<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the quarter ended March 31, 1998 Commission File No. 0-20847
-------------- -------
GENESEE & WYOMING INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0984624
- ----------------------- ------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
71 Lewis Street, Greenwich, Connecticut 06830
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(203) 629-3722
- --------------
(Telephone No.)
Shares of common stock outstanding as of the close of business on
May 13, 1998:
Class Number of Shares Outstanding
- ----- ----------------------------
Class A Common Stock 4,448,499
Class B Common Stock 845,539
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES [ ] NO
<PAGE>
INDEX
<TABLE>
<CAPTION>
Part I - Financial Information
<S> <C>
Item 1. Financial Statements: Page
----
Consolidated Statements of Income - For the
Three Months Ended March 31, 1998 and 1997...... 3
Consolidated Balance Sheets - March 31, 1998
and December 31, 1997........................... 4
Consolidated Statements of Cash Flows - For the
Three Months Ended March 31, 1998 and 1997...... 5
Notes to Consolidated Financial Statements........ 6 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 9 - 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk..................................... 14
Part II - Other Information................................... 15
Index to Exhibits............................................. 16 - 17
Signatures.................................................... 18
</TABLE>
2
<PAGE>
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING REVENUES $37,740 $24,092
--------------------------
OPERATING EXPENSES:
Transportation 11,814 7,232
Maintenance of way and structures 4,205 2,557
Maintenance of equipment 7,759 4,006
General and administrative 6,685 4,743
Depreciation and amortization 2,303 1,519
--------------------------
Total operating expenses 32,766 20,057
--------------------------
INCOME FROM OPERATIONS 4,974 4,035
Interest expense (1,562) (574)
Other income 394 131
--------------------------
Income before provision for income taxes 3,806 3,592
Provision for income tax 1,524 1,458
--------------------------
NET INCOME $2,282 $2,134
==========================
Earnings per common share - basic $0.43 $0.41
==========================
Weighted average number of shares of common stock - basic 5,293 5,246
==========================
Earnings per common share - diluted $0.42 $0.39
==========================
Weighted average number of shares of common stock - diluted 5,427 5,469
==========================
</TABLE>
3
<PAGE>
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
ASSETS (Unaudited)
--------------------------
<S> <C> <C>
CURRENTS ASSETS:
Cash and cash equivalents $ 18,682 $ 11,434
Accounts receivable, net 24,962 29,895
Note receivable - related party 4,542 4,499
Materials and supplies 5,187 5,039
Prepaid expenses and other 3,601 3,145
Deferred income tax assets, net 2,451 2,523
--------------------------
Total current assets 59,425 56,535
--------------------------
PROPERTY AND EQUIPMENT, net 126,935 124,985
--------------------------
SERVICE ASSURANCE AGREEMENT, net 13,375 13,563
--------------------------
OTHER ASSETS, net 15,329 15,449
--------------------------
Total assets $ 215,064 $ 210,532
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 830 $ 1,157
Accounts payable 31,363 30,025
Accrued expenses 6,756 6,796
--------------------------
Total current liabilities 38,949 37,978
--------------------------
LONG-TERM DEBT 73,210 72,987
--------------------------
OTHER LIABILITIES 3,385 3,237
--------------------------
DEFERRED INCOME TAX LIABILITIES, net 9,365 8,470
--------------------------
DEFERRED ITEMS--grants from governmental agen 14,913 15,083
--------------------------
DEFERRED GAIN--sale/leaseback 4,317 4,434
--------------------------
STOCKHOLDERS' EQUITY:
Class A common stock, $0.01 par value, one vote
per share; 12,000,000 shares authorized;
4,447,854 and 4,404,262 issued and outstanding
on March 31, 1998 and December 31, 1997,
respectively. 44 44
Class B common stock, $0.01 par value, 10 votes
per share; 1,500,000 shares authorized; 845,539
and 846,556 issued and outstanding on
March 31, 1998 and December 31, 1997,
respectively. 8 8
Additional paid-in capital 46,692 46,205
Warrants outstanding -- 471
Retained earnings 25,338 23,056
Foreign currency translation adjustment (1,157) (1,441)
--------------------------
Total stockholders' equity 70,925 68,343
--------------------------
Total liabilities and stockholders' equity $ 215,064 $ 210,532
==========================
</TABLE>
4
<PAGE>
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,282 $2,134
Adjustments to reconcile net income to net cash provided
by operating activities-
Depreciation and amortization 2,303 1,519
