<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
-------------
Commission File No. 0-20618
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RAILAMERICA, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 65-0328006
------------------------------- ----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
301 Yamato Road, Suite 1190, Boca Raton, Florida 33431
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(407) 994-6015
- --------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or 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. Yes XX No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Common Stock, par value $.001 - 4,862,910 shares as of August 12, 1996
<PAGE> 2
RAILAMERICA, INC. AND SUBSIDIARIES
INDEX TO FORM 10-QSB
QUARTER ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets - 1
June 30, 1996 and December 31, 1995
Consolidated Statements of Income -
For the six and three months ended
June 30, 1996 and 1995 2
Consolidated Statements of Cash Flows -
For the six months ended June 30, 1996 and 1995 3
Notes to Consolidated Financial
Statements 4
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II OTHER INFORMATION
Item 6 Submission of Matters to a Vote of Security Holders 20
Item 7 Exhibits and Reports on Form 8-K 20
Signatures
</TABLE>
<PAGE> 3
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 1,371,333 $ 3,488,866
Restricted cash 175,000 175,000
Accounts receivable 3,655,459 2,194,828
Inventories 3,265,278 3,360,838
Other current assets 529,859 415,870
Deferred income taxes 329,000 329,000
------------ ------------
Total current assets 9,325,929 9,964,402
Property, plant and equipment, net 28,823,854 25,547,541
Other, net 1,997,728 1,519,827
Excess of cost over net assets of companies acquired, net 2,954,484 3,032,192
------------ ------------
Total assets $ 43,101,995 $ 40,063,962
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1,222,456 $ 969,929
Current maturities of subordinated debt 212,392 1,879,057
Accounts payable 2,330,992 2,093,740
Income taxes payable 160,788 560,788
Accrued expenses 1,245,000 1,420,227
------------ ------------
Total current liabilities 5,171,628 6,923,741
------------ ------------
Long-term debt, less current maturities 21,268,909 17,181,288
------------ ------------
Subordinated debt, less current maturities 3,584,078 3,690,274
------------ ------------
Deferred income taxes 3,411,780 3,120,000
------------ ------------
Commitments and contingent liabilities - -
Stockholders' equity:
Common stock, $.001 par value, 30,000,000 shares authorized;
4,862,910 issued and 4,652,910 outstanding at June 30, 1996 and
4,848,991 issued and 4,658,991 outstanding at December 31, 1995 4,863 4,849
Additional paid-in capital 7,647,853 7,599,313
Retained earnings 2,978,011 2,439,895
Cumulative translation adjustment 71,629 70,355
Less treasury stock (210,000 and190,000 shares at cost, respectively) (1,036,756) (965,753)
------------ ------------
Total stockholders' equity 9,665,600 9,148,659
------------ ------------
$ 43,101,995 $ 40,063,962
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
1
<PAGE> 4
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the six and three months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------ -----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Transportation revenue - railroads and distribution $ 2,095,948 $ 1,332,564 $ 4,762,528 $ 2,937,926
Transportation revenue - motor carrier 1,912,661 1,449,055 3,631,452 2,170,268
Manufacturing revenue 4,688,006 5,096,175 8,141,220 9,416,724
Other 744,892 115,312 841,876 133,466
------------ ------------ ------------ ------------
9,441,507 7,993,106 17,377,076 14,658,384
------------ ------------ ------------ ------------
Operating expenses:
Transportation expenses - railroads and distribution 1,257,491 908,192 2,552,909 1,776,283
Transportation expenses - motor carrier 1,837,023 1,294,162 3,504,162 1,932,197
Cost of goods sold - manufacturing 3,714,818 3,990,546 6,421,661 7,222,540
Selling, general and administrative 1,575,224 1,305,002 3,030,786 2,337,027
------------ ------------ ------------ ------------
8,384,556 7,497,902 15,509,518 13,268,047
------------ ------------ ------------ ------------
Operating income 1,056,951 495,204 1,867,558 1,390,337
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (520,249) (331,009) (973,989) (647,034)
Other, net (19,392) 291,100 (40,058) 397,543
------------ ------------ ------------ ------------
(539,641) (39,909) (1,014,047) (249,491)
------------ ------------ ------------ ------------
Income before income taxes 517,310 455,295 853,511 1,140,846
Provision for income taxes 191,000 158,000 315,394 413,000
------------ ------------ ------------ ------------
Net income $ 326,310 $ 297,295 $ 538,117 $ 727,846
============ ============ ============ ============
=============================================================================================================================
Net earnings attributable to common shares and
dilutive common share equivalents (for primary) $ 383,452 $ 351,734 $ 652,400 $ 891,947
============ ============ ============ ============
Earnings per common share and dilutive common
share equivalents:
Primary $ 0.07 $ 0.06 $ 0.12 $ 0.14
============ ============ ============ ============
Fully Diluted $ 0.07 $ 0.05 $ 0.11 $ 0.14
============ ============ ============ ============
Weighted average common shares and common
share equivalents outstanding:
Primary 5,665,998 6,233,270 5,664,208 6,223,767
============ ============ ============ ============
Fully Diluted 6,475,399 6,677,715 6,473,609 6,668,211
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 5
RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 538,117 $ 727,846
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 1,030,200 778,842
Gain on sale of properties (605,545) (73,445)
Employee stock grants 48,554 15,821
Deferred income taxes 291,780 359,000
Changes in operating assets and liabilities:
Accounts receivable (1,460,631) (489,978)
Inventories 95,560 (741,889)
Other current assets (101,258) (257,865)
Note receivable - 15,121
Accounts payable 237,252 483,899
Income taxes payable (400,000) -
Accrued liabilities (175,227) (26,982)
Deposits and other (64,429) (120,252)
----------- -------------
Net cash (used in) provided by operating activities (565,627) 670,118
----------- -------------
Cash flows from investing activities:
Purchase of property, plant and equipment (3,267,213) (867,019)
Proceeds from sale of properties 937,702 75,000
Acquisition of Steel City - (993,423)
Deferred acquisition costs and other (295,511) (111,860)
----------- -------------
Net cash used in investing activities (2,625,022) (1,897,302)
----------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 6,793,680 14,428,738
Principal payments on debt (5,643,574) (12,186,839)
Sale of common stock - 2,392,551
Purchase of treasury stock (71,003) (965,390)
Decrease in restricted cash - 157,500
Deferred loan costs (5,987) (217,060)
----------- -------------
Net cash provided by financing activities 1,073,116 3,609,500
----------- -------------
Net (decrease) increase in cash (2,117,533) 2,382,316
Cash, beginning of period 3,488,866 470,214
----------- -------------
Cash, end of period $ 1,371,333 $ 2,852,530
=========== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 6
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1 BASIS OF PRESENTATION:
The consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations.
In the opinion of Management, the consolidated financial statements
contain all adjustments which are those of a recurring nature, and
disclosures necessary to present fairly the financial position of the
Company as of June 30, 1996 and December 31, 1995, and the results of
operations and cash flows for the six and three months ended June 30,
1996 and 1995.
The accounting principles which materially affect the financial
position, results of operations and cash flows of the Company are set
forth in Notes to the Consolidated Financial Statements which are
included in the Company's financial statements contained in the
Company's 1995 annual report on Form 10-KSB. Capitalized terms used
but not otherwise defined herein have the meanings set forth in the
Company's annual report on Form 10-KSB.
2 EARNINGS PER SHARE:
For the six and three months ended June 30, 1996 and 1995, primary
earnings per common share was computed on net income increased by pro
forma reductions in interest expense resulting from the assumed
exercise of warrants, options and conversion of redeemable convertible
preferred stock for the periods outstanding, and the resulting assumed
reduction of outstanding indebtedness, divided by the weighted average
number of common and common equivalent shares outstanding during the
period under the modified treasury stock method. Fully diluted
earnings per share was computed, in addition to the above computation,
assuming the conversion of the convertible subordinated notes payable
and using the higher of the average market price or the end of the
quarter market price.
4
<PAGE> 7
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3 INVENTORIES:
Inventories consist of the following as of June 30, 1996 and December
31, 1995:
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Raw materials $ 1,729,114 $ 1,737,683
Work in process 837,152 642,265
Finished goods 552,085 771,842
Replacement or repair parts for equipment
and road property 497,146 209,048
------------ ------------
3,615,497 3,360,838
Less, customer advances related to materials 350,219 -
------------ ------------
Inventories in excess of contract advances $ 3,265,278 $ 3,360,838
============ ============
</TABLE>
4 PROPERTY, PLANT AND EQUIPMENT:
On June 30, 1996, the Company acquired approximately 40 miles of rail
line in the state of Indiana. The purchase price including costs was
approximately $1.1 million. The Company simultaneously sold for cash
approximately 22 miles of the rail line to an unrelated party and sold
a car repair shop which was on the line to another unrelated party.
The combined gain on sale of these two properties was approximately
$582,000 and is included on the consolidated statements of income as
other revenue. The Company continues to own the remaining 18 miles of
rail line and operates the 22 miles pursuant to an operating agreement
through a newly formed subsidiary, Evansville Terminal Company
("ETC").
5 FINANCING:
On March 15, 1996, the Company purchased 100 railroad tank cars for a
purchase price of approximately $1.25 million. Substantially all of
the cars are leased. The purchase was financed through a note payable
with First Union Commercial Corporation. The financing consisted of a
$1.25 million term loan collateralized by the acquired railroad cars.
The term loan matures March 2003 bears interest at 8.3% and calls for
84 equal monthly installments inclusive of principal and interest of
$16,441 with a payment at maturity of $375,000.
During February 1996, the Company entered into a term loan for
purchase of equipment in the principal amount of $167,181 maturing
February 2001. The loan agreement calls for 60 monthly installments
beginning in March 1996 and bears interest at 7.5%.
