<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 June 30, 2000 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
August 7, 2000:
Class Number of Shares Outstanding
----- ----------------------------
Class A Common Stock 3,482,219
Class B Common Stock 845,447
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
Part I - Financial Information
Item 1. Financial Statements: Page
----
Consolidated Statements of Income - For the
Three Month and Six Month Periods Ended
June 30, 2000 and 1999......................... 3
Consolidated Balance Sheets - As of June 30,
2000 and December 31, 1999..................... 4
Consolidated Statements of Cash Flows - For the
Six Month Periods Ended June 30, 2000 and
1999........................................... 5
Notes to Consolidated Financial Statements....... 6 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 11 - 31
Item 3. Quantitative and Qualitative Disclosures About
Market Risk........................................ 31
Part II - Other Information................................ 31 - 32
Index to Exhibits.......................................... 33 - 34
Signatures................................................. 35
2
<PAGE>
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
-------------------------------------------------
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 52,354 $ 42,669 $ 107,765 $ 76,841
-------------------------------------------------
OPERATING EXPENSES:
Transportation 17,148 13,465 35,869 24,778
Maintenance of ways and structures 5,663 4,782 11,619 8,942
Maintenance of equipment 10,329 8,524 21,270 15,466
General and administrative 7,952 7,023 16,260 14,048
Depreciation and amortization 3,455 3,152 6,642 5,846
-------------------------------------------------
Total operating expenses 44,547 36,946 91,660 69,080
-------------------------------------------------
INCOME FROM OPERATIONS 7,807 5,723 16,105 7,761
Interest expense (2,520) (1,930) (5,272) (3,324)
Valuation adjustment of U.S. dollar
denominated foreign debt (2,358) -- (1,486) --
Other income (expense) 691 381 1,248 (216)
-------------------------------------------------
Income before provision for income taxes 3,620 4,174 10,595 4,221
Provision for income taxes 1,342 1,428 3,905 1,807
-------------------------------------------------
NET INCOME $ 2,278 $ 2,746 $ 6,690 $ 2,414
=================================================
Earnings per common
share - basic $ 0.53 $ 0.62 $ 1.55 $ 0.52
=================================================
Weighted average number of shares of
common stock - basic 4,330 4,416 4,329 4,673
=================================================
Earnings per common
share - diluted $ 0.51 $ 0.62 $ 1.50 $ 0.51
=================================================
Weighted average number of shares of
common stock - diluted 4,490 4,439 4,457 4,704
=================================================
</TABLE>
3
<PAGE>
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
As of As of
June 30, Dec. 31,
2000 1999
----------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,207 $ 7,791
Accounts receivable, net 46,156 47,870
Materials and supplies 6,461 6,141
Prepaid expenses and other 5,383 7,689
Deferred income tax assets, net 3,041 3,087
-------- --------
Total current assets 70,248 72,578
-------- --------
PROPERTY AND EQUIPMENT, net 195,650 185,970
-------- --------
SERVICE ASSURANCE AGREEMENT, net 11,690 12,065
-------- --------
INVESTMENT IN UNCONSOLIDATED AFFILIATES 1,578 1,576
-------- --------
OTHER ASSETS, net 25,575 29,751
-------- --------
Total assets $304,741 $301,940
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 16,012 $ 15,146
Accounts payable 42,522 52,501
Accrued expenses 11,234 9,738
-------- --------
Total current liabilities 69,768 77,385
-------- --------
LONG-TERM DEBT, less current portion 92,986 93,230
-------- --------
OTHER LIABILITIES 4,228 4,231
-------- --------
DEFERRED INCOME TAX LIABILITIES, net 15,563 13,145
-------- --------
DEFERRED ITEMS--grants from governmental agencies 32,613 27,427
-------- --------
DEFERRED GAIN--sale/leaseback 3,829 4,109
-------- --------
MINORITY INTEREST - 584
-------- --------
STOCKHOLDERS' EQUITY:
Class A common stock, $0.01 par value, one vote per share; 12,000,000 shares authorized;
4,482,080 and 4,453,368 issued and outstanding on June 30, 2000 and December 31, 1999,
respectively 45 45
Class B common stock, $0.01 par value, 10 votes per share;
1,500,000 shares authorized; 845,447 and 845,539 issued and outstanding on June 30, 2000
and December 31, 1999, respectively 8 8
Additional paid-in capital 47,102 47,072
Retained earnings 53,714 47,023
Currency translation adjustment (4,112) (1,316)
Less treasury stock, at cost, 1,000,000 Class A shares (11,003) (11,003)
-------- --------
Total stockholders' equity 85,754 81,829
-------- --------
Total liabilities and stockholders' equity $304,741 $301,940
======== ========
</TABLE>
4
<PAGE>
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
----------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 6,690 $ 2,414
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 6,642 5,846
Deferred income taxes 2,485 (328)
Gain on disposition of property and equipment (70) (139)
Minority interest expense 30 --
Valuation adjustment of U.S. dollar denominated foreign debt 1,486 --
Changes in assets and liabilities
Accounts receivable 938 3,513
Materials and supplies (486) (430)
Prepaid expenses and other 2,160 401
Accounts payable and accrued expenses (9,070) (1,183)
Other assets and liabilities, net (14) 126
----------------------
Net cash provided by operating activities 10,791 10,220
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (16,588) (6,871)
Cash received in purchase of Rail-one Inc. less
cash paid for common stock -- 57
Proceeds from disposition of property 157 183
----------------------
Net cash used in investing activities (16,431) (6,631)
----------------------
CASH FLOWS FROM FINANCING ACTIVITIES;
Principal payments on long-term borrowings, including capital leases (23,585) (29,761)
Proceeds from issuance of long-term debt 25,297 30,000
Proceeds from governmental grants 5,768 221
Proceeds from employee stock purchases 30 22
Purchase of treasury stock -- (6,374)
----------------------
Net cash provided by (used in) financing activities 7,510 (5,892)
----------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS (454) (246)
----------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,416 (2,549)
CASH AND CASH EQUIVALENTS, beginning of period 7,791 14,396
----------------------
CASH AND CASH EQUIVALENTS, end of period $ 9,207 $ 11,847
======================
CASH PAID DURING PERIOD FOR:
Interest $ 3,782 $ 3,154
Income taxes 1,205 4,076
======================
</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. In the opinion of management, the unaudited financial statements
for the three-month and six-month periods ended June 30, 2000 and 1999, 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, 1999 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. EXPANSION OF OPERATIONS:
Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V.
In August 1999, the Company's wholly-owned subsidiary, Compania de Ferrocarriles
Chiapas-Mayab, S.A. de C.V. (FCCM), was awarded a 30-year concession to operate
certain railways owned by the state-owned Mexican rail company Ferronales. FCCM
also acquired equipment and other assets. The aggregate purchase price,
including acquisition costs, was approximately 297 million pesos, or
approximately $31.5 million at then-current exchange rates. The purchase
included $12.3 million of rolling stock, a $9.7 million advance payment on track
improvements to be completed on the state-owned track property by February,
2001, a $1.0 million escrow payment which will be returned to the Company upon
successful completion of the track improvements, an expected future utilization
by the Company of $2.2 million of value-added taxes paid on the transaction, and
$1.0 million in goodwill. The remaining purchase price ($5.3 million) was
allocated to the 30-year operating license.
Genesee Rail-One Inc.
On April 15, 1999, the Company closed on an agreement to acquire Rail-One Inc.
(Rail-One) which has a 47.5% ownership interest in Genesee Rail-One Inc. (GRO),
thereby increasing the Company's ownership of GRO to 95%. GRO owns and operates
two short line railroads in Canada. Under the terms of the purchase agreement,
the Company converted outstanding notes receivable from Rail-One of $4.6 million
into capital, has begun paying approximately $844,000 in cash to the sellers of
Rail-One in installments over a four year period, and granted options to the
sellers of Rail-One to purchase up to 80,000 shares of the Company's Class A
Common Stock at an exercise price of $8.625 per share. Exercise of the options
is contingent on the Company's recovery of its capital investment in GRO
including debt assumed if the Company were to sell GRO, and upon certain GRO
income performance measures. As of June 30, 2000, these options are not
exercisable. Effective with this agreement,
6
<PAGE>
the operating results of GRO have been consolidated within the financial
statements of the Company. During the second quarter of 2000, the Company
purchased the remaining 5% minority interest with an initial cash payment of
$240,000 and subsequent annual cash installments of $180,000 due in 2001 and
2002. Prior to April 15, 1999, the Company accounted for its investment in GRO
under the equity method.