Deferred income taxes 969 620
Gain on disposition of property and equipment ---- (7)
Changes in assets and liabilities, net of balances
assumed through acquisitions-
Receivables 3,833 (1,594)
Materials and supplies (124) (4)
Prepaid expenses and other (56) (258)
Accounts payable and accrued expenses 1,130 1,152
Other assets and liabilities, net (11) (422)
------------------------
Net cash provided by operating activities 10,326 3,140
------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,986) (1,469)
Proceeds from disposition of property 1,261 259
------------------------
Net cash used in investing activities (2,725) (1,210)
------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings, including capital (482) (4,357)
Proceeds from issuance of long-term debt ---- 5,480
Net proceeds on grants ---- 510
Proceeds from issuance of common stock 17 15
------------------------
Net cash (used in) provided by financing activities
(465) 1,648
------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 112 ----
INCREASE IN CASH AND CASH EQUIVALENTS 7,248 3,578
CASH AND CASH EQUIVALENTS, beginning of period 11,434 14,121
------------------------
CASH AND CASH EQUIVALENTS, end of period $18,682 $17,699
========================
CASH PAID DURING PERIOD FOR:
Interest $1,721 $657
Incomes taxes 47 2,072
========================
SUPPLEMENTAL NON-CASH INVESTING ACTIVITIES:
Capital lease obligation ---- $5,261
========================
</TABLE>
5
<PAGE>
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION:
The interim consolidated financial statements presented herein include the
accounts of Genesee & Wyoming Inc. and its subsidiaries. References to "GWI" or
the "Company" mean Genesee & Wyoming Inc. and, unless the context indicates
otherwise, its consolidated subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation. These interim
consolidated financial statements have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission (the "SEC"). In the opinion of management, the unaudited financial
statements for the three-month periods ended March 31, 1998 and 1997, are
presented on a basis consistent with audited financial statements and contain
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation. The interim consolidated financial statements should be
read in conjunction with the audited financial statements and notes thereto for
the year ended December 31, 1997 included in the Company's Form 10-K.
The results of operations for interim periods are not necessarily indicative
of results of operations for the full year.
2. CORPORATE DEVELOPMENTS:
Australia - On August 28, 1997 the Company announced that its wholly owned
subsidiary, Genesee & Wyoming Australia Pty Ltd ("GWIA"), had been awarded the
contract to purchase certain railroad assets of SA Rail, a division of
Australian National Railway, through the Commonwealth of Australia Office of
Asset Sales. SA Rail provided intrastate freight services in the State of South
Australia, interstate haulage of contract freight, rolling stock rental and
maintenance, and interstate track maintenance. GWIA bid as part of a consortium
including EDI Clyde Engineering and Transfield Pty Ltd. EDI Clyde is a major
Australian provider of railway rolling stock and holds the Australian license
for GM/EMD locomotives. Transfield is a major Australian engineering,
construction and infrastructure maintenance provider. On November 8, 1997 GWIA
closed on the purchase and commenced operation of freight service under the name
of Australia Southern Railroad Pty. Ltd.
3. JOINT VENTURE:
The Company has formed a joint venture, Genesee Rail-One Inc. ("GRO") to
acquire railroads in Canada. GRO is a joint venture with Rail-One Inc., a
subsidiary of The Cygnus Group which is an integrated transportation facilities,
services and infrastructure provider in Canada. The Company's initial capital
investment in GRO was approximately $4,913,000.
On July 29, 1997, GRO commenced operations of the Huron Central Railway Inc.
("HCRY"), a 180-mile railroad located in central Ontario. HCRY leases its ra il
line from the Canadian Pacific Railway for a 20 year term and is responsible for
operation and maintenance of the leased line.
GRO commenced operations on November 11, 1997 of the Quebec Gatineau Railway
Inc. ("QGRY"), a 354-mile railroad linking Quebec City, Montreal and Hull in
Southeastern Quebec. QGRY purchased the majority of assets and also leased a
smaller portion of assets for this railroad from the Canadian Pacific Railway
Company.
6
<PAGE>
Based on GWI's ownership position of 47.5%, the Company is reporting the
results of operations of GRO under the equity method of accounting for
investments. The results of operations of GRO are translated into U.S. dollars
at a weighted average exchange rate for each period and are included in other
income, net.