5
<PAGE> 8
RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5 FINANCING, continued:
During July 1996, the Company entered into a term loan for purchase
of equipment in the principal amount of $772,370 maturing July 1,
2001. The loan agreement calls for 60 monthly installments beginning
in August 1996 and bears interest at 10.06%.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
RailAmerica, Inc. (together with its consolidated subsidiaries, the
"Company") is a multimodal transportation company that historically has
acquired and developed shortline railroads formed primarily through the
acquisition of light density rail lines from larger railroads. In 1995, the
Company expanded its operations in the transportation industry through its
acquisition of Kalyn/Siebert, Inc. ("Kalyn"), a manufacturer of a broad range
of truck trailers, located in Gatesville, Texas and the purchase of
substantially all of the assets of Steel City Truck Lines, Limited ("Steel
City"), a regional motor carrier located in Sault Ste. Marie, Ontario, Canada.
The acquisitions resulted in the establishment of the Company's trailer
manufacturing operations and motor carrier operations and substantially
increased the Company's assets, liabilities, revenue and expenses.
The Company's objectives are to foster growth of its existing
subsidiaries and to create a diversified transportation company by acquiring
additional railroads and other transportation-related companies. Examples of
this strategy are the acquisitions of all of the issued and outstanding stock
of Prairie Holding Corporation ("PHC") which owns Dakota Rail, Inc. ("DRI"), a
shortline railroad headquartered in Hutchinson, Minnesota, effective September
1, 1995 and the purchase of substantially all of the assets and business of the
Seagraves, Whiteface and Lubbock Railroad Company and the Floydada and
Plainview Railroad Company, effective November 1, 1995. The Company also
intends to expand into other transportation-related areas through selective
acquisitions.
The Company intends to increase traffic on its existing rail lines by
offering additional services such as intermodal transportation, distribution
and logistics services, and through the integration of Steel City into the
Company's transportation division. Further, Kalyn has the capability of
manufacturing trailers and other types of intermodal equipment for use by Steel
City and the Company's railroads, which management expects will help to further
develop synergy among the consolidated group.
Set forth below is a discussion of the results of operations for the
Company's railroad and distribution operations, motor carrier operations and
the trailer manufacturing operations. The corporate overhead, which benefits
all of the Company's segments, has not been allocated to the business segments
for this analysis. The Company feels that this presentation will facilitate a
better understanding of the changes in the results of the Company's operations.
Corporate overhead, which is included in selling, general and administrative
expenses in the consolidated statements of income, increased by $223,663 (or
24.9%) to $1,121,924 in the six month period ended June 30, 1996 compared to
$898,261 for the prior year period. The increase was related to the additional
costs incurred to manage the new subsidiaries acquired or formed during 1995
including Steel City, DRI, RailAmerica Intermodal Services ("RIS"), West Texas
and Lubbock Railroad Company ("WTLR"), RailAmerica Equipment Corporation
("REC") and Plainview Terminal Company ("PTC").
7
<PAGE> 10
RAILROAD AND DISTRIBUTION OPERATIONS
The Company's railroad subsidiaries operated approximately 493 miles
of rail line as of June 30, 1996. Currently, these consist of: (i) 136 miles
of which it owns in Michigan; (ii) 4 miles of trackage rights and 45 miles of
rail line which are owned by the State of Michigan and operated pursuant to an
agreement with Michigan Department of Transportation; (iii) 49 miles of rail
line leased from the South Central Tennessee Railroad Authority near Nashville,
Tennessee and 3 miles of trackage rights; (iv) 45 miles of rail line in
Pennsylvania, 18 miles of which the Company has agreed to purchase from the
Commonwealth of Pennsylvania for a price to be determined and 27 miles of which
are operated under a freight easement with the Commonwealth of Pennsylvania;
(v) ten miles of rail line in Delaware made available to the Company pursuant
to a ten-year lease with the Wilmington & Northern Railroad Company; (vi) 44
miles of rail line which the Company is operating and will ultimately purchase
pursuant to a contract for deed from the State of Minnesota, effective
September 1, 1995; (vii) 113 miles of rail line and 4 miles of trackage rights
in West Texas, purchased as of November 1, 1995 and; (viii) 40 miles of rail
line in the State of Indiana, 18 miles of which it owns and 22 miles of which
it operates under an operating agreement.
The Company provides local rail freight services for its customers
providing access to the nation's rail system for shipment of products both
domestically and internationally. The Company hauls varied products for its
customers corresponding to the local markets it serves. The Company's traffic
base in Michigan includes agricultural commodities, automotive parts, chemicals
and fertilizer, ballast and other stone products. The Company's traffic base
in Tennessee includes wood chips, paper, chemicals and processed food products.
The Company's traffic base in Pennsylvania and Delaware includes iron and steel
products, chemicals, agricultural products, lumber and processed food products.
The Company's traffic base in Minnesota includes plastics, lumber, denatured
alcohol, scrap iron and steel. The Company's traffic base in Texas consists of
cotton, sodium sulfate, chemicals, fertilizer, scrap iron and steel. The
Company's traffic base in Indiana consists of agricultural commodities and
plastics.
In keeping with the general nature of business in its Michigan area,
agricultural commodities have represented the substantial majority of the
Company's annual carloadings. Although the acquisitions of South Central
Tennessee Railroad Corporation ("SCTR"), Delaware Valley Railway Company
("DVRC"), DRI, WTLR and PTC will help to diversify the Company's traffic base
and mitigate seasonal fluctuations, the Company believes that, absent
additional acquisitions in industrial areas, agricultural commodities will
continue to represent the primary component of the Company's rail traffic base.
As a result, the Company could be materially and adversely affected by factors
such as weather and fluctuations in grain prices, that generally affect the
agricultural industry. Additionally, sellers of commodities tend to hold
shipments if they anticipate price increases for their commodities. This
circumstance can cause the Company's results of operations to fluctuate from
period to period as a result of fluctuations in the prices of those
commodities. Moreover, agricultural commodities are generally shipped from
September
8
<PAGE> 11
to May and the Company handles most of its traffic during such periods.
RESULTS OF RAILROAD AND DISTRIBUTION OPERATIONS
The discussion of results of operations that follows reflects the
consolidated results of the Company's Railroad and Distribution Operations for
the six and three months ended June 30, 1996 and June 30, 1995. Effective
September 1, 1995 and November 1, 1995, the Company acquired DRI and WTLR,
respectively. As a result, the results of operations for the six and three
month periods ended June 30, 1996 are not comparable to the prior year periods
in certain material respects.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995
REVENUES. The table below compares the Company's revenues for its
railroad and distribution operations for the periods shown.
<TABLE>
<CAPTION>
For the Six Months Ended
-------------------------------------------------------------
June 30, 1996 June 30, 1995
-------------------------- ---------------------------
Gross % Change Gross % Change
Revenues From 1995 Revenues From 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Transportation Revenue $4,762,528 62.1% $ 2,937,926 28.3%
Other Revenue 732,607 511.5% 119,813 37.1%
---------- -----------
Total Revenue $5,495,135 79.7% $ 3,057,739 28.7%
========== ===========
</TABLE>
TRANSPORTATION REVENUES. Transportation revenues for the six month
period ended June 30, 1996 increased approximately $1.8 million (or 62.1%)
compared to the prior year period primarily due to the acquisitions of WTLR and
DRI, which contributed $916,312 and $324,963, respectively, and increases in
Michigan and Tennessee transportation revenue of $215,228 and $368,398
resulting from increased carloadings and freight rates. The net increase in
total revenues for the six month period was comprised of an increase in both
transportation revenue and other revenue. The transportation revenue per
carload increased from $357 to $411 per car due to increased rates and
divisions of revenue with connecting carriers. Carloads handled totaled 11,419
for the six months ended June 30, 1996, an increase of 3,180 (or 38.6%)
compared to 8,239 carloads in the prior year period. The increase was
primarily the result of the acquisitions of the two new Texas railroads (WTLR
and PTC) and DRI which handled 2,317 and 404 carloads, respectively, for the
six month period ended June 30, 1996. In addition, Michigan and Tennessee
carloads increased 440 and 188, respectively.
OTHER REVENUES. Other revenues increased by $612,794 for the six
months ended June
9
<PAGE> 12
30, 1996 compared to the prior year period. Other revenues for the six months
ended June 30, 1996 consisted primarily of a gain on the sale of 22 miles of
rail line and a car repair shop in the State of Indiana. The gain on the sale
was approximately $582,000. Additionally, other revenue for the six months
ended June 30, 1996 and other revenue for the six months ended June 30, 1995
primarily represented rental of locomotives, sales of surplus rail and
material, certain miscellaneous assets and non-operating real estate.
The table below is a comparison of operating expenses (which do not
include interest expense and other income) for the periods shown.
<TABLE>
<CAPTION>
For the Six Months Ended
----------------------------------------
June 30, 1996 June 30, 1995
------------- -------------
% Change % Change
Expenses From 1995 Expenses From 1994
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Maintenance of way $ 890,361 51.9% $ 586,298 39.5%
Maintenance of equipment 441,680 57.3% 280,866 32.3%
Transportation 1,026,754 31.6% 780,289 34.1%
Equipment rental 194,114 50.6% 128,830 (4.6%)
Selling, general and
administrative 647,780 49.7% 432,710 69.7%
------------ -----------
Total operating expenses $ 3,200,689 44.9% $ 2,208,993 37.7%
============ ===========
</TABLE>
OPERATING EXPENSES. Operating expenses were $3.2 million for the six
month period ended June 30, 1996, an increase of $1.0 million (or 44.9%)
compared to operating expenses of $2.2 million for the prior year period.
Maintenance of way expenses increased $304,063 (or 51.9%) for the six month
period primarily due to the addition of WTLR and DRI maintenance of way
expenses and increased depreciation expense. Maintenance of equipment expenses
increased $160,814 (or 57.3%) primarily due to the addition of WTLR and DRI
expenses. Transportation expense increased by $246,465 (or 31.6%) compared to
the 1995 period, primarily due to the addition of WTLR and DRI transportation
expense. Equipment rental increased by $65,284 (or 50.6%) for the six month
period, primarily due to an increase in car hire expense in Tennessee based
upon the increase in carloadings. Selling, general and administrative expenses
increased by $215,070 (or 49.7%) compared to the 1995 six month period
primarily due to the addition of WTLR and DRI expenses.