3. CREDIT FACILITIES:
On August 17, 1999, the Company amended and restated its credit facilities
agreement (the Agreement) to provide for an increase in borrowings from $65.0
million to $150.0 million. The Agreement provides for $88.0 million in revolving
credit facilities, including $15.0 million in Australian dollar equivalents to
be allocated to the Australian subsidiaries, and $62.0 million in term loan
facilities. The term loan facilities include a U.S. Term Loan facility in the
amount of $10.0 million, a Canadian Term Loan facility in the Canadian Dollar
Equivalent of $22.0 million, and a Mexican Term Loan facility of $30.0 million.
The Agreement has a maturity date of August 17, 2004, provides for interest at
various rates, plus the applicable margins, as defined in the Agreement and is
secured by substantially all the assets of the Company and its subsidiaries. The
Agreement requires the maintenance of certain commitment fees, prepayments from
the issuance of new equity or debt and annual sale of assets, and covenant
ratios or amounts, including, but not limited to, funded debt to EBITDA, minimum
EBITDA for a period, cash flow coverage, and Net Worth, all as defined in the
Agreement.
Amounts outstanding under the Agreement which were borrowed by FCCM represent
U.S. dollar denominated foreign debt of the Company's Mexican subsidiary. As the
Mexican peso moved against the U.S. dollar, the revaluation of this outstanding
debt to its Mexican peso equivalent resulted in non-cash gains and losses as
reflected in the accompanying statements of income. On June 16, 2000, pursuant
to a corporate and financial restructuring of the Company's Mexican subsidiaries
and a further Amendment to the Agreement, the income statement impact of the
U.S. dollar denominated foreign debt revaluation will be significantly reduced.
4. CONTINGENCIES:
On August 6, 1998, a lawsuit was commenced against the Company and its
subsidiary, Illinois & Midland Railroad, Inc. (IMRR), by Commonwealth Edison
Company (ComEd) in the Circuit Court of Cook County, Illinois. The suit alleges
that IMRR is in breach of certain provisions of a stock purchase agreement
entered into by a prior unrelated owner of the IMRR rail line. The provisions
allegedly pertain to limitations on rates received by IMRR and the unrelated
predecessor for freight hauled for ComEd's Powerton plant. The suit seeks
unspecified compensatory damages for alleged past rate overcharges. The Company
believes the suit is without merit and intends to vigorously defend against the
suit.
The parent company of ComEd has sold certain of ComEd's power facilities, one
of which is the Powerton plant served by IMRR under the provisions of a 1987
Service Assurance Agreement (the SAA), entered into by a prior unrelated owner
of the IMRR rail line. The SAA, which is not terminable except for failure to
perform, provides that IMRR has exclusive access to provide rail service to the
Powerton plant. On April 6, 1999, a lawsuit was commenced by the Company and its
subsidiary, IMRR, against ComEd in the Circuit Court of Sangamon County,
Illinois. The suit sought declaration of certain rights regarding the SAA
including declarations that the SAA is not terminable at will and that ComEd
must assign its contractual obligations under the SAA to the purchaser of the
Powerton plant. On June 10, 1999, the suit commenced by the Company and IMRR
against ComEd in Sangamon County was voluntarily
7
<PAGE>
withdrawn without prejudice in partial resolution of several procedural motions
pending in the Cook County action, and with the explicit recognition from ComEd
that the action may be re- filed in Cook County. Revenue for haulage to the
Powerton Plant accounted for 6.6% of the consolidated revenues of the Company
and its subsidiaries in 1999. Failure to satisfactorily resolve this litigation
could have a material adverse effect on the Company.
5. COMPREHENSIVE INCOME:
Comprehensive income is the total of net income and all other non-owner
changes in equity. The following table sets forth the Company's comprehensive
income for the three months and six months ended June 30, 2000 and 1999:
Statement of Comprehensive Income
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 2,278 $2,746 $ 6,690 $2,414
Other comprehensive income (loss)
- Foreign currency translation
adjustments (1,093) 337 (2,796) 744
------------------------------------------------------------------------------
Comprehensive income $ 1,185 $3,083 $ 3,894 $3,158
==============================================================================
</TABLE>
6. BUSINESS SEGMENT INFORMATION:
The Company operates in three business segments in two geographic areas: North
American Railroad Operations, which includes operating short line and regional
railroads, and buying, selling, leasing and managing railroad transportation
equipment within the United States, Canada and Mexico; Australian Railroad
Operations, which includes operating a regional railroad and providing hook and
pull (haulage) services to other railroads within Australia; and Industrial
Switching, which includes providing freight car switching and related services
to industrial companies with extensive railroad facilities within their
complexes in the United States.
Corporate overhead expenses, including acquisition expense, are primarily
reported in North American Railroad Operations.
The accounting policies of the reportable segments are the same as those of
the consolidated company. The Company evaluates the performance of its operating
segments based on operating income. Intersegment sales and transfers are not
significant. Summarized financial information for each business segment for the
three-month and six-month periods ended June 30, 2000 and 1999 is shown in the
following tables:
The remainder of this page is intentionally left blank.
8
<PAGE>
Business Segment
(amounts in thousands)
Three Months Ended June 30,
<TABLE>
<CAPTION>
North American Australian Industrial
Railroad Railroad Switching
2000 Operations Operations Operations Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 39,751 $10,055 $2,548 $ 52,354
Operating income 6,245 1,382 180 7,807
Other expense, net (3,815) (295) ( 77) (4,187)
Income before taxes 2,430 1,087 103 3,620
Identifiable assets 257,127 39,456 8,158 304,741
------------------------------------------------------------------------------------
<CAPTION>
North American Australian Industrial
Railroad Railroad Switching
1999 Operations Operations Operations Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 29,054 $10,559 $3,056 $ 42,669
Operating income 4,338 1,162 223 5,723
Other expense, net (1,073) (346) (130) (1,549)
Income before taxes 3,265 816 93 4,174
Identifiable assets 191,933 43,515 9,020 244,468
------------------------------------------------------------------------------------
Six Months Ended June 30,
<CAPTION>
North American Australian Industrial
Railroad Railroad Switching
2000 Operations Operations Operations Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 81,991 $20,685 $5,089 $107,765
Operating income 13,689 2,266 150 16,105
Other expense, net (4,647) (653) (210) (5,510)
Income (loss) before taxes 9,042 1,613 ( 60) 10,595
Identifiable assets 257,127 39,456 8,158 304,741
<CAPTION>
North American Australian Industrial
Railroad Railroad Switching
1999 Operations Operations Operations Total
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 48,993 $21,580 $6,268 $ 76,841
Operating income (loss) 4,753 3,084 ( 76) 7,761
Other expense, net (2,542) (756) (242) (3,540)
Income (loss) before taxes 2,211 2,328 (318) 4,221
Identifiable assets 191,933 43,515 9,020 244,468
------------------------------------------------------------------------------------
</TABLE>
7. RECENTLY ISSUED ACCOUNTING STANDARDS:
The Financial Accounting Standards Board recently issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and hedging activities. The new standard requires that an entity
recognize all
9
<PAGE>
derivatives as either assets or liabilities in the balance sheet and measure
those instruments at fair value with changes in fair value reported in income.
This statement will require the Company to provide separate disclosure of
derivative instruments either on the face of the balance sheet or within the
footnotes to the financial statements. Adoption of this statement is required no
later than the first quarter of 2001, which is when the Company expects to adopt
it. The Company is in the process of assessing the impact of this statement.
The remainder of this page is intentionally left blank.
10
<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 1999
Form 10-K.
General
The Company is a holding company whose subsidiaries own and/or operate short
line and regional freight railroads and provide related rail services in the
United States, Australia, Canada and Mexico. The Company, through its U.S.
industrial switching subsidiary, also provides freight car switching and related
services to United States industrial companies with extensive railroad
facilities within their complexes. The Company generates revenues primarily from
the movement of freight over track owned or operated by its railroads. The
Company also generates non-freight revenues primarily by providing freight car
switching and related rail services such as railcar leasing, railcar repair and
storage to industrial companies with extensive railroad facilities within their
complexes, to shippers along its lines, and to the Class I railroads that
connect with its North American lines.
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. Also, much of the
Company's growth to date has resulted from acquisitions. The Company completed
two acquisitions during the first four months of 1996, one in November 1996, and
another in November 1997. On April 15, 1999, the Company began consolidating the
results of Genesee Rail-One Inc. (as described below), and on September 1, 1999,
the Company began operations of its newly-formed subsidiary, Compania de
Ferrocarriles Chiapas-Mayab, S.A. de C.V. as described below. 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.
Compania de Ferrocarriles Chiapas-Mayab, S.A. de C.V.
In August 1999, the Company's wholly-owned subsidiary, Compania de
Ferrocarriles Chiapas-Mayab, S.A. de C.V. (FCCM), was awarded a 30-year
concession to operate certain railways owned by the state-owned Mexican rail
company Ferronales. FCCM also acquired equipment and other assets. The aggregate
purchase price, including acquisition costs, was approximately 297 million
pesos, or approximately $31.5 million at then-current exchange rates. The
purchase included $12.3 million of rolling stock, a $9.7 million advance payment
on track improvements to be completed
11
<PAGE>
on the state-owned track property by February, 2001, a $1.0 million escrow
payment which will be returned to the Company upon successful completion of the
track improvements, an expected future utilization by the Company of $2.2
million of value-added taxes paid on the transaction, and $1.0 million in
goodwill. The remaining purchase price ($5.3 million) was allocated to the
30-year operating license.