4. LEASES:
In March, 1997, a subsidiary of the Company entered into a master lease
agreement with a leasing company. The lease provides for the inclusion of up to
$13.0 million in railroad rolling stock. As of March 31, 1998, the Company's
subsidiary had $11.8 million of equipment under this lease. Lease payments
until September 30, 1998, are interest only at LIBOR plus 1.5%. After that
date, the equipment currently under lease will require monthly payments of
$116,461 until March, 2017. The Company's subsidiary has the right to purchase
the equipment at any time during the lease for fair market value.
5. CONTINGENCIES:
On June 23, 1997 CSX Transportation, Inc. ("CSX") and Norfolk Southern Corp.
("NS"), submitted a plan to the Surface Transportation Board ("STB") to control
and divide the assets of Consolidated Rail Corporation ("Conrail"). The STB has
announced that it will take up to 395 calendar days to respond to this proposal.
Railroads in the Company's New York and Pennsylvania region interchange with one
or more of these railroads, and rely on them in some cases for providing
overhead traffic, defined as traffic neither originating nor terminating on any
of the Company's subsidiaries. In their joint filing with the STB, CSX and NS
estimated that approximately $8.3 million in freight revenue related to overhead
traffic on one of the Company's subsidiaries may be diverted as a result of the
proposed transaction. The Company agrees with this estimate and is considering
its options for restructuring the operations of the railroad to minimize the
impact. On October 21, 1997 the Company and several of its subsidiaries entered
into a confidential Rate and Route Agreement with CSX that the Company believes
will facilitate the operations restructuring process. Based on its initial
studies the Company believes that no impairment of assets will occur.
6. RECENTLY ISSUED ACCOUNTING STANDARDS:
The Financial Accounting Standards Board recently issued SFAS No. 130,
Reporting Comprehensive Income, which establishes standards for reporting and
display of comprehensive income. The objective of this standard is to report a
measure of changes in equity of an enterprise that result from transactions
other than with owners. Comprehensive income is the total of net income and all
other nonowner changes in equity. The following table sets forth the Company's
comprehensive income for the three months ended March 31, 1998 and 1997:
Statement of Comprehensive Income
Three Months Ended March 31,
(in thousands)
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Net Income $2,282 $2,134
Other comprehensive income, net of tax -
Foreign currency translation adjustments 284 -0-
------ ------
Comprehensive income $2,566 $2,134
====== ======
</TABLE>
7
<PAGE>
The Financial Accounting Standards Board recently issued Statement of Position
("SOP") 98-5, "Reporting of the Costs of Start-Up Activities", which provides
guidance on the financial reporting of start-up costs and organization costs.
It requires costs of start-up activities and organization costs to be expensed
as incurred. Application of this SOP is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company believes the
application of this SOP in the first quarter of 1999 will be immaterial to its
financial statements.
The remainder of this page is intentionally left blank.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
Quarterly Report on Form 10-Q, and with the consolidated financial statements,
related notes and other financial information included in the Company's 1997
Form 10-K.
General
The Company is a holding company whose subsidiaries own and operate short line
and regional freight railroads in the United States and, beginning in November,
1997, Australia, and through its industrial switching subsidiary, provides
railroad switching and related services to industries with extensive railroad
facilities within their complexes. The Company's United States and Australia
railroad subsidiaries generate revenues primarily from the movement of freight
over track owned or operated by its railroads. These subsidiaries also generate
non-freight revenues primarily by providing related rail services such as
railcar leasing, railcar repair and storage to shippers along its lines and to
the railroads that connect with its lines. The Company's industrial switching
subsidiary generates non-freight revenues primarily by providing switching and
other rail related services to industries with extensive railroad facilities
within their complexes.
The Company's operating expenses include wages and benefits, equipment rents
(including car hire), purchased services, depreciation and amortization, diesel
fuel, casualties and insurance, materials and other expenses. Car hire is a
charge paid by a railroad to the owners of railcars used by that railroad in
moving freight. Other expenses generally include property and other non-income
taxes, professional services, communication and data processing costs and
general overhead expense.
When comparing the Company's results of operations from one reporting period
to another, the following factors should be taken into consideration. The
Company has historically experienced fluctuations in revenues and expenses such
as one-time freight moves, customer plant expansions and shut-downs, railcar
sales, accidents and derailments. In periods when these events occur, results
of operations are not easily comparable to other periods. In addition, much of
the Company's growth to date has resulted from various types of acquisitions.
