Find a Railroad

Genesee & Wyoming Reports Results for the Fourth Quarter of 2016

Category:

Wednesday, February 8, 2017 6:00 am EST

Dateline:

DARIEN, Conn.

Public Company Information:

NYSE:
GWR
US3715591059

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

Fourth Quarter Consolidated Highlights

  • Completed the acquisition of Providence and Worcester Railroad Company (P&W), a Class III regional freight railroad operating in Massachusetts, Rhode Island, Connecticut and New York, on November 1, 2016.
  • Completed the acquisition of Glencore Rail (NSW) Pty Limited (GRail), the third largest coal haulage business in Australia, and concurrently issued a 48.9% equity stake in G&W’s Australian subsidiary, G&W Australia Holdings LP (GWA), the holding company for all of G&W's Australian businesses, to Macquarie Infrastructure and Real Assets (MIRA) on December 1, 2016.
  • Announced agreement to purchase Pentalver Transport Limited (Pentalver), a U.K. based maritime container terminal and transportation business, on December 12, 2016.
  • Completed 4,000,000 share offering of Class A Common Stock at $75.00 per share on December 13, 2016. The offering increased G&W's weighted average shares outstanding in the fourth quarter by approximately 522,000 shares, which reduced G&W's diluted earnings per common share (EPS) by approximately $0.01.
  • Recorded impairment and related charges of $32.0 million in U.K./Europe in the fourth quarter of 2016 in conjunction with G&W’s annual assessment of goodwill combined with previously discussed efforts to address challenges with the U.K. coal and European intermodal businesses.
  • Operating revenues increased 0.3% to $516.5 million from $514.9 million, including the recognition of $10.0 million of revenues from a multi-year take-or-pay volume shortfall under a crude-by-rail contract.
  • Same railroad operating revenues, excluding a $19.4 million negative impact of foreign currency depreciation, increased 1.8%, including the revenue from the take-or-pay contract.(1)
  • Reported operating income decreased 43.4% to $53.6 million; Adjusted operating income increased 10.9% to $104.5 million.(2)
  • Reported diluted EPS attributable to G&W decreased from $1.47 to $0.15; Adjusted diluted EPS attributable to G&W increased 1% to $0.99.(2)
    • The decrease in reported diluted EPS was primarily due to a $0.52 impact from U.K./Europe impairment and related charges in the fourth quarter of 2016 and $0.28 of corporate development and related costs in the fourth quarter of 2016, primarily associated with the GRail, P&W and Pentalver transactions, as well as a $0.34 impact from the full year 2015 Short Line Tax Credit being included in the fourth quarter of 2015 and a $0.17 impact from a reduction in U.K. tax rates in the fourth quarter of 2015, partially offset by a $0.10 benefit recognized in 2016 from a multi-year take-or-pay contract.

Fourth Quarter Segment Highlights

  • North America: Operating revenues from G&W's North American Operations increased 7.9% to $322.2 million from $298.6 million, primarily due to a $17.6 million increase in freight-related revenues, as well as $5.2 million of revenues from new operations. Freight-related revenues in the fourth quarter of 2016 included the recognition of $10.0 million of revenues from a multi-year take-or-pay volume shortfall under a crude-by-rail contract. Reported operating income from G&W's North American Operations increased 13.9% to $83.4 million; Adjusted operating income from G&W's North American Operations increased 18.9% to $88.1 million.(2)
  • Australia: Operating revenues from G&W's Australian Operations increased 11.2% to $61.4 million from $55.2 million, primarily due to new operations. Reported operating income from G&W's Australian Operations decreased from $10.5 million to $2.8 million, primarily due to the loss of the Southern Iron Ore fixed payment and corporate development and related costs associated with the GRail transaction; Adjusted operating income from G&W's Australian Operations increased 26.4% from $11.0 million to $13.9 million.(2)
  • U.K./Europe: Operating revenues from G&W's U.K./European Operations decreased 17.4% to $133.0 million from $161.0 million, or 4.5% excluding a $21.7 million impact from foreign currency depreciation, primarily due to port congestion at certain U.K. ports, as well as lower Continental Europe intermodal volumes. Reported operating loss from G&W's U.K./European Operations was $32.6 million, compared with operating income of $10.9 million last year. The operating loss in the U.K./Europe primarily resulted from impairment and related charges of $32.0 million, including $21.5 million of charges related to ERS Railways (ERS) and $10.5 million of charges related to leases of idle excess U.K. coal railcars; Adjusted operating income from G&W's U.K./European Operations decreased from $9.1 million to $2.5 million.(1)(2)

Comments on Fourth Quarter

Jack Hellmann, President and CEO of G&W, commented, “The fourth quarter of 2016 was extraordinarily active at G&W as we closed on the acquisition of GRail in Australia, we closed on the acquisition of the P&W in the United States, we signed an agreement to acquire Pentalver in the U.K., and we raised $287 million of equity to position ourselves for additional acquisition and investment opportunities. Our reported diluted EPS for the fourth quarter of 2016 were $0.15 which included expenses related to the above transactions as well as impairment and related charges in the U.K./Europe. At the same time, our adjusted diluted EPS of $0.99 included a $0.10 diluted EPS benefit from a multi-year take-or-pay contract. Excluding this benefit, our fourth quarter results were consistent with our outlook as our business performed as expected.” (2)

“In North America, a modest increase in same railroad traffic of 2% and good expense management at each of our eight operating regions resulted in 14% growth in operating income in the fourth quarter of 2016, or 5% excluding the take-or-pay contract and corporate development costs. We held the shares of the newly-acquired P&W in a voting trust for November and December and, upon receipt of Surface Transportation Board approval, the P&W came out of trust on December 31st and our integration team has completed a series of initiatives that are consistent with our acquisition plan.”(2)

“In Australia, the fourth quarter of 2016 was a transition period that included two months of 100% G&W ownership and one month of 51% G&W ownership following the December 1st formation of our partnership with MIRA and the concurrent acquisition of GRail. The transition has been smooth and our Australian operations performed as expected throughout the fourth quarter. With improving commodity prices, a record harvest in South Australia and our expanded presence in the Hunter Valley coal supply chain, our outlook for Australia is promising as we enter 2017.”

“In the U.K./Europe, our financial results continued to underperform in the fourth quarter of 2016, although we expect significant improvement as 2017 unfolds, led by the U.K. and Poland. In the fourth quarter, the efficiency of our U.K. intermodal operations suffered due to congestion and irregular shipping patterns in the ports which masked positive changes to the cost structure of our U.K. heavy haul business. Also in the fourth quarter, we recorded impairment and related charges of US$32 million, which included US$10.5 million of charges related to leases of idle U.K. coal railcars and US$21.5 million of charges related to our ERS operations in Continental Europe. For context, at the time of acquisition, ERS net assets represented approximately 1% of the Freightliner acquisition price. By discontinuing most ERS routes and dramatically shrinking the operations, we expect to bring our remaining business on the continent (port switching and maritime intermodal) back to profitability by mid-2017.”