Operating expenses, as a percentage of transportation revenue, were
67.2% and 75.2% for the six months ended June 30, 1996 and 1995, respectively,
as a result of the reasons discussed above. Management anticipates that
operating expenses as a percentage of revenue will remain fairly constant over
the next twelve months at their current level, exclusive of seasonal
fluctuations.
10
<PAGE> 13
OTHER INCOME (EXPENSES). Interest expense was $534,472 for the six
months ended June 30, 1996, which amount is approximately 68.0% higher than the
interest expense for the prior year period. Such increase was primarily due to
the financing of the WTLR and DRI acquisitions. The increase in interest
expense was partially offset by decreased interest rates on certain of the
debt. Other, net of $925 for the six months ended June 30, 1996 decreased from
$367,248 in the prior year period. The decrease was primarily due to income
derived from the reversal of certain accrued liabilities in 1995.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995.
REVENUES. The table below compares the Company's revenues for its
railroad and distribution operations for the periods shown.
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------------------------------------
June 30, 1996 June 30, 1995
--------------------- ------------------------
Gross % Change Gross % Change
Revenues From 1995 Revenues From 1994
----------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Transportation Revenue $ 2,095,949 57.3% $ 1,332,564 13.1%
Other Revenue 652,756 542.1% 101,659 98.3%
----------- -----------
Total Revenue $ 2,748,705 91.7% $ 1,434,223 16.6%
=========== ===========
</TABLE>
TRANSPORTATION REVENUES. Transportation revenues for the three month
period ended June 30, 1996 increased $763,385 (or 57.3%) compared to the prior
year period primarily due to the acquisitions of WTLR and DRI, which
contributed $322,127 and $157,893, respectively, and an increase in Tennessee
transportation revenue of $267,217 resulting from increased carloadings and
freight rates. The net increase in total revenues for the three month period
was comprised of an increase in both transportation revenue and other revenue.
The transportation revenue per carload increased from $330 to $422 per car due
to increased rates and divisions of revenue with connecting carriers. Carloads
handled totaled 4,853 for the three months ended June 30, 1996, an increase of
815 (or 20.2%) compared to 4,038 carloads in the prior year period. The
increase was primarily the result of the acquisitions of the two new Texas
railroads (WTLR and PTC) and DRI which handled 794 and 189 carloads,
respectively, for the three month period ended June 30, 1996. In addition,
Tennessee carloads increased 67 for the three months ended June 30, 1996
compared to the prior year period.
OTHER REVENUES. Other revenues increased by $551,097 for the three
months ended June 30, 1996 compared to the prior year period. Other revenues
for the three months ended June 30, 1996 consisted primarily of a gain on the
sale of 22 miles of rail line and a car repair shop in the State of Indiana.
The gain on the sale was approximately $582,000. Additionally, other revenue
for the three months ended June 30, 1996 and other revenue for the three months
ended June 30, 1995 primarily represented rental of locomotives, sales of
surplus rail and material,
11
<PAGE> 14
certain miscellaneous assets and non-operating real estate.
The table below is a comparison of operating expenses (which do not
include interest expense and other income) for the periods shown.
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------------
June 30, 1996 June 30, 1995
------------- -------------
% Change % Change
Expenses From 1995 Expenses From 1994
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Maintenance of way $ 407,290 38.2% $ 294,658 46.5%
Maintenance of equipment 211,642 39.4% 151,781 29.2%
Transportation 458,653 39.2% 329,559 8.4%
Equipment rental 179,906 36.1% 132,194 60.5%
Selling, general and
administrative 322,637 44.5% 223,330 103.5%
----------- -----------
Total operating expenses $ 1,580,128 39.6% $ 1,131,522 38.9%
=========== ===========
</TABLE>
OPERATING EXPENSES. Operating expenses were approximately $1.6
million for the three month period ended June 30, 1996, an increase of $448,606
(or 39.6%) compared to operating expenses of approximately $1.1 million for the
prior year period. Maintenance of way expenses increased $112,632 (or 38.2%)
for the three month period primarily due to the addition of WTLR and DRI
maintenance of way expenses and increased depreciation expense. Maintenance of
equipment expenses increased $59,821 (or 39.4%) primarily due to the addition
of WTLR and DRI expenses. Transportation expense increased by $129,094 (or
39.2%) compared to the 1995 period, primarily due to the addition of WTLR and
DRI transportation expense. Equipment rental increased by $47,712 (or 36.1%)
for the three month period, primarily due to an increase in car hire expense in
Tennessee based upon the increase in carloadings. Selling, general and
administrative expenses increased by $99,307 (or 44.5%) compared to the 1995
three month period primarily due to the addition of WTLR and DRI expenses.
Operating expenses, as a percentage of transportation revenue, were
75.4% and 84.9% for the three months ended June 30, 1996 and 1995,
respectively.
OTHER INCOME (EXPENSE). Interest expense was $266,875 for the three
months ended June 30, 1996, which amount is approximately 64.2% higher than
the interest expense in the prior year period. Such increase was primarily due
to the financing of the WTLR and DRI acquisitions. The increase in interest
expense was partially offset by decreased interest rates on certain of the
debt. Other, net for the three months ended June 30, 1996 decreased $254,393
from the prior year period. The decrease was due to income derived from the
reversal of certain accrued liabilities in 1995.
12
<PAGE> 15
MOTOR CARRIER OPERATIONS
On February 10, 1995, the Company completed the purchase of
substantially all of the assets of Steel City, a regional motor carrier located
in Sault Ste. Marie, Ontario, Canada. Steel City operates a fleet of
approximately 140 tractors and trailers, and currently serves more than 75
customers in the steel, paper and lumber industries by transporting a broad
variety of products within Canada and between Canada and the United States,
particularly Michigan, Ohio, Indiana, New York and Wisconsin. The Company
acquired and has continued to expand the operations of Steel City through its
Canadian subsidiary Steel City Carriers.
The Company entered into its first intermodal contract in the fourth
quarter of 1995 and began operations under the contract in November 1995
through its subsidiary RIS. In the first half of 1996 RIS, obtained several
additional contracts and expanded its operations.
RESULTS OF MOTOR CARRIER OPERATIONS
The discussion of results of operations that follows reflects the
results of Steel City Carriers and RIS for the six months ended June 30, 1996
and the period from February 10, 1995 to June 30, 1995.
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995
<TABLE>
<CAPTION>
For the Six Months Ended
------------------------------------
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C> <C> <C>
Transportation revenue $ 3,631,452 100.0% $ 2,170,268 100.0%
----------- ------------
Direct operating expenses 3,347,661 92.2% 1,847,203 85.1%
Depreciation expense 156,501 4.3% 84,994 3.9%
Selling, general and administrative
expenses 350,277 9.6% 203,873 9.4%
----------- ------------
Total expenses 3,854,439 106.1% 2,136,070 98.4%
----------- ------------
Operating income (loss) (222,987) (6.1%) 34,198 1.6%
Other expenses (net) (113,844) (3.1%) (64,803) (3.0%)
----------- ------------
Net income (loss) $ (336,831) (9.3%) $ (30,605) (1.4%)
=========== ============
</TABLE>
13
<PAGE> 16
TRANSPORTATION REVENUE - Transportation revenue for the six month
period ended June 30, 1996 increased approximately $1.5 million (or 67.3%)
compared to the prior year. The increase was primarily due to the acquisition
of Steel City effective February 10, 1995. The 1995 period consisted of only
140 days versus 182 days in 1996. In addition, RIS began shipping during the
fourth quarter of 1995. RIS had transportation revenue of $181,286 for the six
months ended June 30, 1996.
Management anticipates that transportation revenue will be positively
effected in the last six months of 1996 for both Steel City Carriers and RIS as
a result of transportation contracts recently executed with new customers,
increased marketing activity and improved weather conditions.
DIRECT OPERATING EXPENSES - Direct operating expenses were 92.2% of
transportation revenue for the six months ended June 30, 1996 compared to 85.1%
for the prior year period. The increase was due to increased equipment
maintenance and repairs, a significant increase in fuel costs from 1995 to 1996
and the unusually extreme winter weather in 1996. The extreme winter weather
caused many roads in Ontario and the northern United States to be closed for
extended periods of time, resulting in lost revenue and increased costs to
Steel City Carriers as a percentage of revenue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses remained fairly constant as a percentage of
transportation revenue for the six months ended June 30, 1996 compared to the
prior year period.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995
<TABLE>
<CAPTION>
For the Three Months Ended
----------------------------------
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C> <C> <C>
Transportation revenue $ 1,912,661 100.0% $ 1,449,055 100.0%
----------- ------------
Direct operating expenses 1,755,713 91.8% 1,248,215 86.1%
Depreciation expense 81,310 4.3% 45,947 3.2%
Selling, general and administrative
expenses 174,435 9.1% 144,064 9.9%
----------- ------------
Total expenses 2,011,458 105.2% 1,438,226 99.3%
----------- ------------
Operating income (loss) (98,797) (5.2%) 10,829 0.7%
Other expenses (net) (64,922) (3.4%) (40,353) (2.8%)
----------- ------------
Net (loss) $ (163,719) (8.6%) $ (29,524) (2.0%)
=========== ============
</TABLE>
14
<PAGE> 17
TRANSPORTATION REVENUE - Transportation revenues for the three month
period ended June 30, 1996 increased $463,606 (or 32.0%) compared to the prior
year. The increase was primarily due to the increase in miles driven by Steel
City from 1995 to 1996 and the inclusion of RIS operations in 1996. RIS had
transportation revenue of $82,470 for the three months ended June 30, 1996.
DIRECT OPERATING EXPENSES - Direct operating expenses were 91.8% of
transportation revenue for the three months ended June 30, 1996 compared to
86.1% for the prior year period. The increase was due to increased equipment
maintenance and repairs and increased fuel prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES - Selling, general and
administrative expenses remained fairly constant for the three months ended
June 30, 1996 compared to the prior year period.