Genesee Rail-One Inc.
On April 15, 1999, the Company closed on an agreement to acquire Rail-One Inc.
(Rail-One) which has a 47.5% ownership interest in Genesee Rail-One Inc. (GRO),
thereby increasing the Company's ownership of GRO to 95%. GRO owns and operates
two short line railroads in Canada. Under the terms of the purchase agreement,
the Company converted outstanding notes receivable from Rail-One of $4.6 million
into capital, has begun paying approximately $844,000 in cash to the sellers of
Rail-One in installments over a four year period, and granted options to the
sellers of Rail-One to purchase up to 80,000 shares of the Company's Class A
Common Stock at an exercise price of $8.625 per share. Exercise of the options
is contingent on the Company's recovery of its capital investment in GRO
including debt assumed if the Company were to sell GRO, and upon certain GRO
income performance measures. As of June 30, 2000, these options are not
exercisable. Effective with this agreement, the operating results of GRO have
been consolidated within the financial statements of the Company. During the
second quarter of 2000, the Company purchased the remaining 5% minority interest
with an initial cash payment of $240,000 and subsequent annual cash installments
of $180,000 due in 2001 and 2002. Prior to April 15, 1999, the Company accounted
for its investment in GRO under the equity method.
The remainder of this page is intentionally left blank.
12
<PAGE>
Results of Operations
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
Consolidated Operating Revenues
Operating revenues were $52.4 million in the quarter ended June 30, 2000
compared to $42.7 million in the quarter ended June 30, 1999, a net increase of
$9.7 million or 22.7%. The net increase was attributable to a $10.7 million
increase in North American railroad revenues of which $8.2 million were revenues
from new railroad operations in Mexico and $2.5 million were from increased
revenues on existing North American operations, offset by a $504,000 decrease in
revenues from Australian railroad operations and a $508,000 decrease in
industrial switching revenues.
The following three sections provide information on railroad revenues in North
America and Australia, and industrial switching revenues in the United States.
North American Railroad Operating Revenues
North American railroad operating revenues were $39.8 million in the quarter
ended June 30, 2000 compared to $29.1 million in the quarter ended June 30,
1999, an increase of $10.7 million or 36.8%. The increase was attributable to a
$9.0 million increase in freight revenues and a $1.7 million increase in non-
freight revenues. The increase of $9.0 million in North American freight
revenues was due to $7.1 million in freight revenues attributable to new
railroad operations in Mexico and $1.9 million in freight revenues on existing
railroad operations. The increase on existing railroad operations includes a
full quarter of activity for GRO in 2000 compared to a two and one-half month
quarter in 1999.
The following table compares North American freight revenues, carloads and
average freight revenues per carload for the quarters ended June 30, 2000 and
1999:
The remainder of this page is intentionally left blank.
13
<PAGE>
North American Freight Revenues and Carloads Comparison by Commodity Group
Quarters Ended June 30, 2000 and 1999
(dollars in thousands, except average per carload)
<TABLE>
<CAPTION>
Average
Freight
Revenues
Per
Freight Revenues Carloads Carload
---------------- -------- -------
% of % of % of % of
Commodity Group 2000 Total 1999 Total 2000 Total 1999 Total 2000 1999
--------------- ---- ----- ---- ----- ---- ----- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal, Coke & Ores $ 6,144 19.3% $ 5,915 25.9% 26,512 29.1% 21,448 29.4% $ 232 $ 276
Pulp & Paper 4,999 15.7% 3,982 17.5% 12,939 14.2% 10,395 14.2% 386 383
Minerals & Stone 4,954 15.6% 1,267 5.6% 10,955 12.0% 5,836 8.0% 452 217
Petroleum Products 4,708 14.8% 1,995 8.7% 7,983 8.8% 4,501 6.2% 590 443
Metals 2,749 8.6% 2,343 10.3% 10,041 11.0% 8,578 11.7% 274 273
Chemicals &
Plastics 2,373 7.5% 2,243 9.8% 4,545 5.0% 4,508 6.2% 522 498
Lumber & Forest
Products 2,194 6.9% 2,231 9.8% 7,208 7.9% 7,119 9.7% 304 313
Farm & Food Products 1,641 5.2% 1,141 5.0% 4,491 4.9% 4,131 5.6% 365 276
Autos & Auto Parts 852 2.7% 650 2.9% 1,554 1.8% 1,279 1.8% 548 508
Other 1,201 3.7% 1,039 4.5% 4,776 5.3% 5,221 7.2% 251 199
------------------------------------------------------------------------------------
Total $31,815 100.0% $22,806 100.0% 91,004 100.0% 73,016 100.0% 350 312
===================================================================================================
</TABLE>
Pulp and Paper increased by $1.0 million or 25.5% of which $908,000 was on
existing railroad operations and $109,000 was attributable to new railroad
operations in Mexico. The increase on existing railroad operations consisted
primarily of increases in Canada, Oregon and New York-Pennsylvania railroad
operations resulting from a much stronger paper market in 2000 than in 1999.
Minerals and Stone increased by $3.7 million or 291.0% of which $3.3 million
was attributable to new railroad operations in Mexico and $345,000 was on
existing railroad operations.
Petroleum Products increased by $2.7 million or 136.0% of which $2.5 million
was attributable to new railroad operations in Mexico and $206,000 was on
existing railroad operations.
Freight revenues from all remaining commodities reflected a net increase of
$1.6 million or 10.2% of which $1.2 million was attributable to new railroad
operations in Mexico and $406,000 was on existing railroad operations.
Total North American carloads were 91,004 in the quarter ended June 30, 2000
compared to 73,016 in the quarter ended June 30, 1999, an increase of 17,988 or
24.6%. The increase of 17,988 consisted of 10,175 carloads attributable to new
railroad operations in Mexico and 7,813 carloads on existing railroad operations
of which 5,064 carloads were coal.
The overall average revenue per carload increased to $350 in the quarter ended
June 30, 2000, compared to $312 per carload in the quarter ended June 30, 1999,
an increase of 12.2% due primarily to higher per carload revenues attributable
to Mexico netted against a slight decrease on existing railroad operations. The
decrease on existing operations is primarily attributable to lower per carload
revenues from coal.
14
<PAGE>
North American non-freight railroad revenues were $7.9 million in the quarter
ended June 30, 2000 compared to $6.2 million in the quarter June 30, 1999, an
increase of $1.7 million or 27.0%. The increase is attributable to $1.1 million
of non-freight revenues from new railroad operations in Mexico and $590,000 in
non-freight revenues on existing railroad operations. The following table
compares North America non-freight revenues for the quarters ended June 30, 2000
and 1999:
North American Railroad
Non-Freight Operating Revenue Comparison
Quarters Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
$ % of $ % of
Non-Freight Non-Freight
Revenue Revenue
<S> <C> <C> <C> <C>
Railroad switching $2,733 34.5% $1,653 26.5%
Car hire and rental income 2,087 26.3% 2,233 35.7%
Car repair services 810 10.2% 582 9.3%
Other operating income 2,305 29.0% 1,780 28.5%
------ ----- ------ -----
Total non-freight revenues $7,935 100.0% $6,248 100.0%
====== ===== ====== =====
</TABLE>
Australian Operating Revenues
Australian operating revenues were $10.1 million in the quarter ended June 30,
2000, compared to $10.6 million in the quarter ended June 30, 1999, a decrease
of $504,000 or 4.8%. The decrease was attributable to a $393,000 decline in
freight revenues and a $111,000 decrease in non-freight revenues. The decrease
in Australian operating revenues is primarily due to the depreciation of the
Australian dollar against the U.S. dollar in the 2000 period compared to the
1999 period. The average currency exchange rate in the quarter ended June 30,
2000 was $0.590 compared to $0.654 in the quarter ended June 30, 1999, a
decrease of $0.064 or 9.8%. In Australian dollars, operating revenues increased
by approximately 5.6%.
The following table outlines Australian freight revenues for the quarters
ended June 30, 2000 and 1999:
The remainder of this page is intentionally left blank.
