RailAmerica, Inc. Reports Third Quarter 2012 Results

Nov 05, 2012, 06:00 ET from RailAmerica, Inc.

JACKSONVILLE, Fla., Nov. 5, 2012 /PRNewswire/ --

Third Quarter Highlights

  • Revenue increased 11% versus third quarter 2011.
  • Operating income down 31%; (up 25% excluding 45G benefit, asset sales, impairments and strategic alternatives expense[1]).
  • Net income of $0.12 per share.
  • Adjusted net income per share[1] of $0.40.

On October 1, 2012, RailAmerica, Inc. (RailAmerica) was acquired by Genesee & Wyoming Inc. (GWI) (NYSE: GWR) and deregistered its common stock and delisted from the New York Stock Exchange. Immediately following the closing of the acquisition, control of RailAmerica was placed into a voting trust with R. Lawrence McCaffrey appointed as trustee. The trust will remain in effect until the U.S. Surface Transportation Board (STB) issues its decision on GWI's application to control RailAmerica and its railroads, which decision could be as early as the fourth quarter of 2012 or as late as the first quarter of 2013.

For the pendency of the trust, GWI will account for its ownership of RailAmerica under the equity method of accounting. RailAmerica financial results for the third quarter of 2012 are for periods prior to GWI's ownership of RailAmerica and will not be included in GWI's financial results for such periods. This press release and a presentation containing supplemental information for the third quarter and year to date results will be posted on RailAmerica's website www.railamerica.com.

RailAmerica today reported financial results for the quarter ended September 30, 2012. Third quarter 2012 revenue increased 11% to $155.4 million from $139.7 million in the third quarter of 2011. Freight revenue increased 8% to $113.0 million with carloads up 4% and average revenue per car up 4%. Non-freight revenue increased 21% to $42.4 million.

The Company reported third quarter 2012 net income of $5.9 million, or $0.12 per diluted share. This compares to net income of $9.1 million, or $0.17 per diluted share in the third quarter of 2011. Noteworthy items impacting the third quarters of 2012 and 2011 include:

  • Acquisition / Transaction costs: In the third quarter of 2012 the Company incurred $17.0 million of transaction related expenses. $16.6 million was due to the Company's previously announced exploration of strategic alternatives, which resulted in the sale of RailAmerica to Genesee & Wyoming Inc. The remainder of the expenses were due to acquisition and industrial development related activity.
  • Restricted stock amortization: Third quarter 2012 restricted stock amortization (included in labor and benefits) included $2.4 million related to retirement eligibility vesting for certain participants. The vesting was associated with grants made during the third quarter of 2012 under terms of the agreement to sell the Company. Otherwise these expenses would have been incurred in the first quarter of 2013.
  • Amortization of swap termination costs: Non-cash charges of $1.3 million and $2.7 million were recorded in interest expense during the third quarters of 2012 and 2011, respectively, due to the June 2009 termination of an interest rate swap agreement.
  • 45G tax credits: A $3.9 million income statement benefit was recorded in the third quarter of 2011, but no benefit was recognized in the third quarter of 2012 since the credit is currently not in effect for 2012.
  • Asset impairment: Third quarter of 2011 includes a $1.9 million non-cash impairment charge resulting from an evaluation of our locomotive fleet.
  • Credit facility replacement: Third quarter of 2011 includes a $0.7 million non-cash charge related to the replacement of our asset backed loan facility with a new revolving credit facility.

Summary of Noteworthy Items Impacting Third Quarter 2011 and 2012

For the Three Months Ended September 30,

($ in thousands except EPS)

2011

2012

Pre Tax

EPS

Pre Tax

EPS

Strategic alternatives

$0

$0.00

($16,587)

($0.26)

Acquisition / Transaction costs

(203)

(0.00)

(393)

(0.00)

Restricted stock amortization increase

-

-

(2,366)

(0.03)

Amortization of swap termination costs

(2,747)

(0.03)

(1,283)

(0.02)

45G credits

3,879

0.05

-

-

Impairment of assets

(1,949)

(0.02)

-

-

Loss on extinguishment of credit agreement

(719)

(0.01)

-

-

Gain / (loss) on sale of assets

(8)

(0.00)

1,337

0.02

Note: Effective tax rate of 39% for 2011 and 37% for all 2012 items other than strategic alternatives, which are tax effected at 21%.