TRAILER MANUFACTURING OPERATIONS
Kalyn, located in Gatesville, Texas, was established in 1968 and
manufactures a broad range of specialty truck trailers. Kalyn products are
marketed to customers in the construction, trucking, agricultural, railroad,
utility and oil industries. In addition, a substantial portion of Kalyn's
sales are to the military and several other local and federal government
agencies.
Kalyn builds all the structural parts of its trailers using primarily
steel bars and plates. The major manufacturing steps include cutting, bending
and welding of steel and, once assembled, sand blasting, cleaning and painting.
The axles and running gears are purchased as sub-assemblies which are
integrated into the Kalyn trailer design. Kalyn contracts out any necessary
machining. Kalyn's plant is currently operating one shift, although the
Company believes manufacturing capacity can be increased by adding a partial
second shift. As a consequence of significant increases in sales order volume,
during 1995 Kalyn expanded its manufacturing facility to partially address this
increased demand by adding 15,000 sq. ft. of manufacturing space upon land that
Kalyn owns. Kalyn recently completed construction of an additional 16,000 sq.
ft. expansion of its manufacturing facility upon land that it owns. This
expansion was necessitated by Kalyn's receipt in October 1995 of a $27 million
contract from the U.S. Army Tank Automotive Command ("TACOM"), and in February
1996, a second $18.7 million contract from TACOM, and in April 1996, of an
additional contract from the General Services Administration with an estimated
value of approximately $25 million. The total expansion cost approximately
$400,000 and was completed in the second quarter of 1996.
RESULTS OF TRAILER MANUFACTURING OPERATIONS
The discussion of results of operations that follows reflects the
results of Kalyn, RailAmerica Financial Services ("RFS") and RailAmerica
Equipment Corporation for the six and three months ended June 30, 1996.
15
<PAGE> 18
COMPARISON OF OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JUNE
30, 1995
The following table sets forth the income and expense items for the
six months ended June 30, 1996 and 1995 and the percentage relationship of
income and expense items to net sales for the periods indicated:
<TABLE>
<CAPTION>
For the Six Months Ended
---------------------------------
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 8,141,220
100.0% $ 9,416,724 100.0%
Cost of goods sold 6,421,661 78.9% 7,222,540 76.7%
----------- -----------
Gross profit 1,719,559 21.1% 2,194,184 23.3%
Selling, general and
administrative expenses 801,536 9.8% 788,530 8.4%
----------- -----------
Income from operations 918,023 11.3% 1,405,654 14.9%
Other expenses (net) (239,614) 2.9% (233,632) 2.5%
----------- -----------
Net Income Before Taxes $ 678,409 8.3% $ 1,172,022 12.4%
=========== ===========
</TABLE>
NET SALES. Net sales consist of trailer sales, part sales and repair
income. Trailer sales represent approximately 95% of the net sales in both
1996 and 1995. Kalyn sold 299 trailers for the six months ended June 30, 1996
and 476 trailers for the six months ended June 30, 1995. The average price per
trailer sold was $25,779 for the six months ended June 30, 1996 and $18,119 for
the six months ended June 30, 1995. Sales to governmental agencies represented
18.2% and 26.3% of Kalyn's net sales for the six months ended June 30, 1996 and
1995, respectively. During the first quarter of 1996, Kalyn was in the process
of building 5 prototype trailers in connection with the October 1995 TACOM $27
million contract. The sale of these trailers will be recognized upon
completion of inspection and testing by TACOM. Full production under the
contract will begin immediately after acceptance by TACOM of the prototype
trailers. The decrease in sales for the six month period ended June 30, 1996
compared to the six month period ended June 30, 1995 was partially due to the
above contract work as well as the federal government budget impasse which
resulted in a suspension of new trailer orders from the government. Kalyn's
backlog of orders for both government and commercial sales was approximately
$10.0 million as of June 30, 1996 compared to $ 7.1 million at June 30, 1995.
COST OF GOODS SOLD. Cost of goods sold was 78.9% of net sales for the
six months ended June 30, 1996 compared to 76.7% for the six months ended June
30, 1995. The increase was
16
<PAGE> 19
partially due to certain fixed costs of manufacturing being spread over a
smaller revenue base in 1996. Additionally, commercial orders represented a
higher percentage of the sales in 1996 than in 1995. Commercial trailers have
more variations in design which generally require greater expertise in the
manufacturing process. Government contracts are typically for larger
quantities of similar style trailers. This creates greater economies of scale
in the production process which translates into a relatively lower cost per
unit produced. Historically, commercial sales have had a higher cost of goods
sold and lower gross profit margin than government sales. Management
anticipates gross profit as a percentage of net revenue to increase over the
next twelve months as a relatively larger percentage of sales attributable to
government agencies based upon the new contracts that were received during the
fourth quarter of 1995 and first quarter of 1996.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative costs remained fairly constant during the six months ended June
30, 1996 compared to the six months ended June 30, 1995.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND
JUNE 30, 1995
The following table sets forth the income and expense items for the
three months ended June 30, 1996 and 1995 and the percentage relationship of
income and expense items to net sales for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------------
June 30, 1996 June 30, 1995
------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 4,688,006 100.0% $ 5,096,175 100.0%
Cost of goods sold 3,714,818 79.2% 3,990,546 78.3%
----------- -----------
Gross profit 973,188 20.8% 1,105,629 21.7%
Selling, general and
administrative expenses 414,331 8.8% 398,304 7.9%
----------- -----------
Income from operations 558,857 12.0% 707,325 13.8%
Other expenses (net) (141,301) 3.0% (114,500) 2.2%
----------- -----------
Net Income Before Taxes $ 417,556 9.0% $ 592,825 11.6%
=========== ===========
</TABLE>
NET SALES. Net sales consist of trailer sales, part sales and repair
income. Trailer sales represent approximately 96% of the net sales in both
1996 and 1995. Kalyn sold 158 trailers for the three months ended June 30,
1996 and 239 trailers for the three months ended June 30, 1995.
17
<PAGE> 20
The average price per trailer sold was $28,406 for the three months ended June
30, 1996 and $20,486 for the three months ended June 30, 1995. Sales to
governmental agencies represented 19.3% and 30.2% of Kalyn's net sales for the
three months ended June 30, 1996 and 1995, respectively. The decrease in sales
for the three month period ended June 30, 1996 compared to the three month
period ended June 30, 1995 was partially due to the federal government budget
impasse which resulted in a suspension of new trailer orders from the
government.
COST OF GOODS SOLD. Cost of goods sold was 79.2% of net sales for the
three months ended June 30, 1996 compared to 78.3% for the three months ended
June 30, 1995. The increase was partially due to certain fixed costs of
manufacturing being spread over a smaller revenue base in 1996. Additionally,
commercial orders represented a higher percentage of the sales in 1996 than in
1995. Commercial trailers have more variations in design which generally
require greater expertise in the manufacturing process. Government contracts
are typically for larger quantities of similar style trailers. This creates
greater economies of scale in the production process which translates into a
relatively lower cost per unit produced. Historically, commercial sales have
had a higher cost of goods sold and lower gross profit margin than government
sales.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative costs remained fairly constant during the three months ended
June 30, 1996 compared to the three months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES - COMBINED OPERATIONS
The discussion of liquidity and capital resources that follows
reflects the consolidated results of the Company, including all subsidiaries.
The Company's cash used in operating activities was $0.6 million for
the six month period ended June 30, 1996. However, approximately $1.5 million
and $0.6 million of the cash used in operating activities is attributable to an
increase in the Company's accounts receivable and a gain on the sale of
property, respectively. The Company's accounts receivable increased from $2.2
million as of December 31, 1995 to $3.7 million as of June 30, 1996 primarily
as a result of seasonal factors and timing of certain balances at
Kalyn/Siebert, Inc that were collected in July. See the discussion below
regarding cash flow from investing activities for more information regarding
the cash provided by the Company's sale of property.
The Company's cash used in investing activities was $2.6 million for
the six month period ended June 30, 1996. One of the Company's main uses of
cash in the six month period ended June 30, 1996 was for property, plant and
equipment. Property, plant and equipment increased by $3.3 million during 1996
primarily due to purchase of 40 miles of rail line in Indiana, improvements
made to the Company's various other rail lines, Kalyn's new plant construction,
described below, and acquisition of transportation equipment for the motor
carrier segment, less current period depreciation. During late 1995, Kalyn
began construction of an additional 16,000 sq. ft. addition to its
manufacturing facility upon land that it owns. This expansion was necessitated
by Kalyn's receipt in October 1995 of a $27 million contract with TACOM. The
18
<PAGE> 21
expansion cost approximately $300,000 and was funded through operating cash
flow and advance payments from TACOM. Partially offsetting its cash
expenditures for investing activities, the Company generated $937,702 of
proceeds from sale of properties.
The Company's cash provided by financing activities was $1.1 million
for the six months ended June 30, 1996. The primary component of this
consisted of the net proceeds from borrowings on the Revolver.
The Company's long term debt represents financing of property and
equipment, as well as the acquisition financing for SCTR, Kalyn, Steel City,
DRI, WTLR and PTC. Certain of this indebtedness has been refinanced effective
September 29, 1995 by a $15 million revolving line of credit ("Revolver") with
National Bank of Canada. The Revolver has a three year maturity and bears
interest at either the bank's prime rate plus 0.5% or the one, three or six
month LIBOR plus 2.5%. The Revolver is collateralized by substantially all of
the assets of the Company, Kalyn, HESR, Saginaw Valley Railway Company, RIS,
Steel City Carriers and WTLR. As of June 30, 1996, the Company had
approximately $0.7 million available under the Revolver.
As of June 30, 1996, the Company had working capital of $4.2 million
compared to working capital of $3.0 million as of December 31, 1995. Cash on
hand as of June 30, 1996 was $1.4 million compared to $3.5 million as of
December 31, 1995. The decrease in cash from December 31, 1995 to June 30,
1996 is due to the factors discussed above. The Company's cash flows from
operations have been historically sufficient, and are currently sufficient to
meet its ongoing operating requirements, capital requirements for property,
plant and equipment, and to satisfy the Company's interest expense
requirements.