15
<PAGE>
Australian Freight Revenues and Carloads Comparison by Commodity Group
Quarters Ended June 30, 2000 and 1999
(dollars in thousands, except average per carload)
<TABLE>
<CAPTION>
Average
Freight
Revenues
Per
Freight Revenues Carloads Carload
---------------- -------- -------
Commodity Group % of % of % of % of
--------------- 2000 Total 1999 Total 2000 Total 1999 Total 2000 1999
---- ----- ---- ----- ---- ----- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hook and Pull
(Haulage) $4,540 50.4% $5,049 53.7% 13,956 21.9% 12,098 34.9% $ 325 $ 417
Grain 1,809 20.1% 2,830 30.1% 7,835 12.3% 10,852 31.3% 231 261
Iron Ores 1,001 11.1% - 0.0% 27,026 42.4% - 0.0% 37 -
Gypsum 790 8.8% 656 7.0% 11,365 17.8% 8,703 25.1% 70 75
Marble 480 5.3% 487 5.2% 2,142 3.4% 1,967 5.7% 224 248
Lime 355 3.9% 370 3.9% 969 1.5% 1,090 3.0% 366 339
Other 27 0.4% 3 0.1% 410 0.7% - 0.0% 66 -
------------------------------------------------------------------------------
Total $9,002 100.0% $9,395 100.0% 63,703 100.0% 34,710 100.0% 141 271
==============================================================================
</TABLE>
The net decrease of $393,000 in Australian freight revenues was primarily
attributable to decreases in the shipment of Grain of $1.0 million and Hook and
Pull of $509,000, offset by an increase of $1.0 million from the shipment of
Iron Ores for a new customer. Grain revenues for the 1999 quarter reflect the
strong harvest experienced during the 1998/99 season. Freight revenues from all
remaining commodities increased $136,000.
Australia carloads were 63,703 in the quarter ended June 30, 2000 compared to
34,710 in the quarter ended June 30, 1999, a net increase of 28,993 or 83.5%.
The net increase of 28,993 was primarily the result of 27,026 carloads from the
shipment of Iron Ores for a new customer. The net remaining increase of 1,967 is
comprised of a 2,662 carload increase in Gypsum, a 1,858 carload increase in
Hook and Pull and a net increase in all other non-grain commodities of 464
carloads offset by a decrease in grain carloads of 3,017.
The overall average revenue per carload decreased to $141 in the quarter ended
June 30, 2000, compared to $271 per carload in the quarter ended June 30, 1999,
a decrease of 47.8% due primarily to the increase in Iron Ore carloads at a
lower revenue per carload. Excluding Iron Ores, the average revenue per carload
in the quarter ended June 30, 2000 was $218, a decrease of 19.6% due primarily
to lower revenue per car for Hook and Pull and Grain.
Australian non-freight revenues were $1.1 million in the quarter ended June
30, 2000, compared to $1.2 million in the quarter ended June 30, 1999, a
decrease of $111,000 or 9.5 %. The following table compares Australian
non-freight revenues for the quarters ended June 30, 2000 and 1999:
The remainder of this page is intentionally left blank.
16
<PAGE>
Australian Railroad
Non-freight Operating Revenue Comparison
Quarters Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
$ % of $ % of
Non-freight Non-freight
Revenue Revenue
<S> <C> <C> <C> <C>
Car hire and rental income $ 576 54.7% $ 702 60.3%
Other operating income 477 45.3% 462 39.7%
------ ----- ------ -----
Total non-freight revenues $1,053 100.0% $1,164 100.0%
====== ===== ====== =====
</TABLE>
Industrial Switching Revenues
Revenues from U.S. industrial switching activities were $2.5 million in the
quarter ended June 30, 2000 compared to $3.1 million in the quarter ended June
30, 1999, a decrease of $508,000 or 16.6% due primarily to the Company's
decision to exit an unprofitable switching contract in May, 1999.
Consolidated Operating Expenses
Operating expenses for all operations combined were $44.5 million in the
quarter ended June 30, 2000, compared to $36.9 million in the quarter ended June
30, 1999, an increase of $7.6 million or 20.6%. Expenses attributable to North
American railroad operations were $33.5 million in the quarter ended June 30,
2000, compared to $24.7 million in the quarter ended June 30, 1999, an increase
of $8.8 million or 35.6% of which $6.8 million were expenses attributable to new
railroad operations in Mexico and $2.0 million were expenses attributable to
existing railroad operations. Expenses attributable to operations in Australia
were $8.7 million in the quarter ended June 30, 2000, compared to $9.4 million
in the quarter ended June 30, 1999, a decrease of $724,000 or 7.7%. Expenses
attributable to U.S. industrial switching were $2.4 million in the quarter ended
June 30, 2000, compared to $2.8 million in the quarter ended June 30, 1999, a
decrease of $466,000 or 16.4%.
The following three sections provide information on railroad expenses in North
America and Australia, and industrial switching expenses in the United States.
North America Railroad Operating Expenses
The following table sets forth a comparison of the Company's North American
railroad operating expenses in the quarters ended June 30, 2000 and 1999:
The remainder of this page is intentionally left blank.
17
<PAGE>
North American Railroad
Operating Expense Comparison
Quarters Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
-------- --------
% of % of
Operating Operating
$ Revenue $ Revenue
<S> <C> <C> <C> <C>
Labor and benefits $13,970 35.1% $ 9,351 32.2%
Equipment rents 4,726 11.9% 3,630 12.5%
Purchased services 2,924 7.4% 1,677 5.8%
Depreciation and amortization 2,711 6.8% 2,397 8.3%
Diesel fuel 2,839 7.1% 1,321 4.5%
Casualties and insurance 1,370 3.4% 1,197 4.1%
Materials 2,590 6.5% 1,766 6.1%
Other expenses 2,375 6.1% 3,376 11.6%
------- ---- ------- ----
Total operating expenses $33,505 84.3% $24,715 85.1%
======= ==== ======= ====
</TABLE>
Labor and benefits expense was $14.0 million in the quarter ended June 30,
2000 compared to $9.4 million in the quarter ended June 30, 1999, an increase of
$4.6 million or 49.4% of which $2.8 million was attributable to new railroad
operations in Mexico and $1.8 million was attributable to existing railroad
operations. The increase on existing railroad operations primarily relates to
increased freight operations and the addition of senior administrative and
safety personnel.
Equipment rents were $4.7 million in the quarter ended June 30, 2000 compared
to $3.6 million in the quarter ended June 30, 1999, an increase of $1.1 million
or 30.2% primarily attributable to increased car hire of approximately $205,000
and freight car, equipment and locomotive rental of approximately $850,000 on
existing railroad operations.
Purchased services were $2.9 million in the quarter ended June 30, 2000
compared to $1.7 million in the quarter ended June 30, 1999, an increase of $1.2
million or 74.4% of which $677,000 was attributable to new railroad operations
in Mexico and $570,000 was attributable to existing railroad operations.
Diesel fuel expense was $2.8 million in the quarter ended June 30, 2000
compared to $1.3 million in the quarter ended June 30, 1999, an increase of $1.5
million or 114.9% of which $720,000 was attributable to new railroad operations
in Mexico and $798,000 was attributable to an increase on existing railroad
operations. The increase on existing railroad operations is primarily the result
of significant fuel price increases experienced at all operating locations.
All other expenses combined were $9.0 million in the quarter ended June 30,
2000 compared to $8.7 million in the quarter ended June 30, 1999, a net increase
of $310,000 or 3.5% which consisted of $2.5 million attributable to new railroad
operations in Mexico and a decrease of $2.2 million attributable to existing
railroad operations. The decrease on existing railroad operations was primarily
due to reduced acquisition and other costs of $1.7 million, reduced casualties
and insurance of $326,000, and reduced depreciation of $158,000 due to asset
disposals.
18
<PAGE>
Australian Railroad Operating Expenses
Expenses attributable to operations in Australia were $8.7 million in the
quarter ended June 30, 2000, compared to $9.4 million in the quarter ended June
30, 1999, a decrease of $724,000 or 7.7%. The decrease in Australian operating
expense is primarily due to the depreciation of the Australian dollar against
the U.S. dollar in the 2000 period compared to the 1999 period. The average
currency exchange rate in the quarter ended June 30, 2000 was $0.590 compared to
$0.654 in the quarter ended June 30, 1999, a decrease of $0.064 or 9.8%. In
Australian dollars, operating expense increased by approximately 2.4%. The
following table sets forth a comparison of the Company's Australian railroad
operating expenses in the quarters ended June 30, 2000 and 1999:
Australian Railroad Operations
Operating Expense Comparison
Quarters Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
% of % of
Operating Operating
$ Revenue $ Revenue
<S> <C> <C> <C> <C>
Labor and benefits $1,369 13.6% $1,436 13.6%
Equipment rents 53 0.5% 69 0.7%
Purchased services 3,003 29.9% 2,969 28.1%
Depreciation and amortization 584 5.8% 534 5.1%
Diesel fuel 2,186 21.7% 1,980 18.8%
Casualties and insurance 214 2.1% 627 5.9%
Materials 371 3.7% 376 3.6%
Other expenses 893 9.0% 1,406 13.2%
------ ---- ------ ----
Total operating expenses $8,673 86.3% $9,397 89.0%
====== ==== ====== ====
</TABLE>
Diesel fuel was $2.2 million in the quarter ended June 30, 2000 compared to
$2.0 million in the quarter ended June 30, 1999, an increase of $206,000 or
10.4%, due primarily to fuel price increases.