“Meanwhile we continue to evaluate multiple acquisition and investment opportunities across G&W’s global footprint and have over $500 million of borrowing capacity under our revolving credit facility.”

Financial Results

G&W's operating revenues increased $1.7 million, or 0.3%, to $516.5 million, in the fourth quarter of 2016, compared with $514.9 million in the fourth quarter of 2015. G&W's operating income in the fourth quarter of 2016 was $53.6 million, compared with $94.6 million in the fourth quarter of 2015. G&W's adjusted operating income in the fourth quarter of 2016 was $104.5 million, compared with $94.2 million in the fourth quarter of 2015.(2)

Reported net income attributable to G&W in the fourth quarter of 2016 was $8.9 million, compared with $84.9 million in the fourth quarter of 2015. Excluding the net impact of certain items affecting comparability between periods as discussed below, adjusted net income attributable to G&W in the fourth quarter of 2016 was $58.3 million, compared with $56.8 million in the fourth quarter of 2015.(2)

Reported diluted EPS attributable to G&W in the fourth quarter of 2016 were $0.15 with 58.8 million weighted average shares outstanding, compared with reported diluted EPS in the fourth quarter of 2015 of $1.47 with 57.9 million weighted average shares outstanding. Excluding the net impact of certain items affecting comparability discussed below, adjusted diluted EPS attributable to G&W in the fourth quarter of 2016 were $0.99 with 58.8 million weighted average shares outstanding, compared with adjusted diluted EPS in the fourth quarter of 2015 of $0.98 with 57.9 million weighted average shares outstanding.(2)

Impact of GRail Acquisition on G&W Financial Presentation

In conjunction with the GRail transaction that closed on December 1, 2016, G&W issued a 48.9% equity stake in GWA to MIRA and retained a 51.1% interest. G&W continues to consolidate 100% of GWA in its financial statements and now reports a noncontrolling interest for MIRA’s 48.9% equity ownership.

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

Items Affecting Comparability

In the fourth quarter of 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 Taxes
Impact

After-Tax Net
Income/(Loss)
Attributable
to G&W
Impact

Diluted EPS
Attributable
to G&W
Impact

Three Months Ended December 31, 2016

ERS impairment and related charges $ (21.5 ) $ (21.5 ) $ (0.37 )
U.K. coal railcar leases $ (10.5 ) $ (8.6 ) $ (0.15 )
Corporate development and related costs $ (19.2 ) $ (16.2 ) $ (0.28 )
Net loss on sale and impairment of assets $ (1.1 ) $ (0.8 ) $ (0.01 )
Restructuring costs $ (1.9 ) $ (1.4 ) $ (0.02 )
Write-off of debt issuance costs $ (2.2 ) $ (0.8 ) $ (0.01 )
 

Three Months Ended December 31, 2015

Corporate development and related costs $ (1.3 ) $ (0.8 ) $ (0.01 )
Net gain on sale of assets $ 0.3 $ 0.2 $
Freightliner acquisition/integration related costs $ (1.2 ) $ (0.9 ) $ (0.02 )

Out of period benefit of final allocation of fair values to
Freightliner's assets & liabilities

$ 2.0 $ 1.6 $ 0.03
Q1-Q3 2015 Short Line Tax Credit $ $ 19.7 $ 0.34
Impact of reduction in U.K. effective tax rate $ $ 9.7 $ 0.17

Application of full year effective tax rate to Q1 - Q3
2015 results

$ $ (1.3 ) $ (0.02 )
 

In the fourth quarter of 2016, G&W’s results included U.K./Europe impairment and related charges of $32.0 million, which included $21.5 million of charges related to ERS and $10.5 million of charges related to leases of idle excess U.K. coal railcars. The fourth quarter of 2016 also included corporate development and related costs of $19.2 million, primarily related to the GRail, P&W and Pentalver transactions, write-off of debt issuance costs of $2.2 million related to the termination of Australia's term loan as a result of the entry into a new Australian credit facility in conjunction with the GRail acquisition, restructuring costs of $1.9 million and net loss on the sale and impairment of assets of $1.1 million.

In the fourth quarter of 2015, G&W finalized its allocation of fair values to assets and liabilities associated with the acquisition of Freightliner in March of 2015, which resulted in a decrease in operating expenses of $3.9 million and an increase in interest expense of $1.0 million. Of the $3.9 million decrease in operating expenses and the $1.0 million increase in interest expense recorded in the fourth quarter of 2015, $2.6 million and $0.7 million, respectively, did not relate to that period, but were included as adjustments to G&W's fourth quarter 2015 results. In the fourth quarter of 2015, G&W’s results also included corporate development and related costs of $1.3 million, Freightliner acquisition/integration costs of $1.2 million and net gain on the sale of assets of $0.3 million.

In December 2015, the U.S. Short Line Tax Credit (which had previously expired on December 31, 2014), was extended for fiscal years 2015 and 2016. In the fourth quarter of 2015, G&W recorded a full year tax benefit of $27.4 million associated with the extension of the Short Line Tax Credit, of which $19.7 million related to the first three quarters of 2015, as well as an income tax benefit of $9.7 million associated with a prospective change in U.K. tax rates enacted during the fourth quarter of 2015. In addition, net income for the fourth quarter of 2015 was reduced by $1.3 million due to the application of the full year effective income tax rate to the results of the first three quarters of 2015.

Fourth Quarter Results by Segment

Operating revenues from G&W's North American Operations increased $23.6 million, or 7.9%, to $322.2 million in the fourth quarter of 2016, compared with $298.6 million in the fourth quarter of 2015. Excluding $5.2 million of revenues from new operations, North American Operations same railroad revenues increased by $18.3 million, or 6.1%, primarily due to an increase in freight-related revenues. The increase in freight-related revenues included $10.0 million of revenue recognized in the fourth quarter of 2016 associated with a 4-year take-or-pay volume commitment contract.

North American Operations traffic increased 14,711 carloads, or 3.8%, to 402,939 carloads in the fourth quarter of 2016. Excluding 6,389 carloads from new operations, same railroad traffic increased 8,322 carloads, or 2.1%, in the fourth quarter of 2016 compared with the fourth quarter of 2015. The same railroad traffic increase was principally due to increases of 10,054 carloads of coal and coke traffic (primarily in the Midwest and Central regions), 4,146 carloads of metals traffic (primarily in the Northeast and Midwest regions), 4,000 carloads of agricultural products traffic (primarily in the Central, Mountain West and Pacific regions), partially offset by decreases of 3,843 carloads of pulp and paper traffic (primarily in the Southern, Northeast and Canada regions), 3,020 carloads of minerals and stone traffic (primarily in the Northeast and Coastal regions) and 2,918 carloads of other traffic (primarily in the Canada, Central and Southern regions). All remaining traffic decreased by a net 97 carloads.

Operating income from G&W's North American Operations in the fourth quarter of 2016 was $83.4 million, compared with $73.2 million in the fourth quarter of 2015. The operating ratio for North American Operations was 74.1% in the fourth quarter of 2016, compared with an operating ratio of 75.5% in the fourth quarter of 2015.