Because of variations in the structure, timing and size of these acquisitions
and differences in economics among the Company's railroads resulting from
differences in the rates and other material terms established through
negotiation, the Company's results of operations in any reporting period may not
be directly comparable to its results of operations in other reporting periods.
Results of Operations
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Consolidated Operating Revenues
Operating revenues were $37.7 million in the first three months of 1998
compared to $24.1 million in the first three months of 1997, an increase of
$13.6 million or 56.6%. The increase was attributable to a $10.4 million
increase in freight revenues and a $3.2 million increase in non-freight
revenues.
9
<PAGE>
Freight revenues were $27.8 million in the first three months of 1998 compared
to $17.4 million in the first three months of 1997, an increase of $10.4 million
or 59.9%. This increase is a net result of $10.8 million of freight revenue
from a new subsidiary with operations in Australia (see Note 2. to Consolidated
Financial Statements) and a $380,000 decrease in domestic freight revenue.
Non-freight revenues were $9.9 million in the first three months of 1998
compared to $6.7 million in the first three months of 1997, an increase of $3.2
million or 48.2%. This increase is the result of $1.5 million of non-freight
revenue from a new subsidiary with operations in Australia (see Note 2. to
Consolidated Financial Statements) and a $1.7 million increase in United States
non-freight revenue.
The following three sections provide information on railroad revenues in the
United States and Australia, and industrial switching revenues in the United
States.
United States Operating Revenues
Operating revenues were $21.5 million in the first three months of 1998
compared to $20.9 million in the first three months of 1997, an increase of
$637,000 or 3.0%. The increase was attributable to a net change of a decrease in
freight revenues of $380,000 and an increase in non-freight revenues of $1.0
million.
The following table compares United States freight revenues, carloads and
average freight revenues per carload for the first three months of 1998 and
1997:
United States Freight Revenues and Carloads Comparison by Commodity Group
Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
AVERAGE
FREIGHT
REVENUES
FREIGHT REVENUES CARLOADS PER CARLOAD
---------------------------------- -------------------------------- ------------------
(DOLLARS IN THOUSANDS EXCEPT REVENUES PER CARLOAD)
% OF % OF % OF % OF
COMMODITY GROUP 1998 TOTAL 1997 TOTAL 1998 TOTAL 1997 TOTAL 1998 1997
------- ------- ------- ------- ------ ------- ------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COAL, COKE & ORES $ 5,151 30.3% $ 6,666 38.3% 20,877 35.4% 25,759 45.3% $ 247 $ 259
PULP & PAPER 2,346 13.8 1,767 10.2 6,109 10.4 4,612 8.1 384 383
PETROLEUM PRODUCTS 2,206 13.0 1,956 11.2 5,273 8.9 4,072 7.2 418 480
METALS 1,510 8.9 1,196 6.9 5,947 10.1 5,037 8.9 254 237
CHEMICALS 1,316 7.7 1,523 8.8 2,448 4.2 2,835 5.0 538 537
LUMBER & FOREST
PRODUCTS 1,315 7.7 1,463 8.4 4,342 7.4 4,334 7.6 303 338
FARM & FOOD PRODUCTS 943 5.5 945 5.4 3,756 6.4 3,420 6.0 251 276
MINERALS & STONE 878 5.2 617 3.5 3,185 5.4 2,214 3.9 276 279
AUTOS & AUTO PARTS 451 2.7 898 5.2 894 1.4 1,698 3.0 504 529
OTHER 899 5.2 364 2.1 6,105 10.4 2,872 5.0 147 127
------- ----- ------- ----- ------ ----- ------ ----- ------- -------
TOTAL $17,015 100.0% $17,395 100.0% 58,936 100.0% 56,853 100.0% $ 289 $ 306
======= ===== ======= ===== ====== ===== ====== ===== ======= =======
</TABLE>
The decrease in United States freight revenues was largely attributable to the
decline in freight revenues from the shipment of coal. Freight revenues from
coal were $5.2 million in the first three months of 1998, compared to
10
<PAGE>
$6.7 million in the first three months of 1997, a decrease of $1.5 million or
22.7% due to reduced shipments of coal resulting from scheduled maintenance at a
key customer's facilities. The decrease in freight revenues from coal was
partially offset by increases in freight revenues from Pulp & Paper of $579,000
or 32.8%, Metals of $314,000 or 26.3% and Petroleum Products of $250,000 or
12.8%. Freight revenues from all remaining commodities reflected a net decrease
of $8,000.