Casualties and insurance was $214,000 in the quarter ended June 30, 2000
compared to $627,000 in the quarter ended June 30, 1999, a decrease of $413,000
or 65.9%, due primarily to a reduction of approximately $300,000 in derailment
expense and a reduction of approximately $100,000 in insurance premium expense.
All other expenses combined were $6.3 million in the quarter ended June 30,
2000 compared to $6.8 million in the quarter ended June 30, 1999, a decrease of
$517,000 or 7.6% due primarily to reductions of approximately $200,000 in
trackage rights, $100,000 in regulatory costs, $100,000 in fringe benefit
provisions and a net reduction of approximately $100,000 in all other expenses.
U.S. Industrial Switching Operating Expenses
The following table sets forth a comparison of the Company's U.S. industrial
switching operating expenses in the quarters ended June 30, 2000 and 1999:
19
<PAGE>
U.S. Industrial Switching
Operating Expense Comparison
Quarters Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
% of % of
Operating Operating
$ Revenue $ Revenue
<S> <C> <C> <C> <C>
Labor and benefits $1,511 59.3% $2,099 68.7%
Equipment rents 45 1.8% 47 1.5%
Purchased services 53 2.1% 111 3.6%
Depreciation and amortization 160 6.3% 221 7.2%
Diesel fuel 122 4.8% 101 3.3%
Casualties and insurance 128 5.0% 266 8.7%
Materials 147 5.8% 233 7.7%
Other expenses 202 7.8% (244) -8.0%
------ ---- ------ ----
Total operating expenses $2,368 92.9% $2,834 92.7%
====== ==== ====== ====
</TABLE>
Labor and benefits expense was $1.5 million in the quarter ended June 30, 2000
compared to $2.1 million in the quarter ended June 30, 1999, a decrease of
$588,000 or 28.0%, due primarily to the Company's decision to exit an
unprofitable switching contract in May, 1999.
All other expenses combined were $857,000 in the quarter ended June 30, 2000
compared to $735,000 in the quarter ended June 30, 1999, an increase of $122,000
or 16.6%. Although the quarter to quarter comparison reflects an increase of
$122,000, the 1999 quarter included a one-time credit of $305,000. Excluding the
credit in 1999, the quarter to quarter comparison would result in a decrease of
$183,000 due primarily to the Company's decision to exit an unprofitable
switching contract in May, 1999. The credit balance in 1999 reflected the
reclassification of $305,000 of administrative expense to railroad operations
expense.
Operating Ratios
The Company's combined operating ratio decreased to 85.1% in the quarter ended
June 30, 2000 from 86.6% in the quarter ended June 30, 1999. The operating ratio
for North American railroad operations decreased to 84.3% in the quarter ended
June 30, 2000 from 85.1% in the quarter ended June 30, 1999. The operating ratio
for Australian railroad operations decreased to 86.3% in the quarter ended June
30, 2000 from 89.0% in the quarter ended June 30, 1999. The operating ratio for
U.S. industrial switching operations increased slightly to 92.9% in the quarter
ended June 30, 2000 from 92.7% in the quarter ended June 30, 1999.
Valuation Adjustment of U.S. Dollar Denominated Foreign Debt
Amounts outstanding under the Company's credit facilities which were borrowed
by FCCM represent U.S. dollar denominated foreign debt of the Company's Mexican
subsidiary. As the Mexican peso moved against the U.S. dollar, the revaluation
of this outstanding debt to its Mexican peso equivalent resulted in non-cash
gains and losses which totaled a loss of $2.4 million in the quarter ended June
30, 2000. On June 16, 2000, pursuant to a corporate and financial restructuring
of the Company's Mexican subsidiaries and a further Amendment to the credit
facilities, the income
20
<PAGE>
statement impact of the U.S. dollar denominated foreign debt revaluation will be
significantly reduced.
Interest Expense and Income Taxes
Interest expense in the quarter ended June 30, 2000 was $2.5 million compared
to $1.9 million in the quarter ended June 30, 1999, an increase of $590,000 or
30.6% due primarily to financing of the FCCM acquisition. The Company's
effective income tax rate in the quarter ended June 30, 2000 was 37.1% which
compared to 34.2% in the quarter ended June 30, 1999. The increase is primarily
attributable to a change in the effective tax rate on Canadian operations.
Net Income and Earnings Per Share
The Company's net income in the quarter ended June 30, 2000 was $2.3 million
compared to net income of $2.7 million in the quarter ended June 30, 1999, a
decrease of $468,000. The decrease in net income is the net result of an
increase in net income from operations in Australia of $186,000 and an increase
in the net income of industrial switching operations of $73,000, offset by a
decrease in net income from North America railroad operations of $726,000 which
includes approximately $1.5 million of the after-tax effect of the non-cash loss
from the depreciation of the Mexican peso. Excluding the approximately $1.5
million after-tax effect of the non-cash loss, net income from North America
railroad operations increased by approximately $769,000 or 34.5%.
Basic and Diluted Earnings Per Share in the quarter ended June 30, 2000 were
$0.53 and $0.51, respectively, on weighted average shares of 4.3 million and 4.5
million, respectively, compared to earnings of $0.62 and $0.62, respectively, on
weighted average shares of 4.4 million in the quarter ended June 30, 1999.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Consolidated Operating Revenues
Operating revenues were $107.8 million in the six months ended June 30, 2000
compared to $76.8 million in the six months ended June 30, 1999, a net increase
of $31.0 million or 40.2%. The net increase was attributable to a $33.0 million
increase in North American railroad revenues of which $16.6 million were
revenues from new railroad operations in Mexico, $7.6 million were from
increased revenues on existing North American operations and $8.8 million was
from the acquisition of GRO, offset by a $895,000 decrease in revenues from
Australian railroad operations and a $1.2 million decrease in industrial
switching revenues. The $8.8 million from the acquisition of GRO represents
revenues for the first quarter of 2000 for which there are no comparable
revenues in 1999.
The following three sections provide information on railroad revenues in North
America and Australia, and industrial switching revenues in the United States.
North American Railroad Operating Revenues
North American railroad operating revenues were $82.0 million in the six
months ended June 30, 2000 compared to $49.0 million in the six months ended
June 30, 1999, an increase of $33.0 million or 67.4%. The increase was
attributable to a $27.6 million increase in freight revenues and a $5.4 million
increase in non- freight revenues. The increase of $27.6 million in North
American freight revenues was due to $14.4 million in freight revenues
attributable to new railroad operations in Mexico, an increase of $6.1 million
in freight revenues on existing railroad
21
<PAGE>
operations and $7.1 million from the acquisition of GRO. The $7.1 million from
the acquisition of GRO represents revenues for the first quarter of 2000 for
which there are no comparable revenues in 1999.
The following table compares North American freight revenues, carloads and
average freight revenues per carload for the six months ended June 30, 2000 and
1999:
North American Freight Revenues and Carloads Comparison by Commodity Group
Six months Ended June 30, 2000 and 1999
(dollars in thousands, except average per carload)
<TABLE>
<CAPTION>
Average
Freight
Revenues
Per
Freight Revenues Carloads Carload
---------------- -------- -------
Commodity Group % of % of % of % of
--------------- 2000 Total 1999 Total 2000 Total 1999 Total 2000 1999
---- ----- ---- ----- ---- ----- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal, Coke & Ores $13,383 20.5% $ 9,589 25.4% 59,102 30.9% 36,420 29.8% $ 226 $ 263
Pulp & Paper 9,864 15.1% 5,993 15.9% 25,704 13.4% 16,101 13.2% 384 372
Petroleum Products 9,726 14.9% 3,892 10.3% 16,338 8.5% 8,676 7.1% 595 449
Minerals & Stone 8,802 13.5% 1,761 4.7% 19,916 10.4% 7,558 6.2% 442 233
Metals 5,273 8.1% 3,389 9.0% 19,081 10.0% 12,837 10.5% 276 264
Farm & Food Products 5,108 7.8% 2,159 5.7% 14,419 7.5% 7,722 6.3% 354 280
Chemicals &
Plastics 4,634 7.1% 4,052 10.7% 8,957 4.7% 7,979 6.5% 517 508
Lumber & Forest
Products 4,398 6.7% 3,890 10.3% 14,324 7.5% 12,920 10.6% 307 301
Autos & Auto Parts 1,609 2.5% 1,250 3.3% 2,934 1.5% 2,461 2.0% 548 508
Other 2,525 3.8% 1,739 4.7% 10,462 5.6% 9,390 7.8% 241 185
---------------------------------------------------------------------------------------
Total $65,322 100.0% $37,714 100.0% 191,237 100.0% 122,064 100.0% 342 309
======================================================================================================
</TABLE>
Coal increased by $3.8 million or 39.6% of which $3.7 million was on existing
railroad operations and $63,000 was from the acquisition of GRO. The increase on
existing railroad operations was primarily attributable to a return to
normalized shipments at a key customer's facilities compared to reduced
shipments in the first six months of 1999 due to scheduled inventory reductions
and planned maintenance projects at the key customer's facilities.