Operating revenues from G&W's Australian Operations increased $6.2 million, or 11.2%, to $61.4 million in the fourth quarter of 2016, compared with $55.2 million in the fourth quarter of 2015. When comparing our non-freight revenues from existing operations in the fourth quarter of 2016 to our non-freight revenues in the fourth quarter of 2015, note that the 2016 existing operations included $4.1 million of revenue for services provided to GRail for the month of December 2016, which were eliminated in G&W's consolidated freight-related revenues. Excluding a net increase of $7.0 million of revenues from new operations and a $2.3 million increase due to the impact of foreign currency appreciation, Australian Operations same railroad revenues decreased by $3.1 million, or 5.3%, primarily due to a decrease in freight-related revenues resulting from the loss of the Southern Iron fixed fee payment.(1)

Australian Operations traffic increased 36,144 carloads, or 78.2%, to 82,389 carloads in the fourth quarter of 2016. Excluding 35,203 carloads from new operations, same railroad traffic increased 941 carloads, or 2.0%, in the fourth quarter of 2016 compared with the fourth quarter of 2015.

Operating income from G&W's Australian Operations in the fourth quarter of 2016 was $2.8 million, compared with $10.5 million in the fourth quarter of 2015. The decrease in the Australian Operations operating income was primarily due to $10.7 million of corporate development and related costs in the fourth quarter of 2016 related to the GRail acquisition. The operating ratio for Australian Operations was 95.4% in the fourth quarter of 2016, compared with an operating ratio of 81.0% in the fourth quarter of 2015.

Operating revenues from G&W's U.K./European Operations decreased $28.1 million, or 17.4% to $133.0 million in the fourth quarter of 2016, compared with $161.0 million in the fourth quarter of 2015. Excluding a $21.7 million decrease due to the impact of foreign currency depreciation, operating revenues decreased $6.3 million, or 4.5%, primarily due to a decrease in Continental Europe intermodal revenues and U.K. coal revenues.(1)

U.K./European Operations traffic increased 5,562 carloads, or 2.0%, to 281,222 carloads in the fourth quarter of 2016. The traffic increase was principally due to an increase of 9,446 carloads of intermodal traffic (primarily in the U.K.), partially offset by a decrease of 4,183 carloads of coal and coke traffic (primarily in the U.K.).

Operating loss from G&W's U.K./European Operations in the fourth quarter of 2016 was $32.6 million, compared with operating income of $10.9 million in the fourth quarter of 2015. The operating loss in the U.K./Europe primarily resulted from impairment and related charges of $32.0 million, including $21.5 million of charges related to our ERS business and $10.5 million of charges related to leases of idle excess U.K. coal railcars, as well as $1.8 million of restructuring expenses and $1.3 million of corporate development expenses, primarily related to the previously announced Pentalver acquisition.

Consolidated Annual Results

2016 Segment Highlights

  • North America: Operating revenues from G&W's North American Operations decreased 0.4% to $1,236.8 million from $1,241.8 million. Reported operating income from G&W's North American Operations increased 7.4% to $319.6 million; Adjusted operating income from G&W's North American Operations increased 5.2% to $327.4 million .(2)
  • Australia: Operating revenues from G&W's Australian Operations decreased 8.4% to $222.6 million from $243.0 million. Reported operating income from G&W's Australian Operations decreased 91.2% to $4.8 million, primarily due to the loss of the Southern Iron Ore fixed payment and corporate development and related costs associated with the GRail transaction; Adjusted operating income from G&W's Australian Operations decreased 27.4% to $41.8 million.(2)
  • U.K./Europe: Operating revenues from G&W's U.K./European Operations increased 5.1% to $542.2 million from $515.6 million, or increased 15.8% excluding a $47.3 million impact from foreign currency depreciation, primarily due to the full year of operation of Freightliner in 2016 versus nine months in 2015. Reported operating income from G&W's U.K./European Operations decreased from operating income of $31.9 million to an operating loss of $34.7 million; Adjusted operating income from G&W's U.K./European Operations decreased 84.3% to $5.1 million.(1)(2)

Reported net income attributable to G&W for the year ended December 31, 2016 was $141.1 million ($215.5 million pre-tax), compared with $225.0 million ($300.9 million pre-tax) for the year ended December 31, 2015. Excluding the impact of certain items affecting comparability listed below, adjusted net income attributable to G&W for the year ended December 31, 2016 was $212.4 million ($305.7 million adjusted pre-tax), compared with $240.7 million ($339.0 million adjusted pre-tax) for the year ended December 31, 2015.(2)

G&W’s diluted EPS for the year ended December 31, 2016 were $2.42 with 58.3 million weighted average shares outstanding, compared with diluted EPS of $3.89 with 57.8 million weighted average shares outstanding for the year ended December 31, 2015. Excluding certain items affecting comparability listed below, G&W’s adjusted diluted EPS for the year ended December 31, 2016 were $3.65 with 58.3 million weighted average shares outstanding, compared with adjusted diluted EPS of $4.16 with 57.8 million weighted average shares outstanding for the year ended December 31, 2015.(2)

G&W’s 2016 and 2015 annual results included certain items affecting comparability between the periods that are set forth in the following table (in millions, except per share amounts).

             

Income/(Loss)
Before Taxes
Impact

After-Tax Net
Income/(Loss)
Attributable
to G&W
Impact

Diluted EPS
Attributable
to G&W
Impact

Year Ended December 31, 2016

Corporate development and related costs $ (26.6 ) $ (21.4 ) $ (0.37 )
Net loss on sale and impairment of assets $ (0.1 ) $ $
Australia impairment and related costs $ (21.1 ) $ (16.8 ) $ (0.29 )
ERS impairment and related costs $ (21.5 ) $ (21.5 ) $ (0.37 )
U.K. coal railcar leases $ (10.5 ) $ (8.6 ) $ (0.15 )
Restructuring costs $ (8.2 ) $ (6.5 ) $ (0.11 )
Write-off of debt issuance costs $ (2.2 ) $ (0.8 ) $ (0.01 )
Impact of reduction in U.K. effective tax rate $ $ 4.3 $ 0.07
 

Year Ended December 31, 2015

Corporate development and related costs $ (6.4 ) $ (4.3 ) $ (0.07 )
Net gain on sale of assets $ 2.3 $ 1.7 $ 0.03
Freightliner acquisition/integration related costs $ (15.3 ) $ (11.2 ) $ (0.19 )

Loss on settlement of Freightliner acquisition-related
foreign currency forward purchase contracts

$ (18.7 ) $ (11.6 ) $ (0.20 )
Impact of reduction in U.K. effective tax rate $ $ 9.7 $ 0.17
 

Free Cash Flow (2)

G&W’s free cash flow for the twelve months ended December 31, 2016 and 2015 was as follows (in millions):

     
Twelve Months Ended
2016     2015
Net cash provided by operating activities $ 407.0 $ 475.1
Net cash used in investing activities, excluding new business investments (1,110.5 ) (1,008.6 )
Net cash used for acquisitions (a) 987.3   792.2  
Free cash flow before new business investments 283.8 258.7
New business investments (24.5 ) (65.6 )
Free cash flow (2) $ 259.3   $ 193.0  
 
(a)     The 2016 period consisted primarily of net cash used for the acquisitions of GRail and P&W as well as $17.8 million in cash paid for incremental expenses related to the purchase and integration of GRail, P&W and Freightliner. The 2015 period consisted primarily of net cash used for the acquisition of Freightliner and Pinsly Arkansas as well as $33.2 million in cash paid for incremental expenses related to the purchase and integration of Freightliner.
 