The Company expects that its future cash flows will be sufficient for
its current and contemplated operations for at least the next twelve months,
including anticipated capital expenditures for the upgrading of existing rail
lines of approximately $1,000,000 during this period and purchases of tractors
and trailers for Steel City Carriers of approximately $500,000. The Company,
with its present subsidiaries, does not expect any other significant capital
expenditures over the next twelve months. To the extent possible, the Company
intends to fund its acquisitions of property, plant and equipment to allow its
cash flow from operations to be devoted to other uses, including debt service
requirements.
Because the Company's long-term business strategy includes the
selective acquisition of additional transportation-related businesses, the
Company will, most likely, require additional equity and/or debt capital in
order to consummate a significant acquisition or undertake major development
activities. It is impossible to predict the amount of capital that may be
required for such acquisitions or development, and there is no assurance that
sufficient financing for such activities will be available on terms acceptable
to the Company, if at all. However, the Company has recently entered into a
letter of intent with a large investment banking firm to raise up to $15
million of new subordinated debt financing. The Company's $15 million
revolving line of credit allows acquisition advances of up to $10 million for
such acquisitions. The Company drew down $4.25 million of these advances to
fund its acquisition of substantially all of the assets of the
19
<PAGE> 22
Seagraves, Whiteface and Lubbock Railroad and the Floydada and Plainview
Railroad Company on November 1, 1995.
INFLATION
Inflation in recent years has not had a significant impact on the
Company's operations, and it is not expected to adversely affect the Company in
the future unless it increases substantially, and the Company is unable to pass
through the increases in its freight rates and trailer prices.
PART II. OTHER INFORMATION
ITEM 6. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its 1996 annual meeting on July 24, 1996 at which
Donald Redfearn and Charles Swinburn were re-elected and Robert Toia and
Douglas Nichols were elected as Directors of the Company. Messrs. Gary
Marino, John Marino, John Sullivan and Richard Rampell continued in office as
directors after the meeting. At the meeting votes were cast as follows:
<TABLE>
<CAPTION>
In Favor Against Abstentions
-------- ------- -----------
<S> <C> <C> <C>
Re-election of Donald Redfearn as Director 4,261,595 0 103,844
Re-election of Charles Swinburn as Director 4,261,595 0 103,844
Election of Robert Toia as Director 4,261,395 0 104,044
Election of Douglas Nichols as Director 4,261,595 0 103,844
</TABLE>
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
3.1 Amended and Restated Articles of Incorporation of
Registrant(10)
3.2 By-laws of Registrant(1)
4.2 Class B Warrant(2)
4.3 Representatives' Warrant(2)
4.4 Series A Convertible Subordinated Debentures(8)
10.10 Third Party Agreement, dated December 19, 1990, between HESR
and TSBY(1)
10.14 RailAmerica, Inc. 1992 Stock Option Plan(1)+
10.17 Security Agreement, dated October 30, 1992, between U.S.
Concord, Inc. and HESR(3)
10.18 Equipment Finance Lease, dated March 8, 1993, among Charter
Financial, Inc., the Company, HESR, SGVY and RSC(2)
10.19 Purchase Money Security Agreement, dated March 8, 1993, as
amended, among Charter Financial, Inc., the Company, HESR,
SGVY and RSC(2)
10.21 Purchase Money Loan and Security Agreement, dated April
1993, among
20
<PAGE> 23
Charter Financial, Inc., Tilden Financial Corp., the
Company, HESR, SGVY, and RSC(2)
10.23 Loan Agreement among RailAmerica, Inc., South Central
Tennessee Railroad Corporation, South Central Tennessee
Railroad Company, Inc. and Charter Financial, Inc., dated as
of December 31, 1993(5)
10.24 Lease Agreement between South Central Tennessee Railroad
Authority and South Central Tennessee Railroad Company, Inc.
dated October 16, 1984(3)
10.32 Stock Purchase Agreement between Steel City Truck Lines
Limited, Josef Bichler and RailAmerica, Inc. dated December
19, 1994(11)
10.33 Stock Purchase Agreement between 823215 Ontario, Inc. and
RailAmerica, Inc. dated February 6, 1995(11)
10.34 Loan documents in connection with RailAmerica's acquisition
of Kalyn/Siebert Incorporated(6)
10.35 Employment Agreement between Robert B. Coward and
Kalyn/Siebert Incorporated(6)
10.36 Loan documents in connection with RailAmerica's acquisition
of the assets of Steel City Truck Lines limited(7)
10.37 Stock Purchase Agreement, dated July 11, 1995, among
RailAmerica, Inc., Brain E. Muir, Elli M.A. Mills and
Kimberly Hughes, Prairie Holding Corporation and Dakota
Rail, Inc.(8)
10.38 Settlement Agreement, entered into March 15, 1995, by Eric
D. Gerst and RailAmerica, Inc., RailAmerica Services
Corporation and Huron and Eastern Railway Company, Inc.(8)
10.39 Loan Agreement, dated September 29, 1995, by and between
RailAmerica, Inc., Kalyn/Siebert Incorporated, RailAmerica
Intermodal Services, Inc., RailAmerica Carriers, Inc., Steel
City Carriers, Inc., Saginaw Valley Railway Company, Inc.,
Huron and Eastern Railway Company, Inc. and National Bank of
Canada(10)
10.40 Asset Purchase Agreement, dated October 11, 1995, by and
among Seagraves, Whiteface & Lubbock Railroad Co., American
Railway Corporation, TEMCO Corporation and RailAmerica,
Inc.(9)
10.41 Employment Agreement between Gary O. Marino and RailAmerica,
Inc.(10)+
10.42 Employment Agreement between John H. Marino and RailAmerica,
Inc.(10)+
10.43 Stock Option Agreement, dated November 11, 1994, between
RailAmerica, Inc. and Gary O. Marino(10)+
10.44 RailAmerica, Inc. 1995 Stock Incentive Plan(10)+
10.45 RailAmerica, Inc. 1995 Non-Employee Director Stock Option
Plan(10)
10.46 RailAmerica, Inc. 1995 Employee Stock Purchase Plan(10)
10.47 RailAmerica, Inc. Corporate Senior Executive Bonus Plan(10)+
10.48 Stock Purchase Agreement between Transborder Air Cargo., JLC
Container Station, Inc., the undersigned stockholders of the
Companies, RailAmerica, Inc. and a subsidiary corporation of
RailAmerica, Inc. to be designated at or prior to the
Closing(11)
10.49 Purchase and Sale Agreement dated November 30, 1995, by and
between CSX Transportation, Inc. and Saginaw Valley Railway
Company, Inc.(11)
21
<PAGE> 24
10.50 Stock Purchase Agreement dated October 1, 1995 by and
between RailAmerica, Inc. and the holders of all the issued
and outstanding shares of the Company's Preferred Stock(11)
10.51 Asset Purchase Agreement dated January 26, 1996 by and
between TEMCO Corporation and RailAmerica Equipment
Corporation(11)
10.52 Agreement of Sale dated July 18, 1996 by and between the
Commonwealth's Department of Transportation and Delaware
Valley Railway Company, Inc., a wholly owned subsidiary of
RailAmerica, Inc.
10.53 Agreement entered into by and between R. Frank Unger,
Trustee of Sagamore National Corporation, Indiana HiRail
Corporation and RailAmerica, Inc.
11 Computation of Per Share Earnings
21 Subsidiaries of Registrant. Amended as follows: Evansville
Terminal Company was formed June 30, 1996 and became a
wholly owned subsidiary of the Company.
27 Financial Data Schedule (for SEC use only)
____________________
(1) Incorporated by reference to the same exhibit number filed as part of
the Registrant's Registration Statement on Form S-1, Registration No.
33-49026.
(2) Incorporated by reference to the same exhibit number filed as part of
the Registrant's Post-Effective Amendment No. 3 on Form SB-2 dated
November 25, 1994, Registration No. 33-49026.
(3) Incorporated by reference to the same exhibit number filed as part of
the Company's annual report on Form 10- KSB, filed with the Securities
and Exchange Commission on March 31, 1993.
(4) Incorporated by reference to the same exhibit number filed as part of
the Registrant's Post-Effective Amendment No. 4 on Form SB-2 dated
December 14, 1994, Registration No. 33-49026.
(5) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-KSB for the year ended December 31, 1993, filed
with the Securities and Exchange Commission on April 15, 1994.
(6) Incorporated by reference to the same exhibit number filed as a part
of the Registrant's Post-Effective Amendment No. 2 on Form SB-2, dated
October 17, 1994, Registration No. 33-49026.
(7) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-KSB for the year ended December 31, 1994, filed
with the Securities and exchange Commission on March 30, 1995.
22
<PAGE> 25
(8) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-QSB for the quarter ended June 30, 1995, filed
with the Securities and Exchange Commission on August 9, 1995.
(9) Incorporated by reference to the exhibit 2.1 filed as part of the
Company's Form 8-K as of November 1, 1995, filed with the Securities
and Exchange Commission on November 3, 1995.
(10) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-QSB for the quarter ended September 30, 1995,
filed with the Securities and Exchange Commission on November 12,
1995.
(11) Incorporated by reference to the same exhibit number filed as part of
the Company's Form 10-KSB for the year ended December 31, 1995, filed
with the Securities and exchange Commission on April 12, 1996.
+ Executive Compensation Plan or Arrangement.
(b) No Reports on Form 8-K were filed during the quarter.
23
<PAGE> 26
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RAILAMERICA, INC.