Pulp and Paper increased by $3.9 million or 64.6% of which $204,000 was
attributable to new railroad operations in Mexico, $1.5 million was on existing
railroad operations and $2.2 million was from the acquisition of GRO. The
increase on existing railroad operations consisted primarily of increases in
Canada (in the second quarter), Oregon and New York-Pennsylvania resulting from
a much stronger paper market in 2000 than in 1999.
Petroleum Products increased by $5.8 million or 149.9% of which $5.4 million
was attributable to new railroad operations in Mexico, $358,000 was on existing
railroad operations and $63,000 was from the acquisition of GRO.
Minerals and Stone increased by $7.0 million or 399.8% of which $5.9 million
was attributable to new railroad operations in Mexico, $788,000 was on existing
railroad operations and $391,000 was from the acquisition of GRO.
22
<PAGE>
Metals increased by $1.9 million or 55.6% of which $99,000 was attributable to
new railroad operations in Mexico, $561,000 was on existing railroad operations
and $1.2 million was from the acquisition of GRO.
Farm and Food Products increased by $2.9 million or 136.6% of which $1.5
million was attributable to new railroad operations in Mexico and $1.5 million
was from the acquisition of GRO, which was offset by $42,000 decrease on
existing railroad operations.
Freight revenues from all remaining commodities reflected a net increase of
$2.2 million or 20.4% of which $1.4 million was attributable to new railroad
operations in Mexico and $1.6 million was from the acquisition of GRO, offset by
a $755,000 decrease on existing railroad operations.
Total North American carloads were 191,237 in the six months ended June 30,
2000 compared to 122,064 in the six months ended June 30, 1999, an increase of
69,173 or 56.7%. The increase of 69,173 consisted of an increase of 20,980
carloads attributable to new railroad operations in Mexico, 26,871 carloads were
on existing railroad operations of which 22,679 carloads were coal, and 21,322
carloads were attributable to the acquisition of GRO.
The overall average revenue per carload increased to $342 in the six months
ended June 30, 2000, compared to $309 per carload in the six months ended June
30, 1999, an increase of 10.7% due primarily to higher per carload revenues
attributable to Canada and Mexico netted against a slight decrease on existing
railroad operations.
North American non-freight railroad revenues were $16.7 million in the six
months ended June 30, 2000 compared to $11.3 million in the six months June 30,
1999, an increase of $5.4 million or 47.8%. The increase is the result of $2.2
million of non-freight revenues attributable to new railroad operations in
Mexico, an increase of $1.5 million in non-freight revenues on existing railroad
operations and $1.7 million of non-freight revenues attributable to the
acquisition of GRO. The $1.7 million from the acquisition of GRO represents
non-freight revenues for the first quarter of 2000 for which there are no
comparable revenues in 1999. The following table compares North America non-
freight revenues for the six months ended June 30, 2000 and 1999:
North American Railroad
Non-Freight Operating Revenue Comparison
Six months Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
$ % of $ % of
Non-Freight Non-Freight
Revenue Revenue
<S> <C> <C> <C> <C>
Railroad switching $ 5,550 33.3% $ 3,410 30.2%
Car hire and rental income 4,040 24.2% 3,742 33.2%
Car repair services 1,672 10.0% 1,051 9.3%
Other operating income 5,406 32.5% 3,076 27.3%
------- ----- ------- -----
Total non-freight revenues $16,668 100.0% $11,279 100.0%
======= ===== ======= =====
</TABLE>
23
<PAGE>
Australian Operating Revenues
Australian operating revenues were $20.7 million in the six months ended June
30, 2000, compared to $21.6 million in the six months ended June 30, 1999, a
decrease of $895,000 or 4.1%. The decrease was attributable to a $695,000
decline in freight revenues and a $200,000 decrease in non-freight revenues. The
decrease in Australian operating revenues is primarily due to the depreciation
of the Australian dollar against the U.S. dollar in the 2000 period compared to
the 1999 period. The average currency exchange rate in the six months ended June
30, 2000 was $0.610 compared to $0.643 in the six months ended June 30, 1999, a
decrease of $0.033 or 5.2%. In Australian dollars, operating revenues increased
by approximately 1.1%.
The following table outlines Australian freight revenues for the six months
ended June 30, 2000 and 1999:
Australian Freight Revenues and Carloads Comparison by Commodity Group
Six months Ended June 30, 2000 and 1999
(dollars in thousands, except average per carload)
<TABLE>
Average
Freight
Revenues
Per
Freight Revenues Carloads Carload
---------------- -------- -------
Commodity Group % of % of % of % of
--------------- 2000 Total 1999 Total 2000 Total 1999 Total 2000 1999
---- ----- ---- ----- ---- ----- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Hook and Pull
(Haulage) $ 8,848 47.5% $ 9,256 47.9% 27,463 21.7% 27,011 34.0% $ 322 $ 343
Grain 4,469 24.0% 6,504 33.7% 18,305 14.4% 24,758 31.1% 244 263
Iron Ores 2,033 10.9% - 0.0% 52,753 41.6% - 0.0% 39 -
Gypsum 1,481 8.0% 1,309 6.8% 21,076 16.6% 17,649 22.2% 70 74
Marble 961 5.2% 959 5.0% 4,160 3.3% 3,937 4.9% 231 244
Lime 786 4.2% 623 3.2% 2,149 1.7% 1,868 2.3% 366 334
Coal - 0.0% 664 3.4% - 0.0% 4,317 5.4% - 154
Other 49 0.2% 7 0.0% 776 0.7% 12 0.1% 63 583
---------------------------------------------------------------------------------
Total $18,627 100.0% $19,322 100.0% 126,682 100.0% 79,552 100.0% 147 243
=================================================================================
</TABLE>
The net decrease of $695,000 in Australian freight revenues was primarily
attributable to decreases in the shipment of Grain of $2.0 million, Coal of
$664,000, and Hook and Pull of $408,000, offset by an increase of $2.0 million
from the shipment of Iron Ores for a new customer and an increase from all
remaining commodities of $379,000. Grain revenues for the six months of 1999
reflect the strong harvest experienced during the 1998/99 season. There were no
freight revenues from coal in the six months ended June 30, 2000, due to the
non-renewal of a coal contract.
Australia carloads were 126,682 in the six months ended June 30, 2000 compared
to 79,552 in the six months ended June 30, 1999, a net increase of 47,130 or
59.2%. The net increase of 47,130 was primarily the result of 52,753 carloads
from the shipment of Iron Ores for a new customer and an increase in carloads
from Gypsum of 3,427, offset by decreases in carloads from Grain and Coal of
6,453 and 4,317,
24
<PAGE>
respectively. The net remaining increase from all other commodities was 1,720
carloads.
The overall average revenue per carload decreased to $147 in the six months
ended June 30, 2000, compared to $243 per carload in the six months ended June
30, 1999, a decrease of 39.5% due primarily to the increase in Iron Ores
carloads at a lower revenue per carload. Excluding Iron Ores, the average
revenue per carload in the six months ended June 30, 2000 was $224, a decrease
of 7.8% due primarily to lower revenue per carload for Hook and Pull and Grain.
Australian non-freight revenues were $2.1 million in the six months ended June
30, 2000, compared to $2.3 million in the six months ended June 30, 1999, a
decrease of $200,000 or 8.9%. The following table compares Australian non-
freight revenues for the six months ended June 30, 2000 and 1999:
Australian Railroad
Non-freight Operating Revenue Comparison
Six months Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
$ % of $ % of
Non-freight Non-freight
Revenue Revenue
<S> <C> <C> <C> <C>
Car hire and rental income $1,234 60.0% $1,416 62.7%
Other operating income 824 40.0% 842 37.3%
------ ----- ------ -----
Total non-freight revenues $2,058 100.0% $2,258 100.0%
====== ===== ====== =====
</TABLE>
Industrial Switching Revenues
Revenues from U.S. industrial switching activities were $5.1 million in the
six months ended June 30, 2000 compared to $6.3 million in the six months ended
June 30, 1999, a decrease of $1.2 million or 18.8% due primarily to the
Company's decision to exit an unprofitable switching contract in May, 1999.