Conference Call and Webcast Details

As previously announced, G&W’s conference call to discuss financial results for the fourth quarter of 2016 will be held on Wednesday, February 8, 2017, at 11 a.m. EST. The dial-in number for the teleconference in the U.S. is (800) 230-1059; outside the U.S. is (612) 234-9959, or the call may be accessed live over the Internet (listen only) at www.gwrr.com/investors. Management will be referring to a slide presentation that will also be available at gwrr.com/investors. The webcast will be archived at www.gwrr.com/investors until the following quarter’s earnings press release. Telephone replay is available for 30 days beginning at 1 p.m. EST on February 8, 2017 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 405456.

About G&W

G&W owns or leases 122 freight railroads worldwide that are organized in 10 operating regions with approximately 7,300 employees and 3,000 customers.

  • G&W's eight North American regions serve 41 U.S. states and four Canadian provinces and include 115 short line and regional freight railroads, with more than 13,000 track-miles.
  • G&W's Australia Region provides rail freight services in New South Wales, including in the Hunter Valley coal supply chain, and in the Northern Territory and South Australia, including operating the 1,400-mile Tarcoola-to-Darwin rail line. As of December 1, 2016, G&W's Australia Region was 51.1% owned by G&W and 48.9% owned by a consortium of funds and clients managed by Macquarie Infrastructure and Real Assets.
  • G&W's U.K./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 Europe 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. Foreign exchange impact is calculated by comparing the prior year period results translated from local currency to U.S. dollars using current period exchange rates to the prior period results in U.S. dollars as reported.

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

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2016 AND 2015
(in thousands, except per share amounts)
(unaudited)
 
     

Three Months Ended
December 31,

    Twelve Months Ended
December 31,
2016     2015 2016     2015
OPERATING REVENUES $ 516,534 $ 514,853 $ 2,001,527 $ 2,000,401
OPERATING EXPENSES 462,963   420,222   1,711,915   1,616,140  
OPERATING INCOME 53,571 94,631 289,612 384,261
INTEREST INCOME 280 106 1,107 481
INTEREST EXPENSE (22,592 ) (18,329 ) (75,641 ) (67,073 )

LOSS ON SETTLEMENT OF FOREIGN CURRENCY
FORWARD PURCHASE CONTRACTS

(18,686 )
OTHER (EXPENSE)/INCOME, NET (2,534 ) 1,403   413   1,948  
INCOME BEFORE INCOME TAXES 28,725 77,811 215,491 300,931
(PROVISION FOR)/BENEFIT FROM INCOME TAXES (19,832 ) 7,123   (74,395 ) (75,894 )
NET INCOME 8,893 84,934 141,096 225,037

LESS:   NET LOSS ATTRIBUTABLE TO
             NONCONTROLLING INTEREST

(41 )   (41 )  

NET INCOME ATTRIBUTABLE TO GENESEE &
WYOMING INC.

$ 8,934   $ 84,934   $ 141,137   $ 225,037  

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

$ 0.15   $ 1.49   $ 2.46   $ 3.97  
WEIGHTED AVERAGE SHARES - BASIC 57,832   56,915   57,324   56,734  

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

$ 0.15   $ 1.47   $ 2.42   $ 3.89  
WEIGHTED AVERAGE SHARES - DILUTED 58,785   57,886   58,256   57,848  
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2016 AND 2015
(in thousands)
(unaudited)
         
December 31,
2016 2015
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 32,319 $ 35,941
Accounts receivable, net 363,923 382,458
Materials and supplies 43,621 45,790
Prepaid expenses and other 45,475   43,197
Total current assets 485,338   507,386
PROPERTY AND EQUIPMENT, net 4,503,319 4,215,063
GOODWILL 1,125,596 826,575
INTANGIBLE ASSETS, net 1,472,376 1,128,952
DEFERRED INCOME TAX ASSETS, net 2,671 2,270
OTHER ASSETS, net 45,658   22,836
Total assets $ 7,634,958   $ 6,703,082
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 52,538 $ 75,966
Accounts payable 266,867 282,275
Accrued expenses 159,705   169,586
Total current liabilities 479,110   527,827
LONG-TERM DEBT, less current portion 2,306,915 2,205,785
DEFERRED INCOME TAX LIABILITIES, net

1,162,221

983,136
DEFERRED ITEMS - grants from outside parties 301,383 292,198
OTHER LONG-TERM LIABILITIES

198,208

174,675
TOTAL EQUITY

3,187,121

  2,519,461
Total liabilities and equity $ 7,634,958   $ 6,703,082
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2016 AND 2015
(in thousands)
(unaudited)
     
Twelve Months Ended
December 31,
2016     2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 141,096 $ 225,037
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 205,188 188,535
Stock-based compensation 17,976 14,649
Excess tax benefits from share-based compensation (28 ) (1,477 )
Deferred income taxes 33,442 40,477
Net loss/(gain) on sale and impairment of assets 32,485 (2,291 )
Loss on settlement of foreign currency forward purchase contracts 18,686

Changes in assets and liabilities which (used) provided cash, net of effect of
acquisitions:

Accounts receivable, net (15,953 ) 28,905
Materials and supplies 750 (4,073 )
Prepaid expenses and other 836 7,462
Accounts payable and accrued expenses (20,468 ) (39,881 )
Other assets and liabilities, net 11,715   (882 )
Net cash provided by operating activities 407,039   475,147  
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (219,544 ) (371,504 )
Grant proceeds from outside parties 36,094 41,742
Cash paid for acquisitions, net of cash acquired (969,476 ) (740,237 )

Net payment from settlement of foreign currency forward purchase contracts related
to an acquisition

(18,686 )
Insurance proceeds for the replacement of assets 15,201 10,394
Proceeds from disposition of property and equipment 2,691   4,018  
Net cash used in investing activities (1,135,034 ) (1,074,273 )
CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on revolving line-of-credit, long-term debt and capital lease
obligations

(1,104,222 ) (675,430 )
Proceeds from revolving line-of-credit and long-term borrowings 1,074,516 1,261,640
Proceeds from noncontrolling interest 476,828
Proceeds from Class A common stock issuance 300,000
Stock issuance costs (14,243 )
Debt amendment/issuance costs (17,731 ) (9,622 )
Proceeds from employee stock purchases 9,317 6,829
Excess tax benefits from share-based compensation 28 1,477
Treasury stock acquisitions (4,541 ) (3,261 )