Date: August 12, 1996 By: /s/Gary O. Marino
-----------------------------
Gary O. Marino, on behalf
of the Company as President,
and as Chief Executive Officer
(Principal Financial Officer)
24
<PAGE> 1
EXHIBIT 10.52
Federal I.D. No. 650328006 Agreement No. 829601
AGREEMENT OF SALE
THIS AGREEMENT, made as of the 18 day of July, 1996, by and between the
Commonwealth's Department of Transportation, hereinafter referred to as the
"DEPARTMENT",
a n d
Delaware Valley Railway Company, Inc., a wholly owned subsidiary of Rail
America, Inc., with its principal office located at King Street Station, 1800
Diagonal Road, Suite 150, Alexandria, Virginia 22314, hereinafter referred to as
the "RAILROAD";
W I T N E S S E T H:
WHEREAS, the DEPARTMENT owns a line of RAILROAD, and property
appurtenant thereto, known as USRA Line No. 907, the Wilmington and Northern
Branch, extending between the Pennsylvania-Delaware state line at M.P. 12.70
and Modena, PA at M.P. 30.29 formerly owned by the Reading Corporation,
hereinafter referred to as the "Line"; and,
WHEREAS, at the time the DEPARTMENT purchased the Line the Federal
Railroad Administration (FRA) provided ninety percent (90%) of the initial
cost, the Department provided 6 2/3%, and the remaining 3 1/3% provided by the
shippers on the Line; and,
<PAGE> 2
WHEREAS, under the provisions of the Rail Freight Preservation and
Improvement Act, Act No. 119, of 1984 (July 5, 1984), as amended by Act of
1988-188 dated December 21, 1988 (55 P.S. Section 696.1-11), the DEPARTMENT is
authorized to sell or convey any rail line or lines for continued rail use, to
any responsible party provided fair market value is received for the property;
and,
WHEREAS, under 49 CFR Part 18.31(2), the DEPARTMENT can sell the Line
through the competitive process to the extent practicable, less any reasonable
selling and fixing up expenses; and,
WHEREAS, reasonable selling and fixing up expenses shall be defined
as rehabilitation or improvement costs, excluding routine maintenance, as
approved by the FRA; and,
WHEREAS, rehabilitation and improvement means replacing or upgrading
the track, and other facilities needed to provide service on a line, to the
extent necessary to permit adequate and efficient rail freight service on the
line; and,
WHEREAS, routine maintenance means inspection and light repairs,
emergency repairs, and a planned program of periodic maintenance, which is
necessary to keep the track at its existing condition or to comply with FRA
Class I Track Safety Standards; and,
2
<PAGE> 3
WHEREAS, through a Request For Proposal process, the Delaware Valley
Railway Company, Inc., was selected the operator of the Line and entered into
a Use of Rail Properties Agreement (Agreement No. 829412, Attachment One) which
allows for the purchase of the Line at Fair Market Value through a lease
purchase option provided in Section 31 of said agreement; and,
WHEREAS, the Fair Market Value of the property will be determined by
an independent appraisal selected through the DEPARTMENT's competitive bid
process with the costs to be borne by the RAILROAD; and,
WHEREAS, the Fair Market Value is defined as the fair market value
for all track materials in place and the fair market value for the real estate
property; and,
WHEREAS, the RAILROAD is desirous of purchasing the DEPARTMENT'S
interest in the line and, pursuant to Section 31 of Operating Agreement No.
829412, will have sixty (60) days after completion of the appraisal process
and submission of the appraisal report to accept the fair market value, less
the appraisal costs and any reasonable selling and fixing up expenses paid by
the DEPARTMENT through a rehabilitation program and as approved by the FRA
from the track value; and,
WHEREAS, the closing date shall be set at a mutually agreed upon time
following all governmental approvals; and,
3
<PAGE> 4
WHEREAS, the RAILROAD will pay all closing costs associated with the
acquisition of the line; and,
WHEREAS, the DEPARTMENT intends to continue to provide access to the
RAILROAD across USRA Line No. 142 under the terms and conditions of the
existing freight easement with SEPTA; and,
WHEREAS, the DEPARTMENT intends to acquire USRA Line No. 142, the
Octoraro Branch, from the Southeastern Pennsylvania Transportation Authority
(SEPTA) and in the event that the DEPARTMENT decides to sell USRA Line No. 142
after acquisition, the DEPARTMENT will grant the RAILROAD the option to
purchase said line; provided, however, that this action does not violate any
of the terms and conditions set forth by SEPTA at the time of the acquisition;
and,
WHEREAS, in the event that the DEPARTMENT decides to sell Line No. 142
after acquisition, the RAILROAD understands and agrees that it will have sixty
(60) days to notify the DEPARTMENT of its intent to purchase this Line under
the terms and conditions set forth by the DEPARTMENT; and,
WHEREAS, the consideration paid by the RAILROAD for access to USRA
Line No. 142 under the provisions of the Freight Easement includes the
RAILROAD'S net losses incurred during the term of Agreement #829412 which are
applied in accordance with Section 10(3) of
4
<PAGE> 5
Agreement No. 829412 and its amendments, as defined by the RAILROAD and
approved by the DEPARTMENT and any other applicable authorities, to the extent
allowable by law; and,
WHEREAS, the parties understand and agree that the operating agreement
between the Department and the RAILROAD expires at the close of business on
June 30, 1996 (4:30 p.m.) and that this Agreement sha11 take effect at said
close of business; and,
WHEREAS, the parties understand and agree that, notwithstanding the
expiration of the operating agreement, the RAILROAD will continue to provide
rail freight service during the pendency of the sale in the manner specified in
Article III of Agreement No. 829412 incorporated herein by reference as if
physically attached hereto and made a part hereof; and,
WHEREAS, the RAILROAD shall be authorized to continue to conduct
excursion service in the manner and subject to the terms and conditions
specified in Supplemental Agreement NO. 829412A.
NOW, THEREFORE, for and in consideration of the foregoing premises
and the mutual promises hereinafter set forth, the parties hereto agree, with
the intention of being legally bound hereby, as follows:
5
<PAGE> 6
SECTION 1. DESCRIPTION OF PROPERTY.
The DEPARTMENT hereby conveys to the RAILROAD, and the RAILROAD
hereby accepts, under the terms and conditions hereinafter set forth, the
following described Line: All that certain right-of-way demised to the
DEPARTMENT in Agreement No. 71363A by and between the Reading Company,
Grantor, and the Commonwealth of Pennsylvania, Grantee, together with
improvements, ties, rails, trestles, bridges, understructures and any other
improvements thereon erected, subject to any exclusions and provisions herein
contained, whether title is held in fee, easement, or otherwise. A plan
of the general location of the said right-of-way is filed in the Chester
County Court House in Misc. Book 539 Page 468 and Plan Book 74 Page 6.
SECTION 2. WARRANTY OF TITLE.
Title shall be conveyed by delivery of a Quitclaim Deed without any
covenants or warranties of any kind whatsoever by the DEPARTMENT. Said title
shall be conveyed free and clear of all liens, encumbrances, restrictions and
objections by or against the DEPARTMENT, except those of record and as
mentioned in this Agreement.
The premises above described are to be conveyed in their present
physical condition, it being understood that the RAILROAD has carefully
inspected said premises and in executing this Agreement, is relying solely
upon such inspection and not upon any representation made by the DEPARTMENT
its officers, agents, or employees, and the DEPARTMENT makes no warranty,
expressed or
6
<PAGE> 7
implied, in respect to the condition of the said premises or any
part thereof. The RAILROAD agrees to indemnify, protect, defend and hold
harmless the DEPARTMENT from and against any and all liability, costs and
expenses arising out of or connected with any personnel injury claims,
property claims, contract claims and/or environmental claims with respect to
environmental conditions existing on or after July 1, 1994, regardless whether
such conditions are known or unknown as of the date of closing.
SECTION 3. COMPENSATION.
The DEPARTMENT agrees to accept the appraised fair market value less
the appraisal costs and any reasonable selling and fixing up expenses subject
to FRA approval, as previously defined from the track material value to be paid
at closing.
SECTION 4. RAIL OPERATIONS AND MAINTENANCE.
The RAILROAD will provide, or arrange by contract to have provided,
RAILROAD freight transportation service over the Line without any operating
subsidy from the DEPARTMENT. The RAILROAD will be responsible for all
maintenance and repairs to the Line which shall be kept in good order and
repair in accordance with state and/or federal safety requirements.
SECTION 5. RAIL FREIGHT SERVICE.
The RAILROAD agrees to provide or arrange to provide rail freight
service on the Line for a period of five (5) years after closing. Failure to
provide continuous freight service may be
7
<PAGE> 8
cause for termination under Section 13. Rail freight service is defined as a
frequency of service to deliver rail cars to receivers, or to pick up rail
cars from shippers on the line that satisfies their needs. This freight
service is the connection between the receiver/shipper and other railroad
carrier(s). The railroad is not required to operate a scheduled train when
there are no rail cars to be delivered or picked up.
SECTION 6. LICENSES AND OCCUPANCIES.
Conveyance shall be made subject to existing tenancies and at the
time of settlement, the licenses, and/or agreements as listed in Attachment
Two, attached hereto and made a part hereof, will be assigned, amended or
cancelled as circumstances warrant.
The RAILROAD will assume all profits from those licenses, leases
and/or agreements listed in Attachment Two effective after closing on said
property. The RAILROAD may lease, grant easements or licenses, develop, or
otherwise utilize the properties or portions thereof so long as such actions
do not unduly interfere with the utilization of said Line for RAILROAD
purposes. Such uses shall include, without limitation, transverse and
longitudinal occupancies for public improvements (e.g., roads, sewers, etc.,
at, above or below grade), pipelines, power lines and energy corridors,
bikeways, and commercial development of air, subterranean, and surface rights.
The RAILROAD shall be prohibited from granting any perpetual license, easement
or agreement until after the expiration of this agreement.
8
<PAGE> 9
SECTION 7. SALE OR CONVEYANCE OF PROPERTY.
The RAILROAD shall be prohibited from transferring title to any real
estate or parcels included in this conveyance to any party for a period of
five (5) years from the effective date of this Agreement. Exceptions shall
include non-operating properties. The DEPARTMENT shall be notified in writing
in advance of any proposed sale, and no such sale shall take place without the
written consent of the DEPARTMENT, which consent shall not be unreasonably
withheld.
SECTION 8. LIABILITY.