The Company reported operating income of $21.7 million in the third quarter of 2012 compared to $31.5 million in the third quarter of 2011. In addition to the items mentioned above impacting operating income, third quarter 2012 expenses were up primarily due to the inclusion of operating expenses from acquisitions (Marquette Railroad, Wellsboro & Corning Railroad and TransRail North America (TNA)). Also, incentive compensation increased $4.5 million. Operating income excluding the impact of 45G credits, asset sales, impairments and strategic alternatives expense is shown below.

For the Three Months Ended

September 30,

2011

2012

($ in thousands)

Operating revenue

$139,665

$155,418

Operating expense

108,177

133,670

Operating income, reported

31,488

21,748

Less: Benefit from 45G credits

(3,879)

-

Operating income excluding 45G Benefit1

27,609

21,748

Net (gain) loss on sale of assets

8

(1,337)

Impairment of assets

1,949

-

Strategic alternatives expense

-

16,587

Operating income excluding 45G Benefit, Asset Sales, Impairments and Strategic Alternatives expense1

29,566

36,998

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

A more detailed discussion of financial results for the third quarter of 2012 compared to the third quarter of 2011 follows.

Operating Revenue

Operating revenue increased by $15.8 million, or 11%, to $155.4 million in the three months ended September 30, 2012 from $139.7 million in the three months ended September 30, 2011. The net increase in operating revenue was due to higher non-freight revenue, rate increases, change in commodity mix, and increased carloads.

Total carloads during the three months ended September 30, 2012 increased 4% to 214,357 from 206,975 in the three months ended September 30, 2011. The increase in the average revenue per carload to $527 in the three months ended September 30, 2012, from $506 in the comparable period in 2011 was primarily due to rate increases, commodity mix, and fuel surcharge.

Freight revenue was $113.0 million in the three months ended September 30, 2012 compared to $104.7 million in the three months ended September 30, 2011, an increase of $8.3 million or 8%. This increase was primarily due to the net effect of the following:

  • Industrial products (includes chemicals, pulp, paper & allied products, metallic ores and metals, waste and scrap materials, other, petroleum, and motor vehicles) revenue increased $5.9 million, or 11%, primarily due to motor vehicle carload growth of 84%, which was driven by increased production at multiple automobile manufacturing plants we serve in Indiana, Michigan, California and Washington, chemicals and other which were driven by rates and commodity mix. The increase in the motor vehicles category was partially offset by an 11% decrease in metallic ores and metals carloads and an 8% decrease in pulp, paper and allied products traffic;
  • Agricultural Products (includes agricultural products and food or kindred products) revenue increased $0.5 million, or 2%, primarily due to agricultural products carload increases of 4% as a result of increased shipments in export traffic destined for Asia. This increase in agricultural products was partially offset by a 9% decrease in carloads for food and kindred products driven by soft demand for dried grain products;
  • Construction Products (includes non-metallic minerals and products and forest products) revenue increased $2.0 million, or 11%, primarily due to increased forest products carloads of 12% which was driven by an increase in lumber traffic in the Northeast and Northwest; and
  • Coal revenue decreased $0.1 million, or 1%, although coal volumes increased by 6%. The volume increase was primarily due to several lower rated Class I detour trains routed over one of our lines due to maintenance on the Class I mainline.

Operating Expenses

Operating expenses increased to $133.7 million in the three months ended September 30, 2012 from $108.2 million in the three months ended September 30, 2011. The operating ratio was 86.0% in 2012 compared to 77.5% in 2011. The increase in the operating ratio was primarily due to professional service fees related to the sale of the Company and the absence of track maintenance credits in the third quarter of 2012.