Net cash provided by financing activities

719,952   581,633  
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 4,421   (6,293 )
DECREASE IN CASH AND CASH EQUIVALENTS (3,622 ) (23,786 )
CASH AND CASH EQUIVALENTS, beginning of period 35,941   59,727  
CASH AND CASH EQUIVALENTS, end of period $ 32,319   $ 35,941  
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                                 
Three Months Ended December 31, Twelve Months Ended December 31,
2016 2015 2016 2015
Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 354,563 68.7 % $ 348,787 67.8 % $ 1,371,566 68.5 % $ 1,400,547 70.0 %
Freight-related revenues 139,693 27.0 % 140,559 27.3 % 536,359 26.8 % 502,083 25.1 %
All other revenues 22,278   4.3 % 25,507   4.9 % 93,602   4.7 % 97,771   4.9 %
Total operating revenues $ 516,534   100.0 % $ 514,853   100.0 % $ 2,001,527   100.0 % $ 2,000,401   100.0 %
 

Operating expenses:

Labor and benefits(a) $ 157,817 30.5 % $ 158,878 30.8 % $ 633,114 31.5 % $ 614,967 30.7 %
Equipment rents(b) 45,738 8.8 % 39,680 7.7 % 159,372 8.0 % 149,825 7.5 %
Purchased services(c) 48,921 9.5 % 51,056 9.9 % 198,046 9.9 % 186,905 9.3 %

Depreciation and
amortization(d)

54,093 10.5 % 49,967 9.7 % 205,188 10.3 % 188,535 9.4 %

Diesel fuel used in
train operations

34,352 6.7 % 30,293 5.9 % 118,203 5.9 % 132,149 6.6 %

Electricity used in
train operations

3,451 0.7 % 3,184 0.6 % 13,346 0.7 % 13,714 0.7 %

Casualties
and insurance

10,070 1.9 % 12,467 2.4 % 38,884 1.9 % 42,494 2.1 %
Materials 19,860 3.8 % 24,484 4.8 % 82,522 4.1 % 95,248 4.9 %
Trackage rights 22,685 4.4 % 20,870 4.1 % 87,194 4.4 % 78,140 3.9 %

Net loss/(gain) on
sale and impairment
of assets(e)

20,491 4.0 % (310 ) (0.1 )% 32,484 1.6 % (2,291 ) (0.1 )%
Restructuring costs 1,862 0.4 % % 8,182 0.4 % %
Other expenses(f) 43,623   8.4 % 29,653   5.8 % 135,380   6.8 % 116,454   5.8 %
Total operating expenses $ 462,963   89.6 % $ 420,222   81.6 % $ 1,711,915   85.5 % $ 1,616,140   80.8 %
Operating income $ 53,571   $ 94,631   $ 289,612   $ 384,261  

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

$ 53,879 $ 85,068 $ 183,450 $ 329,762
 
(a)     Includes $2.4 million and $2.8 million corporate development and related costs for the three and twelve months ended December 31, 2016, respectively. Includes $2.3 million of corporate development and related costs for twelve months ended December 31, 2015. Includes $0.7 million and $0.9 million Freightliner acquisition/integration related costs for the three and twelve months ended December, 2015, respectively.
(b) Includes $9.9 million related to leases of idle excess U.K. coal railcars for both the three and twelve months ended December 31, 2016.
(c) Includes $0.2 million and $0.4 million Freightliner acquisition/integration related costs for the three and twelve months ended December 31, 2015, respectively.
(d) Includes $2.6 million out of period impact of final allocation of fair values to Freightliner's assets and liabilities for the three months ended December 31, 2015.
(e) Includes an impairment charge of $18.9 million associated with our ERS business and $0.5 million related to leasehold improvements associated with leases of idle excess U.K. coal railcars for both the three and twelve months ended December 31, 2016. Includes an impairment charge of $13.0 million associated with an Australia iron ore customer entering into voluntary administration for the twelve months ended December 31, 2016.
(f)

Includes $2.6 million write-down of accounts receivable associated with our ERS business for both the three and twelve months ended December 31, 2016. Includes the write-down of accounts receivable of $8.1 million associated with an Australia iron ore customer for the twelve months ended December 31, 2016, respectively. Includes $13.6 million and $20.5 million corporate development and related costs for the three and twelve months ended December 31, 2016, respectively. Includes $1.3 million and $2.1 million corporate development and related costs for the three and twelve months ended December 31, 2015, respectively. Includes $0.3 million and $14.0 million Freightliner acquisition/integration costs for the three and twelve months ended December 31, 2015, respectively.

 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
NORTH AMERICAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                                 
Three Months Ended December 31, Twelve Months Ended December 31,
2016 2015 2016 2015
Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 232,465 72.1 % $ 226,435 75.8 % $ 913,619 73.9 % $ 949,028 76.4 %
Freight-related revenues 74,295 23.1 % 56,681 19.0 % 258,922 20.9 % 227,154 18.3 %
All other revenues 15,457   4.8 % 15,532   5.2 % 64,223   5.2 % 65,633   5.3 %
Total operating revenues $ 322,217   100.0 % $ 298,648   100.0 % $ 1,236,764   100.0 % $ 1,241,815   100.0 %
 

Operating expenses:

Labor and benefits(a) $ 101,526 31.5 % $ 94,276 31.6 % $ 397,129 32.1 % $ 397,911 32.0 %
Equipment rents 14,199 4.4 % 14,978 5.0 % 57,680 4.7 % 65,918 5.3 %
Purchased services(b) 15,198 4.7 % 17,374 5.8 % 62,369 5.0 % 63,986 5.1 %

Depreciation
and amortization

37,129 11.5 % 36,415 12.2 % 147,527 11.9 % 141,814 11.4 %

Diesel fuel used in
train operations

17,445 5.4 % 15,404 5.2 % 59,023 4.8 % 75,630 6.1 %

Casualties and
insurance

8,705 2.7 % 8,913 3.0 % 29,103 2.4 % 29,574 2.4 %
Materials 11,927 3.7 % 12,419 4.2 % 50,095 4.0 % 57,808 4.7 %
Trackage rights 9,846 3.1 % 5,785 1.9 % 36,645 3.0 % 24,601 2.0 %

Net loss/(gain) on sale
and impairment of
assets

642 0.2 % (277 ) (0.1 )% (209 ) % (2,001 ) (0.2 )%
Restructuring costs 79 % % 884 0.1 % %
Other expenses(c) 22,124   6.9 % 20,141   6.7 % 76,967   6.2 % 89,088   7.2 %
Total operating expenses $ 238,820   74.1 % $ 225,428   75.5 % $ 917,213   74.2 % $ 944,329   76.0 %
Operating income $ 83,397   $ 73,220   $ 319,551   $ 297,486  

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

$ 42,052 $ 61,218 $ 137,334 $ 266,548
 
(a)     Includes $1.7 million and $1.9 million corporate development and related costs for the three and twelve months ended December 31, 2016, respectively. Includes $0.1 million and $0.2 million Freightliner acquisition/integration related costs for the three and twelve months ended December 31, 2015, respectively.
(b) Includes $0.2 million and $0.4 million Freightliner acquisition/integration related costs for the three and twelve months ended December 31, 2015, respectively.
(c) Includes $2.3 million and $5.3 million corporate development and related costs for the three and twelve months ended December 31, 2016, respectively. Includes $0.6 million and $1.4 million corporate development and related costs for the three and twelve months ended December 31, 2015, respectively. Includes $0.2 million and $13.9 million of Freightliner acquisition/integration costs for the three and twelve months ended December 31, 2015, respectively.