Total United States carloads were 58,936 in the first three months of 1998
compared to 56,853 in the first three months of 1997, an increase of 2,083 or
3.7%. However, the overall average revenue per carload declined to $289 in the
first three months of 1998, compared to $306 per carload in the first three
months of 1997, a decrease of 5.6% due to changes in commodity mix and traffic
patterns.
United States non-freight railroad revenues were $4.5 million in the first
three months of 1998 compared to $3.5 million in the first three months of 1997,
an increase of $1.0 million or 28.9%. Revenues from railroad switching
activities were $356,000 in the first three months of 1998 compared to $693,000
in the first three months of 1997, a decrease of $337,000 or 48.6% primarily
attributable to the cessation of operations of the Company's switching
subsidiary in Dayton, Texas. Revenues from car hire and car rentals were $2.2
million in the first three months of 1998 compared to $1.1 million in the first
three months of 1997, an increase of $1.1 million or 98.0%. The increase in
United States car hire and car rentals of $1.1 million was primarily
attributable to the expansion of GWI's fleet available for lease. Other non-
freight railroad revenue, primarily from railcar repair, storage and demurrage,
was $2.0 million in the first three months of 1998 compared to $1.7 million in
the first three months of 1997, an increase of $266,000 or 15.4%.
Australia Operating Revenues (US Dollars)
Operating revenues were $12.3 million in the first three months of 1998 and
consisted of $10.8 million in freight revenues and a $1.5 million in non-freight
revenues.
The following table outlines Australian freight revenues for the first three
months of 1998:
Australian Freight Revenue by Commodity
Three Months Ended March 31, 1998
(in thousands)
<TABLE>
<CAPTION>
Commodity Group Revenue
- --------------- --------
<S> <C>
Hook and Pull (Haulage) $ 3,940
Grain 2874
Coal 2064
Gypsum 757
Marble 508
Lime 356
Other 302
--------
Total $ 10,801
========
</TABLE>
Australia non-freight revenues were $1.5 million in the first three months of
1998 and consisted of $1.1 million in revenues from car hire and car rentals and
$422,000 in other non-freight revenue.
11
<PAGE>
Industrial Switching Revenues
Revenues from industrial switching activities were $3.9 million in the first
three months of 1997 compared to $3.2 million in the first three months of 1997,
an increase of $745,000 or 23.5%. The increase was primarily attributable to a
broadening of the customer base of Rail Link, Inc.
Consolidated Operating Expenses
Operating expenses were $32.8 million in the first three months of 1998
compared to $20.1 million in the first three months of 1997, an increase of
$12.7 million or 63.4%. Expenses attributable to operations in Australia
represented $10.6 million or 83.3% of the change, with increases in domestic
operating expenses making up the remaining $2.1 million or 16.7% of the change.
The Company's operating ratio increased to 86.8% in the first three months of
1998 from 83.3% in the first three months of 1997. The increase is primarily
attributable to the higher levels of purchased services and the price of diesel
fuel inherent in the Australia operation, and to a change in the traffic mix,
principally related to the level of coal movements in the United States.
The following table sets forth a comparison of the Company's operating
expenses for the first quarters of 1998 and 1997:
Operating Expense Comparison
Three Months Ended March 31, 1998 and 1997
(dollars in thousands)
<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
% of % of
Operating Operating
Amount Revenues Amount Revenues
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Labor and benefits $11,185 29.6% $ 8,944 37.1%
Equipment rents 3,280 8.7 2,435 10.1
Purchased services 5,174 13.7 1,017 4.2
Depreciation and
amortization 2,303 6.1 1,519 6.4
Diesel fuel 3,534 9.4 1,343 5.6
Casualties and insurance 1,303 3.5 1,530 6.4
Materials 1,447 3.8 969 4.0
Other 4,540 12.0 2,300 9.5
------- ---- ------- ----
Total $32,766 86.8% $20,057 83.3%
======= ==== ======= ====
</TABLE>
Labor and benefits expense was $11.2 million in the first three months of 1998
compared to $8.9 million in the first three months of 1997, an increase of $2.3
million or 25.1%, primarily due to the commencement of operations in Australia.