The RAILROAD shall hold and save the Commonwealth harmless from all
claims, damages, suits, judgments, or causes of action on account of injury to
or death of persons or loss or damage to property which may result from, or
arise out of the management, control, use or operation of the Line including
all appurtenant facilities, or which relate back to the term of the RAILROAD'S
operating agreement. In this connection it is suggested the RAILROAD acquire,
or cause its operator to acquire, public liability and property damage
insurance, with a minimum 2 million dollar level of coverage.
SECTION 9. TAXES AND OTHER OBLIGATIONS.
Upon the execution of this Agreement any taxes or assessments levied
by public authorities for improvements, water and sewer rents, as well as any
requirement to make water and/or sewer connections and/or to construct sidewalks
or curbs or repair or
9
<PAGE> 10
remove existing construction, shall be the obligation of the RAILROAD.
SECTION 10. APPROVALS.
The sale and conveyance hereunder shall be subject to and conditioned
upon approval, if necessary, of the Public Utility Commission, the Federal
Railroad Administration, the Surface Transportation Board, and/or any other
governmental authority. The cost and expense of obtaining or attempting to
obtain such approval will be borne solely by the RAILROAD.
SECTION 11. DISSOLUTION OF THE LINE.
In the event the RAILROAD fails to provide rail freight service, as
required by Section 4 and 5 of this Agreement, at any time prior to the
expiration of any DEPARTMENT liens on the Line by virtue of this Agreement, the
parties will use their best efforts to engage a replacement RAILROAD to
provide such service. However, in the event no RAILROAD can be engaged for
such purpose, and in the event the Line is abandoned by the RAILROAD, the
RAILROAD will cooperate fully with the DEPARTMENT in settling any and all
claims, liens, or other encumbrances imposed by the DEPARTMENT, government,
authority or financial institution. Such cooperation shall include any
appropriate financial contribution imposed by federal law or regulation upon
the parties.
SECTION 12. FORCE MAJEURE.
In the event that either party shall be delayed, hindered in, or
prevented from the performance of any act required hereunder by
10
<PAGE> 11
reason of strikes, lock-outs, labor troubles, inability to procure materials,
failure of power, restrictive governmental laws and regulations, riots,
insurrection, acts of God, or war, or any other reason beyond its control,
then performance of such act shall be excused for the period of the delay and
the period for the performance of any such act shall be extended for a period
equivalent to the period of such delay.
SECTION 13. TERMINATION FOR CAUSE.
The DEPARTMENT shall have the right to terminate this Agreement, upon
thirty (30) days notice to the RAILROAD, for nonperformance or breach by the
RAILROAD of any of the provisions of this Agreement. RAILROAD shall have thirty
days to cure said defaults.
SECTION 14. RETURN OF PREMISES.
During the five year period after consummation of the sale, if the
RAILROAD shall violate any covenant of this Agreement that remains uncured for
a period of thirty (30) days after receipt of written notice from the
DEPARTMENT, or in the event of the termination of this Agreement pursuant to
Section 13 herein, the DEPARTMENT shall have the right to terminate their
agreement, and the Line shall revert to the DEPARTMENT.
SECTION 15. SUCCESSORS AND ASSIGNS.
The terms and conditions of this Agreement shall extend to and be
binding upon the respective successors and assigns of the parties hereto as
their respective interests may appear, as though in each case herein they had
been specifically mentioned; provided, however, that this Agreement may not be
assigned by the
11
<PAGE> 12
RAILROAD unless written consent from the DEPARTMENT is first obtained
therefor, which consent shall not be unreasonably withheld or delayed by the
DEPARTMENT.
SECTION 16. GOVERNING LAW.
This Agreement is to be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
SECTION 17. SEVERABILITY.
If any term, covenant, condition or provision (or part thereof) of
this Agreement or the application thereof to any person or circumstances
shall, at any time or to any extent, be invalid or unenforceable, the
remainder of this Agreement or the application of such term or provision (or
remainder thereof) to persons or circumstances other than those as to which it
is held invalid or unenforceable, shall not be affected thereof, and each
term, covenant, condition and provision of this Agreement shall be valid and
be enforced to the fullest permitted by law.
SECTION 18. CAPTIONS.
The paragraph headings in this Agreement are for convenience only
and are without legal effect upon the terms thereof.
SECTION 19. NONDISCRIMINATION.
The Owner shall comply with the Commonwealth's Nondiscrimination
Clause attached hereto as Attachment Three and made a part hereof.
12
<PAGE> 13
SECTION 20. DISPUTES.
The RAILROAD agrees to be bound by the Act of May 20, 1937, P.L. 728,
as amended (72 P.S. 4651-1 et seq.), which provides, in substance, that the
Board of Claims shall have jurisdiction of claims against the DEPARTMENT arising
from contracts and the power to order interpleader or impleader of other
parties, when necessary for a complete determination of any claim or
counterclaim in which the DEPARTMENT is a party.
SECTION 21. CONTRACTOR INTEGRITY PROVISIONS.
The RAILROAD shall comply with the Contractor Integrity Provisions
attached hereto as Attachment Four and made a part hereof.
SECTION 22. OFFSET PROVISION.
The RAILROAD agrees that the DEPARTMENT may set off the amount of any
state tax liability or other debt of the RAILROAD or its subsidiaries that is
owed to the DEPARTMENT and not being contested on appeal against any payments
due the RAILROAD under this or any other contract with the DEPARTMENT.
SECTION 23. CONTRACTOR RESPONSIBILITY PROVISION.
The RAILROAD certifies compliance with the Contractor Responsibility
Provisions attached hereto as Attachment Five and made a part hereof.
SECTION 24. AMERICAN WITH DISABILITIES ACT.
The RAILROAD certifies compliance with the American with Disabilities
Act attached hereto as Attachment Six and made a part
13
<PAGE> 14
hereof.
SECTION 25. EXPIRATION.
This Agreement will expire five (5) years from the date of closing of
the property.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused these presents to be signed
and attested by their proper officials, pursuant to due and legal action
authorizing the same to be done, the day and year first above written.
<TABLE>
<CAPTION>
ATTEST: DELAWARE VALLEY RAILWAY COMPANY, INC.
<S> <C> <C> <C>
by /s/ Donald Redfearn June 28, 1996 by /s/ John H. Marino June 28, 1996
--------------------------------------------------- -------------------------------------------------------
Signature Date Signature Date
Secretary/ President July 16, 1996
- ----------------------------------------------------- ---------------------------------------------------------
Title Title
COMMONWEALTH OF PENNSYLVANIA
ATTEST: DEPARTMENT OF TRANSPORTATION
by /s/ Shannon M. Opperman 6/29/96 by /s/ Elizabeth S. Voras 6/29/96
--------------------------------------------------- ------------------------------------------------------
Signature Date Signature Date
Secretary Deputy Secretary for Aviation
- ----------------------------------------------------- --------------------------------------------------------
Title and Rail Freight
--------------------------------------------------------
Title
APPROVED AS TO LEGALITY AND FORM PRELIMINARY APPROVAL
by /s/ Michael H. Kline 7/1/96 by /s/ J. Lichtenstein Lubart 7-1-96
--------------------------------------------------- -------------------------------------------------------
Signature Date Signature Date
For Chief Counsel Assistant counsel
- ----------------------------------------------------- -------------------------------------------------------
Title Title
Recorder No.
------------------------------------------
/s/ Donna L. Kreiser 7-5-96 Certified Funds Available Order
- ----------------------------------------------------- Activity
Signature Date
Program
-----------------------------------------------
General Counsel Symbol
- ----------------------------------------------------- ------------------------------------------------
Title by /s/ David C. Boose 7/18/96
-------------------------------------------------------
by /s/ John A. F. Hall Signature Date
--------------------------------------------------
Signature Date
Comptroller Timothy A. Guss
---------------------------------------------------------
Title
Attorney General
- -----------------------------------------------------
Title
</TABLE>
<TABLE>
<CAPTION>
APPROVED FOR
OFFICE OF THE BUDGET
<S> <C>
by /s/ Timothy A. Guss 7/18/96
-------------------------------------------------------------
Signature Date
Comptroller
--------------------------------------------------------------
Title
</TABLE>
15
<PAGE> 1
AGREEMENT
This agreement entered into by and between R. Frank Unger,
Trustee of Sagamore National Corporation, Indiana HiRail Corporation ("IHR")
(hereinafter referred to as "Trustee") and the undersigned (hereinafter
referred to as "Buyer").
Recitals
1. On December 9, 1995, IHR filed its voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code ("Bankruptcy
Code") commencing case no. IP94-8502-RLB-11 (the "Chapter 11 Case") in the
United States Bankruptcy court for the Southern District of Indiana (the
"Court"). This cause was substantively consolidated with the bankruptcy
petition of Sagamore National Corporation ("Sagamore") on December 19, 1994.
2. On January 6, 1995, the United States Trustee appointed R.
Franklin Unger as the Trustee of IHR and Sagamore pursuant to Section 1163 of
the Bankruptcy Code.
3. The Trustee desires to sell and Buyer desires to purchase all
of the property rights and operating authority including all rail, ties,
fastenings, bolts, metallics, and ballast, and the underlying real estate or
rights of way, that constitutes approximately 40.4 route miles of tracks of
IHR between Browns, Illinois to Evansville, Indiana.
ARTICLE I
ASSETS PURCHASED AND SOLD
1.01 The assets to be sold are the Real Estate,
Rights-of-way, and Improvements that constitute approximately 40.4 route
miles of track, ties and other track material (OTM), located between Browns,
Illinois and Evansville, Indiana, including the Harwood Yard North, all
Trackage Rights, Operating Authorities, and all Leases, Licenses, Commercial
Contracts and Operating Agreements as more particularly described in Exhibits
"A" and "B" (collectively referred to as the "Sale Assets").
1.02 Notwithstanding the provisions of Section 1.01, the
Trustee shall not sell, convey, or transfer to Buyer and Buyer shall not
purchase or acquire from the Trustee any of Trustee's rights or interest to
any other property not described above, including any interest in the real
estate or the right-of-way of IHR, cash, rolling stock, locomotives,
equipment, books, records, office equipment, computer equipment, accounts
receivable, or choses in action.