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
AUSTRALIAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION*
(dollars in thousands)
(unaudited)
                                 
Three Months Ended December 31, Twelve Months Ended December 31,
2016 2015 2016   2015
Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 40,232 65.6 % $ 28,248 51.2 % $ 120,622 54.2 % $ 146,850 60.4 %
Freight-related revenues 19,634 32.0 % 25,373 46.0 % 95,776 43.0 % 87,616 36.1 %
All other revenues 1,489   2.4 % 1,568   2.8 % 6,188   2.8 % 8,486   3.5 %
Total operating revenues $ 61,355   100.0 % $ 55,189   100.0 % $ 222,586   100.0 % $ 242,952   100.0 %
 

Operating expenses:

Labor and benefits(a) $ 17,226 28.1 % $ 15,735 28.5 % $ 66,547 29.9 % $ 67,947 28.0 %
Equipment rents 1,630 2.7 % 3,009 5.5 % 6,514 2.9 % 12,298 5.1 %
Purchased services 5,997 9.8 % 3,722 6.7 % 23,429 10.5 % 19,560 8.0 %

Depreciation and
amortization

9,845 16.0 % 6,654 12.1 % 30,863 13.9 % 27,425 11.3 %

Diesel fuel used in
train operations

5,701 9.3 % 5,247 9.5 % 19,743 8.9 % 21,150 8.7 %

Casualties and
insurance

347 0.6 % 3,035 5.5 % 5,373 2.4 % 8,498 3.5 %
Materials 2,526 4.1 % 3,510 6.4 % 10,559 4.7 % 11,408 4.7 %
Trackage rights 2,846 4.6 % 2,357 4.3 % 10,047 4.5 % 13,234 5.4 %

Net loss/(gain) on
sale and impairment
of assets(b)

349 0.6 % (3 ) % 13,341 6.0 % (48 ) %
Restructuring costs % % 789 0.4 % %
Other expenses(c) 12,080   19.6 % 1,414   2.5 % 30,571   13.7 % 6,638   2.7 %
Total operating expenses $ 58,547   95.4 % $ 44,680   81.0 % $ 217,776   97.8 % $ 188,110   77.4 %
Operating income $ 2,808   $ 10,509   $ 4,810   $ 54,842  

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

$ 3,191 $ 11,051 $ 11,285 $ 31,179
 
*     Amounts shown represent 100% of our Australian Operations, which is 51.1% owned by G&W as of December 1, 2016.
(a) Includes $0.7 million and $0.8 million corporate development and related costs for the three and twelve months ended December 31, 2016, respectively. Includes $2.3 million corporate development and related costs for the twelve months ended December 31, 2015.
(b) Includes an impairment charge of $13.0 million associated with an iron ore customer entering into voluntary administration for the twelve months ended December 31, 2016.
(c) Includes $10.0 million and $13.9 million corporate development and related costs for the three and twelve months ended December 31, 2016, respectively. Includes the write-down of accounts receivable of $8.1 million associated with an iron ore customer entering into voluntary administration for the twelve months ended December 31, 2016 (included as impairment and related costs). Includes $0.5 million and $0.4 million corporate development and related costs for the three and twelve months ended December 31, 2015, respectively.
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
U.K./EUROPEAN OPERATIONS SELECTED CONSOLIDATED FINANCIAL INFORMATION
(dollars in thousands)
(unaudited)
                                 
Three Months Ended December 31, Twelve Months Ended December 31,
2016 2015 2016 2015
Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Amount

% of
Revenue

Operating revenues:

Freight revenues $ 81,866 61.6 % $ 94,104 58.5 % $ 337,325 62.2 % $ 304,669 59.1 %
Freight-related revenues 45,764 34.4 % 58,505 36.3 % 181,661 33.5 % 187,313 36.3 %
All other revenues 5,332   4.0 % 8,407   5.2 % 23,191   4.3 % 23,652   4.6 %
Total operating revenues $ 132,962   100.0 % $ 161,016   100.0 % $ 542,177   100.0 % $ 515,634   100.0 %
 

Operating expenses:

Labor and benefits(a) $ 39,065 29.4 % $ 48,867 30.3 % $ 169,438 31.3 % $ 149,109 28.9 %
Equipment rents (b) 29,909 22.4 % 21,693 13.5 % 95,178 17.5 % 71,609 13.9 %
Purchased services 27,726 20.8 % 29,960 18.6 % 112,248 20.7 % 103,359 20.0 %

Depreciation and
amortization (c)

7,119 5.4 % 6,898 4.3 % 26,798 4.9 % 19,296 3.7 %

Diesel fuel used in
train operations

11,206 8.4 % 9,642 6.0 % 39,437 7.3 % 35,369 6.9 %

Electricity used in
train operations

3,451 2.6 % 3,184 2.0 % 13,346 2.5 % 13,714 2.7 %

Casualties and
insurance

1,018 0.8 % 519 0.3 % 4,408 0.8 % 4,422 0.9 %
Materials 5,407 4.1 % 8,555 5.3 % 21,868 4.0 % 26,032 5.0 %
Trackage rights 9,993 7.5 % 12,728 7.9 % 40,502 7.5 % 40,305 7.8 %

Net loss/(gain) on
sale and impairment
of assets (d)

19,500 14.7 % (30 ) % 19,352 3.6 % (242 ) %
Restructuring costs 1,783 1.3 % % 6,509 1.2 % %
Other expenses (e) 9,419   7.1 % 8,098   5.0 % 27,842   5.1 % 20,728   4.0 %
Total operating expenses $ 165,596   124.5 % $ 150,114   93.2 % $ 576,926   106.4 % $ 483,701   93.8 %
Operating (loss)/income $ (32,634 ) $ 10,902   $ (34,749 ) $ 31,933  

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

$ 8,636 $ 12,799 $ 34,831 $ 32,035
 
(a)     Includes $0.2 million corporate development and related costs for the twelve months ended December 31, 2016. Includes $0.7 million Freightliner acquisition/integration related costs for both the three and twelve months ended December 31, 2015.
(b) Includes $9.9 million related to leases of idle excess U.K. coal railcars for both the three and twelve months ended December 31, 2016.
(c) Includes $2.6 million out of period impact of final allocation of fair values to Freightliner's assets and liabilities for the three months ended December 31, 2015.
(d) Includes an impairment charge of $18.9 million associated with our ERS business and $0.5 million related to leasehold improvements associated with leases of idle excess U.K. coal railcars for both the three and twelve months ended December 31, 2016.
(e) Includes $2.6 million write-down of accounts receivable associated with our ERS business for both the three and twelve months ended December 31, 2016. Includes $1.3 million corporate development and related costs for the both the three and twelve months ended December 31, 2016. Includes $0.2 million and $0.3 million corporate development and related costs for the three and twelve months ended December 31, 2015, respectively.
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
 

