the quarter ended June 30, 2012.  Second quarter 2012 revenue increased 12% to $156.1 million from $139.2 million in the second quarter of 2011.  Freight revenue increased 8% to $113.6 million with average revenue per car up 4% and carloads up 4%.  Non-freight revenue increased 26% to $42.5 million.  

RailAmerica President and Chief Executive Officer John Giles said "Exceptional execution by our team drove another strong quarter with operating income on a comparable basis up 28%.  We remain well positioned for continued progress in the months ahead.  During the second quarter we began integrating our two recent acquisitions.  Additionally, our commercial and industrial development teams are pursuing a robust pipeline of opportunities."

RailAmerica reported second quarter 2012 net income of $11.4 million, or $0.23 per diluted share.  This compares to net income of $8.7 million, or $0.17 per diluted share in the second quarter of 2011.  Noteworthy items impacting the second quarters of 2012 and 2011 include:  

  • Early retirement of debt:  Second quarter of 2012 included $5.7 million of charges related to the redemption of the remaining $74 million of our 9.25% senior notes.
  • Acquisition / Transaction costs:  In the second quarter of 2012 the Company incurred $2.2 million of transaction related expenses.  A large portion was due to the Company's previously announced exploration of strategic alternatives.  In the second quarter of 2011 the Company spent $0.2 million on acquisition related activity.
  • 45G tax credits:  A $5.1 million income statement benefit was recorded in the second quarter of 2011, but no benefit was recognized in the second quarter of 2012 since the credit is currently not in effect for 2012.
  • Amortization of swap termination costs:  Non-cash charges of $1.4 million and $3.2 million were recorded in interest expense during the second quarters of 2012 and 2011, respectively, due to the June 2009 termination of an interest rate swap agreement.
  • Asset impairment:  Second quarter of 2011 includes a non-cash, $3.2 million impairment charge resulting from a comprehensive evaluation of our locomotive fleet and the identification of surplus units.

Summary of Noteworthy Items Impacting Second Quarter 2011 and 2012

For the Three Months Ended June 30,

($ in thousands except EPS)

2011

2012

Pre Tax

EPS

Pre Tax

EPS

Loss on extinguishment of debt

$0

$0.00

($5,666)

($0.07)

Acquisition / Transaction Costs

(243)

(0.00)

(2,184)

(0.03)

45G benefit

5,133

0.06

-

-

Amortization of swap termination costs

(3,201)

(0.04)

(1,363)

(0.02)

Impairment of assets

(3,220)

(0.04)

-

-

Note:  Effective tax rates of 39% and 37% for 2011 and 2012, respectively

The Company reported operating income of $34.2 million in the second quarter of 2012 compared to $28.7 million in the second quarter of 2011.  In addition to the items mentioned above impacting operating income, second quarter 2012 expenses were up primarily due to operating expenses from acquisitions and higher engineering services activity.  Operating income excluding the impact of 45G credits, asset sales and impairments is shown below.

For the Three Months Ended

June 30,

2011

2012

($ in thousands)

Operating revenue

$139,215

$156,096

Operating expense

110,517

121,921

Operating income, reported

28,698

34,175

Less: Benefit from 45G credits

(5,133)

-

Operating income excluding 45G Benefit (1)

23,565

34,175

Net (gain) loss on sale of assets

(64)

5

Impairment of assets

3,220

-

Operating income excluding 45G Benefit, Asset Sales and Impairments(1)

$26,721

$34,180

(1) See schedule at the end of press release for a reconciliation of non-GAAP financial measure

On July 23, 2012 RailAmerica and Genesee & Wyoming Inc. (GWI) (NYSE: GWR) issued a joint press release announcing they had entered into an agreement under which GWI will acquire RailAmerica for an all cash purchase price of $27.50 per share.  RailAmerica will not be holding a conference call to present its second quarter earnings.  The Company will post a presentation containing supplemental information for the second quarter and year to date results in the Investors section of RailAmerica's website (www.railamerica.com).

RailAmerica, Inc. owns and operates short-line and regional freight railroads in North America, operating a portfolio of 45 individual railroads with approximately 7,500 miles of track in 28 U.S. states and three Canadian provinces.