The net increase in operating expenses was due to the following:

  • Labor and benefits expense increased $6.2 million, or 15%, primarily due to higher profit sharing ($4.5 million), restricted stock amortization ($1.9 million) and increased wages as a result of acquisitions ($1.2 million), partially offset by lower health insurance costs ($0.7 million);
  • Equipment rents expense increased $0.3 million, or 3%, primarily due to higher railcar lease expense ($0.5 million) and acquisitions ($0.5 million), partially offset by lower locomotive lease expense ($0.3 million) and car hire ($0.3 million);
  • Purchased services expense increased $18.0 million, or 164%, primarily due to professional services in connection with our sale of the Company ($16.6 million), increased transport services related to the acquisition of TNA ($1.0 million) and write off of project costs ($0.3 million);
  • Diesel fuel expense approximated prior year expense;
  • Casualties and insurance expense decreased $0.4 million, or 9%, primarily due to a decrease in derailment costs ($1.1 million), partially offset by increased reserves related to crossing accidents ($0.5 million);
  • Materials expense increased $1.4 million, or 17%, primarily due to an increase in car repair material purchases resulting from increased car repair activities;
  • Joint facilities expense decreased $0.3 million, or 13% due to a reduction in maintenance charges;
  • Other expenses increased $0.5 million, or less than 5%, primarily due to an increase in railroad lease expense ($0.4 million) and other fees associated with the sale of the Company ($0.2 million), partially offset by lower taxes ($0.2 million);
  • The execution of the track maintenance agreement in 2011 resulted in a shipper paying for $4.0 million of maintenance expenditures, partially offset by $0.1 million of related consulting fees;
  • Asset sales resulted in a net gain of $1.3 million in the three months ended September 30, 2012, related to the sale of land;
  • Impairment of assets was $1.9 million in the three months ended September 30, 2011, related to a tentative sale agreement for various locomotives and further evaluation of the market value of the remaining units identified for potential fleet reductions; and
  • Depreciation and amortization expense decreased $0.7 million, or 6%, including $1.7 million in lower depreciation expense resulting from a road and track asset life study completed during the first quarter of 2012, offset by increased depreciation and amortization associated with acquisitions.

Other Income (Expense) Items

Interest Expense. Interest expense, including amortization of deferred financing costs, decreased $9.0 million to $8.8 million for the three months ended September 30, 2012, from $17.8 million in the three months ended September 30, 2011. This decrease is primarily due to the redemption of $74.0 million of our 9.25% senior notes each in January and June 2012 and $444 million in March 2012 which were replaced with lower cost debt. Interest expense includes $1.9 million and $4.0 million of amortization costs for the three months ended September 30, 2012 and 2011, respectively.

Swap termination cost amortization decreased to $1.3 million during the three months ended September 30, 2012 from $2.7 million during the three months ended September 30, 2011.

Other (Loss) Income. Other loss decreased $0.7 million during the three months ended September 30, 2012 as a result of the write-off of deferred loan costs of $0.6 million during the three months ended September 30, 2011. These costs were partially offset by management fee income that is recorded in connection with transactions where employees receive restricted stock awards from related parties. As part of the restricted stock transactions, the Company recorded an offsetting expense in labor and benefits.

Income Taxes. The effective tax rate for the three months ended September 30, 2012 and 2011 from continuing operations was a provision of 57.8% and 32.7%, respectively. The effective tax rate is affected by recurring items such as tax rates in foreign jurisdictions and the relative amount of income earned in jurisdictions. It is also affected by discrete items that may occur in any given quarter, but are not consistent from quarter to quarter. The effective tax rate for the three months ended September 30, 2012 was adversely impacted by non-deductible professional fees related to the sale of the Company ($2.9 million), partially offset by the reduction of tax reserves due to the lapse of the statute of limitations ($0.5 million). The effective tax rate for the three months ended September 30, 2011 was favorably impacted by the reduction of tax reserves due to the lapse of the statute of limitations ($0.3 million).

The Company will post a presentation containing supplemental information for the third quarter and year to date results on 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 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 related to our business detailed in RailAmerica's previous 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.

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2011

2012

2011

2012

(In thousands, except per share data)

Operating revenue

$ 139,665

$ 155,418

$ 403,817

$ 454,956

Operating expenses:

Labor and benefits

41,379

47,536

124,855

136,316

Equipment rents

9,046

9,320

26,601

27,655

Purchased services

10,996

28,984

31,429

55,504

Diesel fuel

13,142

13,170

41,887

39,805

Casualties and insurance

4,006

3,627

11,095

11,812

Materials

7,879

9,238

18,892

25,393

Joint facilities

2,459

2,132

7,214

7,478

Other expenses

9,271

9,736

29,876

31,425

Track maintenance expense reimbursement

(3,879)

-

(13,162)

-

Net loss (gain) on sale of assets

8

(1,337)

151

(1,495)