<PAGE> 2
1.03 The Sale Assets shall be sold as is, where is, without
recourse in any event to the Trustee or IHR. Except as otherwise expressly
set forth in paragraph 5.01 of this Agreement, the Trustee expressly disclaims
all representations, warranties, and promises of every type, nature, or
description, whether written or expressed or implied, relating to (A) the
physical, structural, or environmental condition of the Sale Assets, (B) the
presence or absence of any hazardous materials or other contaminants on,
under, or about the IHR right-of-way, (C) the feasibility or desirability of
the purchase of the Sale Assets, (D) the projected income from the operations
on the Sale Assets, and (E) any other representation whatsoever with respect
to the Sale Assets, express or implied, including without limitation,
representations, warranties, or promises respecting quality, weight,
character, condition, fitness for the purpose or use intended by Buyer,
habitability or the suitability or sufficiency of the Sale Assets for Buyer
or any intended business to be conducted by Buyer. Buyer acknowledges that it
has inspected the Sale Assets and performed its own due diligence and is
relying exclusively upon its own inspection and due diligence in entering into
this agreement. Buyer hereby acknowledges that it has not relied upon any
representation, warranty, or promise not set forth in this agreement.
Notwithstanding the foregoing, the Trustee warrants delivery of good and
merchantable title to the Sale Assets free and clear of any and all liens,
claims, and encumbrances upon payment of the purchase price required by this
agreement.
ARTICLE II
PURCHASE PRICE; REAL ESTATE
2.01 Buyer will pay a total of $1,010,000.00 in cash for the Sale
Assets.
2.02 At a closing (the "Closing") promptly following the latter
to occur of the consent of the United States Department of Transportation,
Surface Transportation Board ("STB") or the entry of an order from the Court
approving the sale, Buyer will pay the full purchase price. Buyer will
deposit $101,000 upon execution of this agreement, which deposit is hereby
acknowledged by Seller, and such deposit is nonrefundable unless the Trustee is
unable to convey the Seller's interests as described herein due to the
inability of the Trustee to obtain Court or regulatory approvals except as
provided in paragraph 5.01 of this agreement.
2
<PAGE> 3
ARTICLE III
REPRESENTATIONS, WARRANTIES,
AND INDEMNITY OF BUYER
3.01 Buyer acknowledges that Buyer is not an agent, employee,
partner, or joint venturer of the Trustee, and Buyer has exclusive direction
and control over all of its respective employees concerning the manner in
which Buyer operates the railroad lines. Buyer assumes full responsibility
and hereby agrees to indemnify and hold harmless the Trustee and their agents,
officers, and employees from the payment of local, state, and federal taxes or
contributions for or an account of Buyer's employees including, without
limitation, such taxes or contributions for payroll, unemployment insurance,
social security, old age pensions, workers' compensation, or any related
protection with respect to Buyer's employees. Buyer hereby agrees to comply
with applicable rules and regulations promulgated under all such laws.
3.02 Buyer hereby indemnifies and holds harmless the Trustee and
IHR and their agents, officers, and employees from any and all loss, damage,
cost, expense (including attorneys' fees), action or claims for personal injury
(including death) or damage to property arising out of or in connection with
the operations of the Property from and after the sale and closing of the
proposed transaction.
3.03 The Trustee and IHR hereby indemnifies and holds harmless
Buyer and its agents, officers, and employees from any and all loss, damage,
cost, expense (including attorneys' fees), action, or claims for personal injury
(including death) or damage to property arising out of or in connection with
the operations of the Property prior to the sale and closing of the proposed
transaction.
ARTICLE IV
COURT AND GOVERNMENTAL APPROVAL
4.01 The rights and obligations of the parties under this Agreement
shall be contingent upon the following: (a) the consent of the STB to the sale
of the Sale Assets; and (b) the entry by the Court, after notice and hearing
in accordance with the Bankruptcy Code, the Federal Rules of Bankruptcy
Procedure, and any local bankruptcy rule, of an order pursuant to Section
363(b) and (f) of the Code approving the terms of the Agreement and
authorizing the Trustee to execute an deliver this Agreement and to execute a
bill of sale, and appropriate deed and assignments with
3
<PAGE> 4
regard to the property to consummate the sale by the Trustee to Buyer. The
Trustee shall diligently seek the consent of the STB and the entry of the
Court Order.
ARTICLE V
BUYER'S REMEDY AND TRUSTEE'S
COMMITMENT TO ASSIST BUYER
5.01 If the Trustee is unable to convey good and merchantable title,
free and clear of all liens, claims, and encumbrances, to all of the Sale Assets
within a reasonable time or if the Trustee is unable to deliver to Buyer
interchange rights with each existing carrier within a reasonable time or if
there has been a material change in the assets being acquired or in the
Trustee's operation, this offer shall be void at the option of Buyer and Buyer
will be entitled to a return of the deposit. Notwithstanding the foregoing, the
Trustee agrees to defend (with counsel reasonably satisfactory to Buyer),
indemnify, and hold harmless Buyer, its officers, directors, employees, and
agents from any and all liabilities, claims, suits, costs, and expenses arising
out of the breach of the warranty of title to the Sale Assets contained in the
last sentence of paragraph 1.03 of the Agreement, such indemnity and defense not
to exceed the amount of the Purchase Price.
5.02 Trustee shall take all reasonable actions to assist and
facilitate Buyer's purchase of the Sale Assets (including causing all rail cars
or other impediments created by third parties to be removed from the Sale
Assets).
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.01 This Agreement shall be construed and enforced in accordance
with the laws of the State of Indiana, without giving effect to the conflict of
law principles thereof.
6.02 This Agreement may be amended, modified, or supplemented only
in writing with approval of the Court.
6.03 This Agreement sets forth the entire agreement and
understanding of the parties and supersedes any and all prior agreements,
arrangements, and understanding among the parties hereto as to the subject
matter hereof.
4
<PAGE> 5
6.04 This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and assigns. Except as
may be required under applicable law, this Agreement cannot be assigned by Buyer
without the prior written consent of the Trustee.
6.05 The provisions of this Agreement are severable. As such, the
invalidity, in whole or in part, of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement.
If any clause or provision of this Agreement is determined to be illegal,
invalid, or unenforceable under any present or future law by the final judgment
of a court of competent jurisdiction, such clause or provision shall be
ineffective, but the remaining provisions of this Agreement will not be affected
and shall be construed in the broadest manner to effectuate the purpose of this
Agreement. Further, the Parties agree to replace any void or unenforceable
provision of this Agreement with a valid and enforceable provision which will
achieve, to the extent possible, the economic, business, and other purposes of
the void or enforceable provision.
Date: 6/7/96 /s/ R. Franklin Unger
------ --------------------------
R. Franklin Unger, Trustee
Date: 6/3/96 BUYER
------
RAILAMERICA, INC.
by /s/ Robert C. Parker
----------------------------
Its: Manager Operations Analysis
5
<PAGE> 1
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1996
PRIMARY EARNINGS PER SHARE
<TABLE>
<S> <C>
Adjustments to net income:
Net income $ 538,117
Interest reduction on conversion of warrants
and options 114,283
----------
Adjusted net income $ 652,400
==========
Adjustments to shares outstanding:
Actual weighted average shares outstanding 4,669,582
Net additional shares issuable upon conversion
of warrants and options 994,626
----------
Adjusted shares outstanding 5,664,208
==========
Primary earnings per share $ 0.12
==========
FULLY DILUTED EARNINGS PER SHARE
Adjustments to net income:
Net Income $ 538,117
Interest reduction on conversion of warrants,
options and convertible debt 195,734
----------
Adjusted net income $ 733,851
==========
Adjustments to shares outstanding:
Actual weighted average shares outstanding 4,669,582
Net additional shares issuable upon conversion
of warrants and options 994,626
Conversion of convertible debt 809,401
----------
Adjusted shares outstanding 6,473,609
==========
Fully diluted earnings per share $ .11
==========
</TABLE>
<PAGE> 2
COMPUTATION OF PER SHARE EARNINGS
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 1996
PRIMARY EARNINGS PER SHARE
<TABLE>
<S> <C>
Adjustments to net income:
Net income $ 326,310
Interest reduction on conversion of warrants
and options 57,142
----------
Adjusted net income $ 383,452
==========
Adjustments to shares outstanding:
Actual weighted average shares outstanding 4,671,372
Net additional shares issuable upon conversion
of warrants and options 994,626
----------
Adjusted shares outstanding 5,665,998
==========
Primary earnings per share $ 0.07
==========
FULLY DILUTED EARNINGS PER SHARE
Adjustments to net income:
Net Income $ 326,310
Interest reduction on conversion of warrants,
options and convertible debt 97,868
----------
Adjusted net income $ 424,178
==========
Adjustments to shares outstanding:
Actual weighted average shares outstanding 4,671,372
Additional shares issuable upon conversion
of warrants and options 994,626
Conversion of convertible debt 809,401
----------
Adjusted shares outstanding 6,475,399
==========
Fully diluted earnings per share $ .07
==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,371,333
<SECURITIES> 0
<RECEIVABLES> 3,655,459
<ALLOWANCES> 0
<INVENTORY> 3,265,278
<CURRENT-ASSETS> 9,325,929
<PP&E> 28,823,854
<DEPRECIATION> 0
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<CURRENT-LIABILITIES> 5,171,628
<BONDS> 21,268,909
0
0
<COMMON> 4,863
<OTHER-SE> 9,660,737
<TOTAL-LIABILITY-AND-EQUITY> 43,101,995
<SALES> 8,141,220
<TOTAL-REVENUES> 17,377,076
<CGS> 6,421,661
<TOTAL-COSTS> 15,509,518
<OTHER-EXPENSES> 40,058
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 973,989
<INCOME-PRETAX> 853,511
<INCOME-TAX> 315,394
<INCOME-CONTINUING> 538,117
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 538,117
<EPS-PRIMARY> .12
<EPS-DILUTED> .11
</TABLE>