Cautionary Note Regarding Forward-Looking Statements

Certain items in this press release and other information we provide from time to time may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not necessarily limited to, statements relating to future events and financial performance. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "appears," "may," "will," "would," "could," "should," "seeks," "estimates" and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. RailAmerica, Inc. can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from RailAmerica, Inc.'s expectations include, but are not limited to, prolonged capital markets disruption and volatility, general economic conditions and business conditions, our relationships with Class I railroads and other connecting carriers, our ability to obtain railcars and locomotives from other providers on which we are currently dependent, legislative and regulatory developments including rulings by the Surface Transportation Board or the Railroad Retirement Board, strikes or work stoppages by our employees, our transportation of hazardous materials by rail, rising fuel costs, goodwill assessment risks, acquisition risks, competitive pressures within the industry, risks related to the geographic markets in which we operate; and other risks detailed in RailAmerica, Inc.'s filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q.  In addition, new risks and uncertainties emerge from time to time, and it is not possible for RailAmerica, Inc. to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. RailAmerica, Inc. expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

(1) See schedule at end of press release for a reconciliation of non-GAAP financial measure.

INVESTOR CONTACT Ira Berger Vice President & Treasurer     Office: 904.999.5332

MEDIA CONTACT     Donia Crime         Cell: 404.271.1437   Office: 904.645.6200                  

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months Ended

For the Six Months Ended

June 30,

June 30,

2011

2012

2011

2012

(In thousands, except per share data)

Operating revenue

$     139,215

$         156,096

$     264,152

$     299,538

Operating expenses:

Labor and benefits

41,859

43,228

83,476

88,780

Equipment rents

8,889

9,939

17,555

18,335

Purchased services

11,327

15,550

20,433

26,520

Diesel fuel

14,578

13,210

28,745

26,635

Casualties and insurance

4,955

5,306

7,089

8,185

Materials

5,928

9,746

11,013

16,155

Joint facilities

2,550

2,755

4,755

5,346

Other expenses

10,672

10,588

20,605

21,689

Track maintenance expense reimbursement

(5,133)

-

(9,283)

-

Net (gain) loss on sale of assets

(64)

5

143

(158)

Impairment of assets

3,220

-

3,220

-

Depreciation and amortization

11,736

11,594

23,500

22,000

Total operating expenses

110,517

121,921

211,251

233,487

Operating income

28,698

34,175

52,901

66,051

Interest expense (including amortization costs of $4,384, $2,163, $9,242 and $4,779, respectively)

(18,143)

(10,267)

(36,734)

(23,678)

Other income (loss)

495

(5,476)

1,035

(87,418)

Income (loss) before income taxes

11,050

18,432

17,202

(45,045)

Provision for (benefit from) income taxes

2,350

7,235

4,417

(16,023)

Net income (loss)

8,700

11,197

12,785

(29,022)

Less:  Net loss attributable to noncontrolling interest

-

(202)

-

(202)

Net income (loss) attributable to the Company

$         8,700

$           11,399

$       12,785

$     (28,820)

Basic earnings per common share:

Net income (loss) attributable to the Company

$           0.17

$               0.23

$           0.24

$         (0.57)

Diluted earnings per common share:

Net income (loss) attributable to the Company

$           0.17

$               0.23

$           0.24

$         (0.57)

Weighted Average common shares outstanding:

Basic

52,282

50,407

53,467

50,462

Diluted

52,282

50,578

53,467

50,462

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

December 31,

June 30,

2011

2012

(In thousands, except share data)

ASSETS

Current assets:

Cash and cash equivalents

$        90,999

$        50,987

Accounts and notes receivable, net of allowance of $7,291 and $8,817, respectively

96,813

105,747

Current deferred tax assets

9,886

13,659

Other current assets

17,967

24,967

Total current assets

215,665

195,360

Property, plant and equipment, net

1,021,545

1,051,479

Intangible assets

134,851

175,202

Goodwill

211,841

233,922

Other assets

13,478

12,615

Total assets

$   1,597,380

$   1,668,578

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current maturities of long-term debt