Impairment of assets

1,949

-

5,169

-

Depreciation and amortization

11,921

11,264

35,421

33,264

Total operating expenses

108,177

133,670

319,428

367,157

Operating income

31,488

21,748

84,389

87,799

Interest expense (including amortization costs of $3,973, $1,948, $13,215 and $6,727, respectively)

(17,792)

(8,764)

(54,526)

(32,442)

Other (loss) income

(231)

426

804

(86,992)

Income (loss) before income taxes

13,465

13,410

30,667

(31,635)

Provision for (benefit from) income taxes

4,407

7,752

8,824

(8,271)

Net income (loss)

9,058

5,658

21,843

(23,364)

Less: Net loss attributable to noncontrolling interest

-

(287)

-

(489)

Net income (loss) attributable to the Company

$ 9,058

$ 5,945

$ 21,843

$ (22,875)

Basic earnings per common share:

Net income (loss) attributable to the Company

$ 0.17

$ 0.12

$ 0.41

$ (0.45)

Diluted earnings per common share:

Net income (loss) attributable to the Company

$ 0.17

$ 0.12

$ 0.41

$ (0.45)

Weighted Average common shares outstanding:

Basic

52,083

50,395

53,006

50,440

Diluted

52,083

50,603

53,006

50,440

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited)

December 31,

September 30,

2011

2012

(In thousands, except share data)

ASSETS

Current assets:

Cash and cash equivalents

$ 90,999

$ 85,807

Restricted cash

300

Accounts and notes receivable, net of allowance of $7,291 and $8,874 respectively

96,813

106,225

Current deferred tax assets

9,886

8,347

Other current assets

17,967

26,112

Total current assets

215,665

226,791

Property, plant and equipment, net

1,021,545

1,069,543

Intangible assets

134,851

172,981

Goodwill

211,841

235,042

Other assets

13,478

11,855

Total assets

$ 1,597,380

$ 1,716,212

LIABILITIES AND EQUITY

Current liabilities:

Current maturities of long-term debt

$ 71,991

$ 82,435

Accounts payable

78,844

92,483

Accrued expenses

28,616

52,966

Total current liabilities

179,451

227,884

Long-term debt, less current maturities

1,827

584,118

Senior secured notes

501,876

-

Deferred income taxes

213,421

203,717

Other liabilities

20,680

21,432

Total liabilities

917,255

1,037,151

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 50,394,421 shares issued and outstanding at September 30, 2012

506

504

Additional paid in capital and other

591,341

599,174

Retained earnings

84,272

61,282

Accumulated other comprehensive income

4,006

10,915

Total stockholders' equity

680,125

671,875

Noncontrolling interest

-

7,186

Total equity

680,125

679,061

Total liabilities and equity

$ 1,597,380

$ 1,716,212

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Nine Months Ended

September 30,

2011

2012

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ 21,843

$ (23,364)

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

39,012

35,752

Amortization of swap termination costs

9,625

4,237

Net (gain) loss on sale or disposal of properties

151

(1,495)

Impairment of assets

5,169

-

Loss on extinguishment of debt

-

88,107

Deferred financing costs expensed

719

-

Equity compensation costs

7,381

11,946

Deferred income taxes and other

4,453

(10,257)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

(33,167)

(5,594)

Other current assets

(7,209)

(7,919)

Accounts payable

17,048

(1,368)

Accrued expenses

7,967

23,833

Other assets and liabilities

(1,253)

(125)

Net cash provided by operating activities

71,739

113,753

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property, plant and equipment

(93,518)

(72,147)

NECR government grant reimbursements

31,329

7,129

Proceeds from sale of assets

7,598

6,511

Acquisitions, net of cash acquired

(12,716)

(53,107)

Change in restricted cash

-

(300)

Other

(65)

16

Net cash used in investing activities

(67,372)

(111,898)

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on long-term debt

(263)

(3,051)

Proceeds from issuance of long-term debt

-

582,075

Repurchase of senior secured notes

-

(649,720)

Repayment of revolving credit facility

-

(60,000)

Proceeds from revolving credit facility

-

135,000

Repurchase of common stock

(57,664)

(520)

Financing costs paid

(2,891)

(11,196)

Net cash used in financing activities

(60,818)

(7,412)

Effect of exchange rates on cash

(743)

365

Net decrease in cash

(57,194)

(5,192)