Consolidated Operating Expenses
Operating expenses for all operations combined were $91.7 million in the six
months ended June 30, 2000, compared to $69.1 million in the six months ended
June 30, 1999, a net increase of $22.6 million or 32.7%. Expenses attributable
to North American railroad operations were $68.3 million in the six months ended
June 30, 2000, compared to $44.2 million in the six months ended June 30, 1999,
an increase of $24.1 million or 54.4% of which $13.1 million were expenses
attributable to new railroad operations in Mexico, $3.4 million were expenses
attributable to existing railroad operations and $7.6 million were expenses
attributable to the acquisition of GRO. Expenses attributable to operations in
Australia were $18.4 million in the six months ended June 30, 2000, compared to
$18.5 million in the six months ended June 30, 1999, a decrease of $77,000.
Expenses attributable to U.S. industrial switching were $4.9 million in the six
months ended June 30, 2000, compared to $6.3 million in the six months ended
June 30, 1999, a decrease of $1.4 million or 22.1%. The $7.6 million of expenses
attributable to the acquisition of GRO represents the first quarter of 2000 for
which there are no comparable expenses in 1999.
25
<PAGE>
The following three sections provide information on railroad expenses in North
America and Australia, and industrial switching expenses in the United States.
North American Railroad Operating Expenses
The following table sets forth a comparison of the Company's North American
railroad operating expenses in the six months ended June 30, 2000 and 1999:
North American Railroad
Operating Expense Comparison
Six months Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
% of % of
Operating Operating
$ Revenue $ Revenue
<S> <C> <C> <C> <C>
Labor and benefits $27,923 34.1% $17,141 35.0%
Equipment rents 9,874 12.0% 6,361 13.0%
Purchased services 5,667 6.9% 2,702 5.5%
Depreciation and amortization 5,133 6.3% 4,390 9.0%
Diesel fuel 6,226 7.6% 2,050 4.2%
Casualties and insurance 3,158 3.9% 1,785 3.6%
Materials 5,496 6.7% 3,081 6.3%
Other expenses 4,825 5.8% 6,731 13.7%
------- ---- ------- ----
Total operating expenses $68,302 83.3% $44,241 90.3%
======= ==== ======= ====
</TABLE>
Labor and benefits expense was $27.9 million in the six months ended June 30,
2000 compared to $17.1 million in the six months ended June 30, 1999, an
increase of $10.8 million or 62.9% of which $5.5 million was attributable to new
railroad operations in Mexico, $3.3 million was attributable to existing
railroad operations and $2.0 million was attributable to the acquisition of GRO.
The increase on existing railroad operations relates to increased freight
operations and the addition of senior administrative and safety personnel.
Equipment rents were $9.9 million in the six months ended June 30, 2000
compared to $6.4 million in the six months ended June 30, 1999, an increase of
$3.5 million or 55.2% of which $249,000 was attributable to new railroad
operations in Mexico, $1.5 million was attributable to existing railroad
operations and $1.7 million was attributable to the acquisition of GRO.
Purchased services were $5.7 million in the six months ended June 30, 2000
compared to $2.7 million in the six months ended June 30, 1999, an increase of
$3.0 million or 109.7% of which $1.3 million was attributable to new railroad
operations in Mexico and $707,000 was attributable to an increase on existing
railroad operations and $987,000 was attributable to the acquisition of GRO.
Diesel fuel expense was $6.2 million in the six months ended June 30, 2000
compared to $2.1 million in the six months ended June 30, 1999, an increase of
$4.1 million or 203.7% of which $1.5 million was attributable to new railroad
operations in Mexico, $1.6 million was attributable to an increase on existing
railroad operations and $1.1 million was attributable to the acquisition of GRO.
The
26
<PAGE>
increase on existing railroad operations is primarily the result of
significant fuel price increases experienced at all operating locations.
All other expenses combined were $18.6 million in the six months ended June
30, 2000 compared to $16.0 million in the six months ended June 30, 1999, a net
increase of $2.6 million or 16.4% of which $4.5 million was attributable to new
railroad operations in Mexico and $1.7 million was attributable to the
acquisition of GRO, offset by a $3.6 million decrease on existing railroad
operations primarily due to reduced acquisition costs in the 2000 period.
Australian Railroad Operating Expenses
Expenses attributable to operations in Australia were $18.4 million in the six
months ended June 30, 2000, compared to $18.5 million in the six months ended
June 30, 1999, a decrease of $77,000. The decrease in Australian operating
expense is primarily due to the depreciation of the Australian dollar against
the U.S. dollar in the 2000 period compared to the 1999 period. The average
currency exchange rate in the six months ended June 30, 2000 was $0.610 compared
to $0.643 in the six ended June 30, 1999, a decrease of $0.033 or 5.2%. In
Australian dollars, operating expense increased by approximately 5.1%. The
following table sets forth a comparison of the Company's Australian railroad
operating expenses in the six months ended June 30, 2000 and 1999:
Australian Railroad Operations
Operating Expense Comparison
Six months Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
% of % of
Operating Operating
$ Revenue $ Revenue
<S> <C> <C> <C> <C>
Labor and benefits $ 2,819 13.6% $ 2,809 13.0%
Equipment rents 100 0.5% 97 0.4%
Purchased services 6,425 31.1% 5,924 27.5%
Depreciation and amortization 1,189 5.7% 1,029 4.8%
Diesel fuel 4,370 21.1% 3,959 18.3%
Casualties and insurance 805 3.9% 1,249 5.8%
Materials 688 3.3% 859 4.0%
Other expenses 2,023 9.8% 2,570 11.9%
------- ---- ------- ----
Total operating expenses $18,419 89.0% $18,496 85.7%
======= ==== ======= ====
</TABLE>
Purchased services were $6.4 million in the six months ended June 30, 2000
compared to $5.9 million in the six months ended June 30, 1999, an increase of
$501,000 or 8.5%, due primarily to contract maintenance costs associated with
new Iron Ore movements.
Diesel fuel was $4.4 million in the six months ended June 30, 2000 compared to
$4.0 million in the six months ended June 30, 1999, an increase of $411,000 or
10.4%, due primarily to fuel price increases.
All other expenses combined were $7.6 million in the six months ended June 30,
2000 compared to $8.6 million in the six months ended June 30, 1999, a decrease
of
27
<PAGE>
$989,000 or 11.5% due primarily to decreases in casualties and insurance of
$444,000 and other expenses of $545,000.
U.S. Industrial Switching Operating Expenses
The following table sets forth a comparison of the Company's U.S. industrial
switching operating expenses in the six months ended June 30, 2000 and 1999:
U.S. Industrial Switching
Operating Expense Comparison
Six months Ended June 30, 2000 and 1999
(dollars in thousands)
<TABLE>
<CAPTION>
2000 1999
---- ----
% of % of
Operating Operating
$ Revenue $ Revenue
<S> <C> <C> <C> <C>
Labor and benefits $3,053 60.0% $4,443 70.9%
Equipment rents 91 1.8% 93 1.5%
Purchased services 148 2.9% 218 3.5%
Depreciation and amortization 320 6.3% 428 6.8%
Diesel fuel 282 5.5% 220 3.5%
Casualties and insurance 253 5.0% 659 10.5%
Materials 325 6.4% 434 6.9%
Other expenses 467 9.2% (151) -2.4%
------ ---- ------ -----
Total operating expenses $4,939 97.1% $6,344 101.2%
====== ==== ====== =====
</TABLE>
Labor and benefits expense was $3.1 million in the six months ended June 30,
2000 compared to $4.4 million in the six months ended June 30, 1999, a decrease
of $1.3 million or 31.3%, due primarily to the Company's decision to exit an
unprofitable switching contract.
All other expenses combined were $1.9 million in the six months ended June 30,
2000 compared to $1.9 million in the six months ended June 30, 1999.
Operating Ratios
The Company's combined operating ratio decreased to 85.1% in the six months
ended June 30, 2000 from 89.9% in the six months ended June 30, 1999. The
operating ratio for North American railroad operations decreased to 83.3% in the
six months ended June 30, 2000 from 90.3% in the six months ended June 30, 1999.
The operating ratio for Australian railroad operations increased to 89.0% in the
six months ended June 30, 2000 from 85.7% in the six months ended June 30, 1999.
The operating ratio for U.S. industrial switching operations decreased to 97.1%
in the six months ended June 30, 2000 from 101.2% in the six months ended June
30, 1999.
Valuation Adjustment of U.S. Dollar Denominated Foreign Debt
Amounts outstanding under the Company's credit facilities which were borrowed
by FCCM represent U.S. dollar denominated foreign debt of the Company's Mexican
subsidiary. As the Mexican peso moved against the U.S. dollar, the revaluation
of this outstanding debt to its Mexican peso equivalent resulted in non-cash
gains and losses which totaled a loss of $1.5 million in the six months ended
June 30, 2000.
28
<PAGE>
On June 16, 2000, pursuant to a corporate and financial restructuring of the
Company's Mexican subsidiaries and a further Amendment to the credit facilities,
the income statement impact of the U.S. dollar denominated foreign debt
revaluation will be significantly reduced.