However, labor costs decreased as a percentage of revenues to 29.6% in the first
three months of 1998 from 37.1% in the first three months of 1997. The
decrease is largely attributable to the purchased services nature of the
Australia operation in which contractors perform maintenance of track and
maintenance of equipment services traditionally performed by labor thus
resulting in a much lower labor-to-revenue ratio. By the same token,
12
<PAGE>
purchased services expense was $5.2 million in the first three months of 1998
compared to $1.0 million in the first three months of 1997, an increase of $4.2
million or 408.8%, due primarily to the commencement of operations in Australia.
Diesel fuel expense was $3.5 million in the first three months of 1998
compared to $1.3 million in the first three months of 1997, an increase of $2.2
million or 163.1%, which is the net result of $2.5 million in diesel fuel
attributable to the commencement of operations in Australia and a decrease of
$273,000 in diesel fuel consumed by United States operations. The price of
diesel fuel is more expensive in Australia then in the United States on a per
unit basis. Other expense was $4.5 million in the first three months of 1998
compared to $2.3 million in the first three months of 1997, an increase of $2.2
million or 97.4%, of which $1.3 million is due to the commencement of operations
in Australia and $973,000 is due to increases in United States operations
primarily attributable to general and administrative and trackage rights expense
increases.
Interest Expense and Income Taxes
Interest expense in the first three months of 1998 was $1.6 million compared
to $574,000 million in the first three months of 1997, an increase of $989,000
or 172.1%. The increase reflects the growth of overall debt outstanding during
the 1998 period compared to the 1997 period due to the financing of the
acquisition of assets in Australia; the investment in Genesee Rail-One in
Canada; and the acquisition of railroad rolling stock by several domestic
subsidiaries. The Company's effective income tax rate was 40.0% in the first
three months of 1998 compared to 40.6% in the first three months of 1997.
Net Income
The Company's net income in the first three months of 1998 was $2.3 million
compared to $2.1 million in the first three months of 1997, an increase of
$148,000 or 6.9%.
Liquidity and Capital Resources
During the three months ended March 31, 1998 the Company generated cash from
operations of $10.3 million, invested $4.0 million in capital assets and
received $1.3 million in proceeds from the disposition of property.
During the three months ended March 31, 1997 the Company generated cash from
operations of $3.1 million, had net new borrowings of $1.1 million, entered into
a $5.3 million long-term capital lease for rolling stock and recorded $510,000
in net proceeds on governmental grants. A total of $6.8 million was invested in
capital assets of which $5.3 million represented rolling stock under the long-
term capital lease. The Company received $259,000 in proceeds from the
disposition of property.
The Company has budgeted approximately $12.0 million in capital expenditures
in 1998, primarily for track rehabilitation, of which $1.5 million is expected
to be used to complete an obligation to replace rail under the terms of a lease
of one of the Company's railroads in the United States, and $2.5 million is
expected to be used in Australia. Approximately $4.0 million of the budgeted
capital expenditures of $12.0 million was completed as of March 31, 1998.
At March 31, 1998 the Company had long-term debt (including current portion)
totaling $74.0 million, which comprised 51.1% of its total capitalization. This
compares to long-term debt, including current portion, of $74.1 million at
December 31, 1997, comprising 52.0% of total capitalization.
13
<PAGE>
The Company has historically relied primarily on cash generated from
operations to fund working capital and capital expenditures relating to ongoing
operations, while relying on borrowed funds to finance acquisitions and
equipment needs (primarily rolling stock) related to acquisitions. The Company
believes that its cash flow from operations together with amounts available
under its credit facilities will enable the Company to meet its liquidity and
capital expenditure requirements relating to ongoing operations for at least the
duration of its credit facilities.
Forward-Looking Statements
This Report and the documents incorporated herein by reference may contain
forward-looking statements based on current expectations, estimates and
projections about the Company's industry, management's beliefs and assumptions
made by management. Words such as "anticipates," "intends," "plans,"
"believes," "seeks," "estimates," variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are no guarantees of future performance and are subject to certain
risks, uncertainties and assumptions that are difficult to forecast. Therefore,
actual results may differ materially from those expressed or forecast in any
such forward-looking statements. Such risks and uncertainties include, in
addition to those set forth in this Item 2, those noted in the documents
incorporated by reference. The Company undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new information,
future events or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
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14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - NONE
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - NONE
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5. OTHER INFORMATION - NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS - SEE INDEX TO EXHIBITS
(B) REPORTS ON FORM 8-K:
No Reports on Form 8-K were filed by the Registrant during the
period covered by this Report.