Cash, beginning of period

152,968

90,999

Cash, end of period

$ 95,774

$ 85,807

RAILAMERICA, INC. AND SUBSIDIARIES

SELECTED FINANCIAL INFORMATION

(Dollars in thousands)

(Unaudited)

Three Months Ended September 30,

2011

2012

Operating revenue

$ 139,665

100.0%

$ 155,418

100.0%

Operating expenses:

Labor and benefits

41,379

29.7%

47,536

30.6%

Equipment rents

9,046

6.5%

9,320

6.0%

Purchased services

10,996

7.9%

28,984

18.7%

Diesel fuel

13,142

9.4%

13,170

8.5%

Casualties and insurance

4,006

2.9%

3,627

2.3%

Materials

7,879

5.6%

9,238

5.9%

Joint facilities

2,459

1.8%

2,132

1.4%

Other expenses

9,271

6.6%

9,736

6.3%

Track maintenance expense reimbursement

(3,879)

(2.8%)

-

0.0%

Net loss (gain) on sale of assets

8

0.0%

(1,337)

(0.9%)

Impairment of assets

1,949

1.4%

-

0.0%

Depreciation and amortization

11,921

8.5%

11,264

7.2%

Total operating expenses

108,177

77.5%

133,670

86.0%

Operating income

$ 31,488

22.5%

$ 21,748

14.0%

Nine Months Ended September 30,

2011

2012

Operating revenue

$ 403,817

100.0%

$ 454,956

100.0%

Operating expenses:

Labor and benefits

124,855

30.9%

136,316

30.0%

Equipment rents

26,601

6.6%

27,655

6.1%

Purchased services

31,429

7.8%

55,504

12.2%

Diesel fuel

41,887

10.4%

39,805

8.7%

Casualties and insurance

11,095

2.7%

11,812

2.6%

Materials

18,892

4.7%

25,393

5.6%

Joint facilities

7,214

1.8%

7,478

1.6%

Other expenses

29,876

7.4%

31,425

6.9%

Track maintenance expense reimbursement

(13,162)

(3.3%)

-

0.0%

Net loss (gain) on sale of assets

151

0.0%

(1,495)

(0.3%)

Impairment of assets

5,169

1.3%

-

0.0%

Depreciation and amortization

35,421

8.8%

33,264

7.3%

Total operating expenses

319,428

79.1%

367,157

80.7%

Operating income

$ 84,389

20.9%

$ 87,799

19.3%

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

September 30, 2011

September 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

$ 16,220

24,037

$ 675

$ 18,149

24,858

$ 730

Agricultural Products

15,911

29,044

548

16,419

30,179

544

Metallic Ores and Metals

10,744

17,828

603

10,819

15,778

686

Non-Metallic Minerals and Products

10,144

21,508

472

10,734

21,718

494

Pulp, Paper and Allied Products

11,043

18,639

592

10,143

17,207

589

Forest Products

7,937

12,647

628

9,356

14,112

663

Coal

8,738

35,335

247

8,646

37,495

231

Food or Kindred Products

7,479

14,032

533

7,520

12,826

586

Waste and Scrap Materials

6,435

14,965

430

6,728

14,130

476

Petroleum

3,746

8,274

453

5,267

10,059

524

Other

4,547

7,906

575

5,872

10,916

538

Motor Vehicles

1,715

2,760

621

3,395

5,079

668

Total

$ 104,659

206,975

$ 506

$ 113,048

214,357

$ 527

Nine Months Ended

Nine Months Ended

September 30, 2011

September 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

$ 48,708

73,435

$ 663

$ 52,335

72,914

$ 718

Agricultural Products

48,888

93,900

521

52,033

99,076

525

Metallic Ores and Metals

32,276

52,815

611

34,214

51,447

665

Non-Metallic Minerals and Products

29,633

64,132

462

31,541

63,907

494

Pulp, Paper and Allied Products

31,256

52,800

592

29,028

50,920

570

Forest Products

22,695

36,735

618

28,155

42,658

660

Coal

25,127

110,762

227

24,276

108,813

223

Food or Kindred Products

22,148

41,921

528

22,692

40,494

560

Waste and Scrap Materials

18,105

43,575

415

19,506

42,682

457

Petroleum

13,698

27,936

490

16,249

30,833

527

Other

10,530

21,980

479

13,947

29,988

465

Motor Vehicles

4,797

8,121

591

10,446

16,132

648

Total

$ 307,861

628,112

$ 490

$ 334,422

649,864

$ 515

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, industrial development, 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