Three Months Ended
December 31, 2016

      North American Operations     Australian Operations*     U.K./European Operations     Total Operations
Commodity Group

Freight
Revenues

    Carloads**    

Average
Revenues
Per
Carload

Freight
Revenues

    Carloads**    

Average
Revenues
Per
Carload

Freight
Revenues

   

Carloads**

   

Average
Revenues
Per
Carload

Freight
Revenues

   

Carloads**

   

Average
Revenues
Per
Carload

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

Three Months Ended
December 31, 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 $ 28,354 53,463 $ 530 $ 4,392 10,680 $ 411 $ 248 234 $ 1,060 $ 32,994 64,377 $ 513
Autos & Auto Parts 3,638 6,068 600

3,638 6,068 600
Chemicals & Plastics 34,219 43,493 787 34,219 43,493 787
Coal & Coke 19,828 53,004 374 7,428 17,711 419 27,256 70,715 385
Food & Kindred Products 8,664 15,270 567 8,664 15,270 567
Intermodal 2 29 69 17,136 15,608 1,098 70,955 215,644 329 88,093 231,281 381
Lumber & Forest Products 20,062 34,684 578

20,062 34,684 578
Metallic Ores 4,738 6,042 784 4,538 3,308 1,372 9,276 9,350 992
Metals 23,963 29,683 807 23,963 29,683 807
Minerals & Stone 26,996 49,724 543 1,870 16,572 113 15,473 42,071 368 44,339 108,367 409
Petroleum Products 18,167 26,605 683 312 77 4,052 18,479 26,682 693
Pulp & Paper 28,108 43,206 651 28,108 43,206 651
Waste 4,688 9,957 471 4,688 9,957 471
Other 5,008   17,000   295         5,008   17,000   295
Totals $ 226,435   388,228   $ 583 $ 28,248   46,245   $ 611 $ 94,104   275,660   $ 341 $ 348,787   710,133   $ 491
 
*     Australian Operations is 51.1% owned by G&W as of December 1, 2016.
** Represents physical railcars and the estimated railcar equivalents of commodities transported by metric ton or other measure, as well as intermodal units.
 

 
GENESEE & WYOMING INC. AND SUBSIDIARIES
FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD
COMPARISON BY COMMODITY GROUP
(dollars in thousands, except average revenues per carload)
(unaudited)
                                                 

Twelve Months Ended

December 31, 2016

North American Operations Australian Operations* U.K./European Operations Total Operations
Commodity Group

Freight
Revenues

Carloads**

Average
Revenues
Per
Carload

Freight
Revenues

Carloads**

Average
Revenues
Per
Carload

Freight
Revenues

Carloads**

Average
Revenues
Per
Carload

Freight
Revenues

Carloads**

Average
Revenues
Per
Carload

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

Twelve Months Ended

December 31, 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 $ 123,116 216,500 $ 569 $ 22,614 51,534 $ 439 $ 520 610 $ 852 $ 146,250 268,644 $ 544
Autos & Auto Parts 17,313 27,738 624 17,313 27,738 624
Chemicals & Plastics 140,400 179,002 784 140,400 179,002 784
Coal & Coke 93,541 267,258 350 24,026 61,144 393 117,567 328,402 358
Food & Kindred Products 34,899 61,145 571 34,899 61,145 571
Intermodal 9 107 84 71,429 61,659 1,158 227,527 692,304 329 298,965 754,070 396
Lumber & Forest Products 80,209 137,009 585 80,209 137,009 585
Metallic Ores 19,756 24,812 796 44,204 26,915 1,642 63,960 51,727 1,236
Metals 103,898 133,915 776 103,898 133,915 776
Minerals & Stone 116,537 209,957 555 7,306 60,490 121 52,596 133,656 394 176,439 404,103 437
Petroleum Products 67,584 102,759 658 1,297 307 4,225 68,881 103,066 668
Pulp & Paper 113,830 176,543 645 113,830 176,543 645
Waste 18,078 38,927 464 18,078 38,927 464
Other 19,858   68,728   289         19,858   68,728   289
Totals $ 949,028   1,644,400   $ 577 $ 146,850   200,905   $ 731 $ 304,669   887,714   $ 343 $ 1,400,547   2,733,019   $ 512
 
*     Australian Operations is 51.1% owned by G&W as of December 1, 2016.
** Represents physical railcars and the estimated railcar equivalents of commodities transported by metric ton or other measure, as well as intermodal units.
 

Non-GAAP Financial Measures

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

Management views these non-GAAP financial measures as important measures of G&W’s operating performance or, in the case of free cash flow, an important financial measure of how well G&W is managing its assets and a useful indicator of cash flow that may be available for discretionary use by G&W. Management also views these non-GAAP financial measures as a way to assess comparability between periods. Key limitations of the free cash flow measure include the assumptions that G&W will be able to refinance its existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt.

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

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

Reconciliations of Non-GAAP Financial Measures

     

Adjusted Operating Income

 
Three Months Ended
December 31, 2016

North
American
Operations

   

Australian
Operations

   

U.K./
European
Operations

   

Total
Operations

Operating revenues $ 322.2 $ 61.4 $ 133.0 $ 516.5
Operating expenses 238.8   58.5   165.6   463.0  
Operating income/(loss)(a) $ 83.4   $ 2.8   $ (32.6 ) $ 53.6  
 
Operating expenses $ 238.8 $ 58.5 $ 165.6 $ 463.0
ERS impairment and related costs (21.5 ) (21.5 )
U.K. coal railcar leases (10.5 ) (10.5 )

Corporate development and related
costs

(4.0 ) (10.7 ) (1.3 ) (16.0 )

Net loss on sale and impairment of
assets

(0.6 ) (0.3 ) (0.1 ) (1.1 )
Restructuring costs (0.1 )   (1.8 ) (1.9 )
Adjusted operating expenses $ 234.1   $ 47.5   $ 130.5   $ 412.1  
 
Adjusted operating income $ 88.1   $ 13.9   $ 2.5   $ 104.5  
 
Operating income from take-or-pay contract $ (10.0 )

Adjusted operating income, excluding
take-or-pay contract

$ 78.1  
 
     
Three Months Ended
December 31, 2015

North
American
Operations

   

Australian
Operations

   

U.K./
European
Operations

   

Total
Operations

Operating revenues $ 298.6 $ 55.2 $ 161.0 $ 514.9
Operating expenses 225.4   44.7   150.1   420.2  
Operating income(a) $ 73.2   $ 10.5   $ 10.9   $ 94.6  
 