$          71,991

$         64,120

Accounts payable

78,844

101,502

Accrued expenses

28,616

29,468

Total current liabilities

179,451

195,090

Long-term debt, less current maturities

1,827

576,628

Senior secured notes

501,876

-

Deferred income taxes

213,421

200,512

Other liabilities

20,680

31,825

Total liabilities

917,255

1,004,055

Commitments and contingencies

Stockholders' equity:

Common stock, $0.01 par value, 400,000,000 shares authorized; 50,605,440 shares issued and outstanding at December 31, 2011; and 50,396,991 shares issued and outstanding at June 30, 2012

506

504

Additional paid in capital and other

591,341

594,988

Retained earnings

84,272

55,337

Accumulated other comprehensive income

4,006

6,221

Total stockholders' equity

680,125

657,050

Noncontrolling interest

-

7,473

Total equity

680,125

664,523

Total liabilities and stockholders' equity

$   1,597,380

$   1,668,578

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Six Months Ended

June 30,

2011

2012

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$                 12,785

$               (29,022)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization, including amortization of debt issuance costs classified in interest expense

25,864

23,825

Amortization of swap termination costs

6,878

2,954

Net loss (gain) on sale or disposal of properties

143

(158)

Impairment of assets

3,220

-

Loss on extinguishment of debt

-

88,107

Equity compensation costs

4,979

7,647

Deferred income taxes and other

1,533

(18,022)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(23,767)

(5,230)

Other current assets

(10,031)

(6,817)

Accounts payable

11,914

9,471

Accrued expenses

19,691

339

Other assets and liabilities

(481)

218

    Net cash provided by operating activities

52,728

73,312

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment

(36,185)

(42,914)

NECR government grant reimbursements

6,954

3,681

Proceeds from sale of assets

2,788

4,513

Acquisitions, net of cash acquired

(12,706)

(55,443)

Other

(45)

(238)

    Net cash used in investing activities

(39,194)

(90,401)

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on long-term debt

(263)

(1,588)

Proceeds from issuance of long-term debt

-

582,075

Repurchase of senior secured notes

-

(649,720)

Repayment of revolving credit facility

-

(7,000)

Proceeds from revolving credit facility

-

65,000

Repurchase of common stock

(50,091)

(520)

Financing costs paid

(119)

(11,179)

    Net cash used in financing activities

(50,473)

(22,932)

Effect of exchange rates on cash

453

9

Net decrease in cash

(36,486)

(40,012)

Cash, beginning of period

152,968

90,999

Cash, end of period

$               116,482

$                 50,987

RAILAMERICA, INC. AND SUBSIDIARIES

SELECTED FINANCIAL INFORMATION

(Dollars in thousands)

(Unaudited)

Three Months Ended June 30,

2011

2012

Operating revenue

$         139,215

100.0%

$         156,096

100.0%

Operating expenses:

Labor and benefits

41,859

30.1%

43,228

27.7%

Equipment rents

8,889

6.4%

9,939

6.4%

Purchased services

11,327

8.1%

15,550

10.0%

Diesel fuel

14,578

10.5%

13,210

8.4%

Casualties and insurance

4,955

3.5%

5,306

3.4%

Materials

5,928

4.3%

9,746

6.2%

Joint facilities

2,550

1.8%

2,755

1.8%

Other expenses

10,672

7.7%

10,588

6.8%

Track maintenance expense reimbursement

(5,133)

(3.7%)

-

0.0%

Net (gain) loss on sale of assets

(64)

(0.0%)

5

0.0%

Impairment of assets

3,220

2.3%

-

0.0%

Depreciation and amortization

11,736

8.4%

11,594

7.4%

Total operating expenses

110,517

79.4%

121,921

78.1%

Operating income

$           28,698

20.6%

$           34,175

21.9%

Six Months Ended June 30,

2011

2012

Operating revenue

$         264,152

100.0%

$         299,538

100.0%

Operating expenses:

Labor and benefits

83,476

31.6%

88,780

29.6%

Equipment rents

17,555

6.7%

18,335

6.1%

Purchased services

20,433

7.7%

26,520

8.9%

Diesel fuel

28,745

10.9%

26,635

8.9%

Casualties and insurance

7,089

2.7%

8,185

2.7%

Materials

11,013

4.2%

16,155

5.4%

Joint facilities

4,755

1.8%

5,346

1.8%

Other expenses

20,605

7.8%

21,689

7.2%

Track maintenance expense reimbursement

(9,283)

(3.5%)

-

0.0%

Net loss (gain) on sale of assets

143

0.0%

(158)

(0.1%)

Impairment of assets

3,220

1.2%

-

0.0%

Depreciation and amortization

23,500

8.9%

22,000

7.4%

Total operating expenses

211,251

80.0%

233,487

77.9%

Operating income

$           52,901

20.0%

$           66,051

22.1%

RAILAMERICA, INC. AND SUBSIDIARIES

Railroad Freight Revenue, Carloads and Average Freight Revenue

Per Carload

Comparison by Commodity Group (Unaudited)

Three Months Ended

Three Months Ended

June 30, 2011

June 30, 2012

Average Freight

Average Freight

Freight

Revenue per

Freight

Revenue per

Revenue

Carloads

Carload

Revenue

Carloads

Carload

(Dollars in thousands, except average freight revenue per carload)

Chemicals

$          16,324

24,496

$                      666

$          17,465

24,151

$                      723

Agricultural Products

18,044

34,146

528

18,992

36,273

524

Metallic Ores and Metals

11,335

18,388

616

11,169

16,763

666

Non-Metallic Minerals and Products

10,437

22,774

458

11,426

23,493

486

Pulp, Paper and Allied Products

10,481

17,154

611

9,598

17,177

559

Forest Products

7,925

12,656

626

9,864

14,881

663

Coal

7,802

34,682

225

7,483

33,483

223

Food or Kindred Products

7,578

14,253

532

7,649

13,849

552

Waste and Scrap Materials

6,436

15,517

415

6,635

14,581

455

Petroleum

4,304

8,346

516

5,183

9,912

523

Other

3,401

7,019

485

4,388

9,542

460

Motor Vehicles

1,500

2,664

563

3,703

5,661

654

Total

$        105,567

212,095

$                      498

$        113,555

219,766

$                      517

Six Months Ended

Six Months Ended

June 30, 2011

June 30, 2012

Average Freight

Average Freight

Freight

Revenue per

Freight

Revenue per

Revenue

Carloads

Carload

Revenue

Carloads

Carload

(Dollars in thousands, except average freight revenue per carload)

Chemicals

$          32,489

49,398

$                      658

$          34,186

48,056

$                      711

Agricultural Products

32,979

64,856

508

35,614

68,897

517

Metallic Ores and Metals

21,533

34,987

615

23,395

35,669

656

Non-Metallic Minerals and Products

19,490

42,624

457

20,806

42,189

493

Pulp, Paper and Allied Products

20,214

34,161

592

18,885

33,713

560

Forest Products

14,759

24,088

613

18,798

28,546

659

Coal

16,389

75,427

217

15,631

71,318

219

Food or Kindred Products

14,669

27,889

526

15,171

27,668

548

Waste and Scrap Materials

11,671

28,610

408

12,778

28,552

448

Petroleum

9,953

19,662

506

10,982

20,774

529

Other

5,974

14,074

424

8,076

19,072

423

Motor Vehicles

3,082

5,361

575

7,051

11,053

638

Total

$        203,202

421,137

$                      483

$        221,373

435,507

$                      508

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

Adjusted net income (loss) is a supplemental measure of profitability that is not calculated or presented in accordance with U.S. generally accepted accounting principles ("GAAP").  We use non-GAAP financial measures as a supplement to our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.  However, Adjusted net income (loss) has limitations as an analytical tool.  It is not a measurement of our profitability under GAAP and should not be considered as an alternative to Net income (loss) as a measure of profitability.