Q3

Q3 YTD

After Tax

Per Share

After Tax

Per Share

After Tax

Per Share

After Tax

Per Share

Net income

$4,085

$0.07

$8,700

$0.17

$9,058

$0.17

$21,843

$0.41

Add:

Amortization of swap termination costs

2,243

0.04

1,953

0.04

1,675

0.03

5,871

0.11

Impairment of assets

-

-

1,964

0.04

1,189

0.02

3,153

0.06

Loss on extinguishment of credit facility

-

-

-

-

439

0.01

439

0.01

Acquisition expense

44

0.00

148

0.00

124

0.00

316

0.01

Adjusted net income

$6,372

$0.12

$12,765

$0.24

$12,485

$0.24

$31,622

$0.60

Weighted Average common shares outstanding (diluted)

54,651

52,282

52,083

53,006

2012

(In thousands, except per share data)

Q1

Q2

Q3

Q3 YTD

After Tax

Per Share

After Tax

Per Share

After Tax

Per Share

After Tax

Per Share

Net income (loss)

($40,219)

($0.80)

$11,399

$0.23

$5,945

$0.12

($22,875)

($0.45)

Add:

Amortization of swap termination costs

1,002

0.02

859

0.02

808

0.02

2,669

0.05

Loss on extinguishment of debt

51,938

1.03

3,570

0.07

-

-

55,507

1.10

Acquisition / industrial development / strategic alternatives expense

239

0.00

1,376

0.03

13,351

0.26

14,967

0.30

Adjusted net income

$12,961

$0.26

$17,203

$0.34

$20,105

$0.40

$50,268

$0.99

Weighted Average common shares outstanding (diluted)

50,518

50,578

50,603

50,440

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 & Strategic Alternatives Expense and Operating Ratio Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense 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, & Strategic Alternatives Expense and Operating Ratio Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense 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 & Strategic Alternatives Expense and Operating Ratio Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense assist us in measuring our performance and profitability of our operations without the impact of monetizing the 45G tax benefit, Asset Sales, Impairments & Strategic Alternatives Expense. 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 & Strategic Alternatives Expense from our Operating Income and Operating Ratio Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense from our Operating Ratio.

2011

($ in thousands)

Q1

Q2

Q3

Operating revenue

$124,937

$139,215

$139,665

Operating expense

100,734

110,517

108,177

Operating Income, reported

24,203

28,698

31,488

Operating ratio Reported

80.6%

79.4%

77.5%

Less: Benefit from 45G credits

(4,150)

3.3%

(5,133)

3.7%

(3,879)

2.8%

Operating income excluding 45G Benefit

20,053

23,565

27,609

Operating ratio excluding 45G Benefit

83.9%

83.1%

80.3%

Net (gain) loss on sale of assets

207

-0.2%

(64)

0.0%

8

0.0%

Strategic Alternatives Expense

-

0.0%

-

0.0%

-

0.0%

Impairment of assets

-

0.0%

3,220

-2.3%

1,949

-1.4%

Operating income excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense

20,260

26,721

29,566

Operating ratio, excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense

83.8%

80.8%

78.9%

2012

($ in thousands)

Q1

Q2

Q3

Operating revenue

$143,442

$156,096

$155,418

Operating expense

111,566

121,921

133,670

Operating Income, reported

31,876

34,175

21,748

Operating ratio Reported

77.8%

78.1%

86.0%

Less: Benefit from 45G credits

-

0.0%

-

0.0%

-

0.0%

Operating income excluding 45G Benefit

31,876

34,175

21,748

Operating ratio excluding 45G Benefit

77.8%

78.1%

86.0%

Strategic Alternatives Expense

-

0.0%

1,740

-1.1%

16,587

-10.7%

Net (gain) loss on sale of assets

(163)

0.1%

5

0.0%

(1,337)

0.9%

Operating income excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense

31,713

35,920

36,998

Operating ratio, excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives Expense

77.9%

77.0%

76.2%

Note: Numbers may not add due to rounding

SOURCE RailAmerica, Inc.



RELATED LINKS

http://www.railamerica.com