Operating expenses $ 225.4 $ 44.7 $ 150.1 $ 420.2

Corporate development and related
costs

(0.6 ) (0.5 ) (0.2 ) (1.3 )
Net gain on sale of assets 0.3 0.3
Freightliner acquisition/integration costs (0.5 ) (0.7 ) (1.2 )

Out of period benefit of final allocation
of fair values to Freightliner's assets & liabilities

    2.6   2.6  
Adjusted operating expenses $ 224.6   $ 44.2   $ 151.9   $ 420.6  
 
Adjusted operating income $ 74.1   $ 11.0   $ 9.1   $ 94.2  
 

     
Twelve Months Ended
December 31, 2016

North
American
Operations

   

Australian
Operations

   

U.K./
European
Operations

   

Total
Operations

Operating revenues $ 1,236.8 $ 222.6 $ 542.2 $ 2,001.5
Operating expenses 917.2   217.8   576.9   1,711.9  

Operating income/(loss)(a)

$ 319.6   $ 4.8   $ (34.7 ) $ 289.6  
 
Operating expenses $ 917.2 $ 217.8 $ 576.9 $ 1,711.9

Corporate development and related
costs

(7.2 ) (14.7 ) (1.5 ) (23.3 )
Australia impairment and related costs (21.1 ) (21.1 )
ERS impairment and related costs (21.5 ) (21.5 )
U.K. coal railcar leases (10.5 ) (10.5 )
Restructuring costs (0.9 ) (0.8 ) (6.5 ) (8.2 )

Net gain/(loss) on sale and impairment
of assets

0.2   (0.3 ) 0.1   (0.1 )
Adjusted operating expenses $ 909.3   $ 180.8   $ 537.0   $ 1,627.2  
 
Adjusted operating income $ 327.4   $ 41.8   $ 5.1   $ 374.3  
 
     
Twelve Months Ended
December 31, 2015

North
American
Operations

   

Australian
Operations

   

U.K./
European
Operations

   

Total
Operations

Operating revenues $ 1,241.8 $ 243.0 $ 515.6 $ 2,000.4
Operating expenses 944.3   188.1   483.7   1,616.1  
Operating income(a) $ 297.5   $ 54.8   $ 31.9   $ 384.3  
 
Operating expenses $ 944.3 $ 188.1 $ 483.7 $ 1,616.1

Corporate development and related
costs

(1.4 ) (2.7 ) (0.3 ) (4.4 )
Freightliner acquisition/integration costs (14.5 ) (0.7 ) (15.3 )
Net gain on sale of assets 2.0     0.2   2.3  
Adjusted operating expenses $ 930.5   $ 185.4   $ 482.9   $ 1,598.8  
 
Adjusted operating income $ 311.3   $ 57.5   $ 32.7   $ 401.6  
 
(a)     Operating income is calculated as operating revenues less operating expenses.

                 

Adjusted Net Income and Adjusted Diluted Earnings Per Common Share

 
Three Months Ended December 31, 2016

Income Before
Income Taxes

Provision for
Income Taxes

Net Income
Attributable
to G&W

Diluted EPS
Attributable
to G&W

As reported $ 28.7 $ (19.8 ) $ 8.9 $ 0.15
Add back certain items:
ERS impairment and related charges 21.5 21.5 0.37
U.K. coal railcar leases 10.5 (1.9 ) 8.6 0.15
Corporate development and related costs 19.2 (3.0 ) 16.2 0.28

Net loss on sale and impairment of
assets

1.1 (0.3 ) 0.8 0.01
Restructuring costs 1.9 (0.4 ) 1.4 0.02
Write-off of debt issuance costs 2.2  

(0.7

) 0.8   0.01
As adjusted $ 85.1   $

(26.1

) $ 58.3   $ 0.99
 
Three Months Ended December 31, 2015      

Income Before
Income Taxes

   

Provision for
Income Taxes

    Net Income     Diluted EPS
As reported $ 77.8 $ 7.1 $ 84.9 $ 1.47
Add back certain items:
Corporate development and related costs 1.3 (0.4 ) 0.8 0.01
Net gain on sale of assets (0.3 ) 0.1 (0.2 )

Freightliner acquisition/integration
related costs

1.2 (0.4 ) 0.9 0.02

Out of period benefit of final allocation
of fair values to Freightliner's assets &
liabilities

(2.0 ) 0.4 (1.6 ) (0.03 )
Q1-Q3 2015 Short Line Tax Credit (19.7 ) (19.7 ) (0.34 )

Impact of reduction in U.K. effective tax
rate

(9.7 ) (9.7 ) (0.17 )

Application of full year effective tax rate
to Q1 - Q3 2015 results

  1.3   1.3   0.02  
As adjusted $ 78.1   $ (21.3 ) $ 56.8   $ 0.98  
 

                 
Twelve Months Ended December 31, 2016

Income Before
Income Taxes

Provision for
Income Taxes

Net Income
Attributable
to G&W

Diluted EPS
Attributable
to G&W

As reported $ 215.5 $ (74.4 ) $ 141.1 $ 2.42
Add back certain items:

Corporate development and related costs

26.6 (5.2 ) 21.4 0.37

Net loss on sale and impairment of
assets

0.1
Australia impairment and related costs 21.1 (4.4 ) 16.8 0.29
ERS impairment and related costs 21.5 21.5 0.37
U.K. coal railcar leases 10.5 (1.9 ) 8.6 0.15
Restructuring costs 8.2 (1.7 ) 6.5 0.11
Write-off of debt issuance costs 2.2 (0.7 ) 0.8 0.01

Impact of reduction in U.K. effective tax
rate

  (4.3 ) (4.3 ) (0.07 )
As adjusted $ 305.7   $ (92.5 ) $ 212.4   $ 3.65  
 
Twelve Months Ended December 31, 2015      

Income Before
Income Taxes

   

Provision for
Income Taxes

    Net Income     Diluted EPS
As reported $ 300.9 $ (75.9 ) $ 225.0 $ 3.89
Add back certain items:
Corporate development and related costs 6.4 (2.2 ) 4.3 0.07

Freightliner acquisition/integration
related costs

15.3 (4.0 ) 11.2 0.19
Net gain on sale of assets (2.3 ) 0.6 (1.7 ) (0.03 )

Loss on settlement of Freightliner
acquisition-related foreign currency
forward purchase contracts

18.7 (7.1 ) 11.6 0.20

Impact of reduction in U.K. effective tax
rate

  (9.7 ) (9.7 ) (0.17 )
As adjusted $ 339.0   $ (98.3 ) $ 240.7   $ 4.16  
 
     

Free Cash Flow

 

Twelve Months Ended
December 31,

2016     2015
Net cash provided by operating activities $ 407.0 $ 475.1
Net cash used in investing activities(a) (1,135.0 ) (1,074.3 )
Net cash used for acquisitions 987.3   792.2  
Free cash flow $ 259.3   $ 193.0  
 
(a)     The twelve months ended December 31, 2016 and 2015 included $24.5 million and $65.6 million, respectively, of new business investments.
 

Contact:

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

NYSE: GWR