Adjusted net income (loss) assists us in measuring our performance and profitability of our operations without the impact of transaction costs related to debt and credit facility extinguishment, exploration of strategic alternatives, acquisitions, impairment of assets and swap termination. The following table sets forth the reconciliation of Adjusted net income (loss).

2011

(In thousands, except per share data)

Q1

Q2

Q2 YTD

After Tax

Per Share

After Tax

Per Share

After Tax

Per Share

Net income

$4,085

$0.07

$8,700

$0.17

$12,785

$0.24

Add:

Amortization of swap termination costs

2,243

0.04

1,953

0.04

4,196

0.08

Impairment of assets

-

-

1,964

0.04

1,964

0.04

Acquisition expense

44

0.00

148

0.00

192

0.00

Adjusted net income

$6,372

$0.12

$12,765

$0.24

$19,137

$0.36

Weighted Average common shares outstanding (diluted)

54,651

52,282

53,467

2012

(In thousands, except per share data)

Q1

Q2

Q2 YTD

After Tax

Per Share

After Tax

Per Share

After Tax

Per Share

Net income (loss)

($40,219)

($0.80)

$11,399

$0.23

($28,820)

($0.57)

Add:

Amortization of swap termination costs

1,002

0.02

859

0.02

1,861

0.04

Loss on extinguishment of debt

51,938

1.03

3,570

0.07

55,507

1.10

Acquisition / strategic alternatives expense

239

0.00

1,376

0.03

1,615

0.03

Adjusted net income

$12,961

$0.26

$17,203

$0.34

$30,164

$0.60

Weighted Average common shares outstanding (diluted)

50,518

50,578

50,462

Note: Numbers may not add due to rounding

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

Operating Income Excluding 45G Benefit, Operating Ratio Excluding 45G Benefit, Operating Income Excluding 45G Benefit, Asset Sales & Impairments and Operating Ratio Excluding 45G Benefit, Asset Sales & Impairments are supplemental measures of profitability that are not calculated or presented in accordance with U.S. generally accepted accounting principles ("GAAP").  We use non-GAAP financial measures as a supplement to our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business.  However, Operating Income Excluding 45G Benefit, Operating Ratio Excluding 45G Benefit, Operating Income Excluding 45G Benefit, Asset Sales & Impairments and Operating Ratio Excluding 45G Benefit, Asset Sales & Impairments have limitations as analytical tools.  They are not measurements of our profitability under GAAP and should not be considered as alternatives to Operating Income or Operating Ratio as measures of profitability.

Operating Income Excluding 45G Benefit and Operating Ratio Excluding 45G Benefit assist us in measuring our performance and profitability of our operations without the impact of monetizing the 45G tax benefit.  Operating Income Excluding 45G Benefit, Asset Sales & Impairments and Operating Ratio Excluding 45G Benefit, Asset Sales & Impairments assist us in measuring our performance and profitability of our operations without the impact of monetizing the 45G tax benefit, Asset Sales and Impairments.  The following table sets forth the reconciliation of Operating Income Excluding 45G Benefit from our Operating Income, Operating Ratio Excluding 45G Benefit from our Operating Ratio, Operating Income Excluding 45G Benefit, Asset Sales & Impairments from our Operating Income and Operating Ratio Excluding 45G Benefit, Asset Sales & Impairments from our Operating Ratio.

($ in thousands)

Q2 2011

Q2 2012

Operating revenue

$139,215

$156,096

Operating expense

110,517

121,921

Operating income, reported

28,698

34,175

Operating ratio reported

79.4%

78.1%

Less: Benefit from 45G credits

(5,133)

3.7%

-

0.0%

Operating income excluding 45G Benefit

23,565

34,175

Operating ratio excluding 45G Benefit

83.1%

78.1%

Net (gain) loss on sale of assets

(64)

0.0%

5

0.0%

Impairment of assets

3,220

-2.3%

-

0.0%

Operating income excluding 45G Benefit, Asset Sales & Impairments

$26,721

$34,180

Operating ratio, excluding 45G Benefit, Asset Sales & Impairments

80.8%

78.1%

Note: Numbers may not add due to rounding

SOURCE RailAmerica, Inc.



RELATED LINKS

http://www.railamerica.com