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15
<PAGE>
INDEX TO EXHIBITS
(2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION
Not applicable.
(3) (i) ARTICLES OF INCORPORATION
The Form of Restated Certificate of Incorporation referenced under
(4)(a) hereof is incorporated herein by reference.
(ii) BY-LAWS
The By-laws referenced under (4)(b) hereof are incorporated herein by
reference.
(4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
(a) Form of Restated Certificate of Incorporation (Exhibit 3.2)/2/
(b) By-laws (Exhibit 3.3)/1/
(c) Specimen stock certificate representing shares of Class A Common
Stock (Exhibit 4.1)/3/
(d) Form of Class B Stockholders' Agreement dated as of May 20, 1996,
among the Registrant, its executive officers and its Class B
stockholders (Exhibit 4.2)/2/
(e) Promissory Note dated October 7, 1991 of Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc. (Exhibit
4.6)/1/
(10) MATERIAL CONTRACTS
Not applicable.
*(11.1) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION
Not applicable.
(18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES
Not applicable.
(19) REPORT FURNISHED TO SECURITY HOLDERS
Not applicable.
(22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE OF SECURITY
HOLDERS
Not applicable.
(23) CONSENTS OF EXPERTS AND COUNSEL
16
<PAGE>
Not applicable.
(24) POWER OF ATTORNEY
Not applicable.
*(27) FINANCIAL DATA SCHEDULE
(99) ADDITIONAL EXHIBITS
____________________________
*Exhibit filed with this Report.
/1/Exhibit previously filed as part of, and incorporated herein by reference
to, the Registrant's Registration Statement on Form S-1 (Registration No. 333-
3972). The exhibit number contained in parenthesis refers to the exhibit number
in such Registration Statement.
/2/Exhibit previously filed as part of, and incorporated herein by reference
to, Amendment No. 1 to the Registrant's Registration Statement on Form S-1
(Registration No. 333-3972). The exhibit number contained in parenthesis refers
to the exhibit number in such Amendment.
/3/Exhibit previously filed as part of, and incorporated herein by reference
to, Amendment No. 2 to the Registrant's Registration Statement on Form S-1
(Registration No. 333-3972). The exhibit number contained in parenthesis refers
to the exhibit number in such Amendment.
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17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
GENESEE & WYOMING INC.
Date: May 15, 1998 By: /s/ Mortimer B. Fuller, III
---------------------------
Name: Mortimer B. Fuller, III
Title: Chairman of the Board and
CEO
Date: May 15, 1998 By: /s/ Alan R. Harris
---------------------------
Name: Alan R. Harris
Title: Senior Vice President and
Chief Accounting Officer
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18
<PAGE>
Exhibit 11.1
GENESEE & WYOMING INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR TO DATE
MARCH 31, 1998
---------------
BASIC EARNINGS PER SHARE CALCULATION:
- -------------------------------------
<S> <C>
Net Income $2,282
Weighted average number of shares
of common stock 5,293
=====
Earnings per share - basic $0.43
======
DILUTED EARNINGS PER SHARE CALCULATION:
- ---------------------------------------
Net Income $2,282
Weighted average number of shares of common stock
and common stock equivalents outstanding:
Weighted average number of shares
of common stock 5,293
Common stock equivalents issuable under stock
option plans 134
Weighted average number of shares of common stock
and common stock equivalents - diluted 5,427
======
Earnings per share - diluted $ 0.42
======
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 18,682
<SECURITIES> 0
<RECEIVABLES> 24,962
<ALLOWANCES> 0
<INVENTORY> 5,187
<CURRENT-ASSETS> 59,425
<PP&E> 153,536
<DEPRECIATION> 26,601
<TOTAL-ASSETS> 215,064
<CURRENT-LIABILITIES> 38,949
<BONDS> 73,210
0
0
<COMMON> 52
<OTHER-SE> 70,873
<TOTAL-LIABILITY-AND-EQUITY> 215,064
<SALES> 37,740
<TOTAL-REVENUES> 37,740
<CGS> 32,766
<TOTAL-COSTS> 32,766
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,168
<INCOME-PRETAX> 3,806
<INCOME-TAX> 1,524
<INCOME-CONTINUING> 2,282
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,282
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.42
</TABLE>