Interest Expense and Income Taxes
Interest expense in the six months ended June 30, 2000 was $5.3 million
compared to $3.3 million in the six months ended June 30, 1999, an increase of
$2.0 million or 58.6% due primarily to financing of the GRO and FCCM
acquisitions. The Company's effective income tax rate in the six months ended
June 30, 2000 was 36.9% which compared to 42.8% in the six months ended June 30,
1999. The decrease is primarily attributable to a statutory reduction in the
Australian income tax rate and lower effective tax rates in the United States
and Mexico.
Net Income and Earnings Per Share
The Company's net income in the six months ended June 30, 2000 was $6.7
million compared to net income of $2.4 million in the six months ended June 30,
1999, an increase of $4.3 million. The increase in net income is the net result
of an increase in net income from North America railroad operations of $4.5
million and a decrease in the net loss from industrial switching operations of
$249,000, offset by a decrease in net income from operations in Australia of
$445,000. The net income from North America railroad operations of $4.5 million
includes approximately $985,000 of the after-tax effect of the non-cash loss
from the depreciation of the Mexican peso. Excluding the approximately $985,000
after- tax effect of the non-cash loss, net income from North America railroad
operations increased by approximately $5.5 million.
Basic and Diluted Earnings Per Share in the six months ended June 30, 2000
were $1.55 and $1.50, respectively, on weighted average shares of 4.3 million
and 4.5 million, respectively, compared to earnings of $0.52 and $0.51,
respectively, on weighted average shares of 4.7 million in the six months ended
June 30, 1999. The change in weighted average shares outstanding primarily
reflects the impact of a 1.0 million share buy-back program which ended in May,
1999.
Liquidity and Capital Resources
During the six months ended June 30, 2000, the Company generated cash from
operations of $10.8 million, invested $16.6 million in capital assets (including
$5.8 million in state grant funds received for track rehabilitation and
construction), had a net increase in debt of $1.7 million, and received $157,000
in proceeds from the disposition of property.
During the six months ended June 30, 1999, the Company generated cash from
operations of $10.2 million, invested $6.9 million in capital assets (including
$221,000 in state grant funds received for track rehabilitation and
construction), received cash of $57,000 in the purchase of Rail-One Inc. less
cash paid for common stock, had a net increase in debt of $239,000 and received
$183,000 in proceeds from the disposition of property.
Stock Repurchase - On August 12, 1998, the Company's board of directors
authorized the Company to repurchase up to one million shares of the Company's
Class A common stock under SEC Rule 10b-18. In May, 1999, the Company completed
its purchase of the one million shares authorized by the board of directors at a
total cost of $11.0 million.
29
<PAGE>
Credit Facilities - On August 17, 1999, the Company amended and restated its
credit facilities agreement (the Agreement) to provide for an increase in
borrowings from $65.0 million to $150.0 million. The Agreement provides for
$88.0 million in revolving credit facilities, including $15.0 million in
Australian dollar equivalents to be allocated to the Australian subsidiaries,
and $62.0 million in term loan facilities. The term loan facilities include a
U.S. Term Loan facility in the amount of $10.0 million, a Canadian Term Loan
facility in the Canadian Dollar Equivalent of $22.0 million, and a Mexican Term
Loan facility of $30.0 million. The Agreement has a maturity date of August 17,
2004, provides for interest at various rates, plus the applicable margins, as
defined in the Agreement and is secured by substantially all the assets of the
Company and its subsidiaries. The Agreement requires the maintenance of certain
commitment fees, prepayments from the issuance of new equity or debt and annual
sale of assets, and covenant ratios or amounts, including, but not limited to,
funded debt to EBITDA, minimum EBITDA for a period, cash flow coverage, and Net
Worth, all as defined in the Agreement.
Amounts outstanding under the Agreement which were borrowed by FCCM represent
U.S. dollar denominated foreign debt of the Company's Mexican subsidiary. As the
Mexican peso moved against the U.S. dollar, the revaluation of this outstanding
debt to its Mexican peso equivalent resulted in non-cash gains and losses as
reflected in the accompanying statements of income. On June 16, 2000, pursuant
to a corporate and financial restructuring of the Company's Mexican subsidiaries
and a further Amendment to the Agreement, the income statement impact of the
U.S. dollar denominated foreign debt revaluation will be significantly reduced.
The Company has budgeted approximately $38.7 million in capital expenditures
in 2000, primarily for track rehabilitation, of which $7.7 million is expected
to be used in Australia. Of the $38.7 million in capital expenditures, $12.8
million is expected to be funded by rehabilitation grants from state and federal
agencies to several of the Company's railroads. Approximately $16.6 million of
the budgeted capital expenditures of $38.7 million were completed as of June 30,
2000.
At June 30, 2000, the Company had long-term debt (including current portion)
totaling $109.0 million, which comprised 56.0% of its total capitalization. This
compares to long-term debt, including current portion, of $108.4 million at
December 31, 1999, comprising 57.0% of total capitalization.
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
30
<PAGE>
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.
The Company is exposed to the impact of interest rate changes. The Company's
exposure to changes in interest rates applies to its borrowings under its credit
facilities which have variable interest rates depending on the country in which
the funds are drawn, plus the applicable margin, which varies from 1.75% to 2.5%
depending upon the country in which the funds are drawn and the Company's funded
debt to EBITDA ratio, as defined in the credit facilities agreement. The Company
is also exposed to the impact of foreign currency exchange rate risk at its
foreign subsidiaries. The Company does not believe that its market risks have
substantially increased since year end.
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
On May 23, 2000, the Stockholders of the Company approved the following
proposals at the Annual Meeting:
Proposal 1: To elect three directors to serve for a three-year term expiring in
2003:
Authority
For Withheld
--- --------
James M. Fuller 11,739,677 58,217
John M. Randolph 11,722,477 75,417
M. Douglas Young, P.C. 11,739,777 58,117
The other directors, whose terms of office continued after the meeting, are
Mortimer B. Fuller, III, Louis S. Fuller, Robert M. Melzer and Philip J. Ringo.
Proposal 2: To approve and ratify an amendment to the Genesee & Wyoming Inc.
1996 Stock Option Plan which increases the total number of shares available for
option grants thereunder from 850,000 to 1,050,000:
For 10,467,167
Against 575,426
Abstain 64,196
Broker Non-Votes 691,105
Proposal 3: To approve and ratify an amendment to the Genesee & Wyoming Inc.
1996 Stock Option Plan which sets a 200,000-share limit on option grants to any
employee in any year:
For 11,453,547
Against 279,051
Abstain 65,296
31
<PAGE>
Proposal 4. Proposal to approve and ratify the selection of Arthur Andersen LLP
as the Company's independent auditors for the year ending December 31, 2000.
For 11,762,943
Against 13,210
Abstain 21,741
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.
The remainder of this page is intentionally left blank.
32
<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
(f) First Amendment to Promissory Note dated as of March 19, 1999
between Buffalo & Pittsburgh Railroad, Inc. and CSX
Transportation, Inc. (Exhibit 4.1)4
(g) Third Amended and Restated Revolving Credit and Term Loan
Agreement dated as of August 17, 1999 among the Registrant,
certain subsidiaries, BankBoston, N.A. and the banks named
therein (Exhibit 4.1)5
(10) Material Contracts
*(10.1) Amendment No. 4 to Genesee & Wyoming Inc. 1996 Stock Option Plan
*(10.2) Amendment No. 5 to Genesee & Wyoming Inc. 1996 Stock Option Plan
*(10.3) Amendment No. 2 to Genesee & Wyoming Inc. Stock Option Plan for Outside
Directors
*(11.1) Statement re computation of per share earnings
(15) Letter re unaudited interim financial information
33
<PAGE>
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
Not applicable.
(24) Power of attorney
Not applicable.
*(27) Financial Data Schedule
(99) Additional Exhibits
Not applicable.
____________________________
*Exhibit filed with this Report.
1Exhibit 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.
2Exhibit 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.
3Exhibit 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.
4Exhibit previously filed as part of, and incorporated herein by
reference to, the Registrant's Report on Form 10-K for the fiscal year ended
December 31, 1998. The exhibit number contained in parenthesis refers to the
exhibit number in such Report.
5Exhibit previously filed as part of, and incorporated herein by
reference to, the Registrant's Report on Form 10-Q for the quarter ended
September 30, 1999. The exhibit number contained in parenthesis refers to the
exhibit number in such Report.
34
<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: August 11, 2000 By: /s/ Mortimer B. Fuller, III
---------------------------
Name: Mortimer B. Fuller, III
Title: Chairman of the Board and CEO
Date: August 11, 2000 By: /s/ Alan R. Harris
---------------------------
Name: Alan R. Harris
Title: Senior Vice President and
Chief Accounting Officer
The remainder of this page is intentionally left blank.
35
