<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported) September 3, 1999
-------------------------------
RAILAMERICA, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation)
0-20618 65-0328006
- ----------------------------- ---------------------------------
(Commission File Number) (IRS Employer Identification No.)
5300 BROKEN SOUND BLVD N.W.
BOCA RATON, FLORIDA 33487
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code (561) 994-6015
----------------------------
N/A
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(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Attached hereto as exhibit 7(a) and incorporated herein by reference:
(a) Financial Statements of Business Acquired.
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Income for the years ended
December 31, 1998 and 1997
Consolidated Statements of Stockholders' Equity for the years
ended December 31, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended
December 31, 1998 and 1997
Notes to consolidated financial statements
Unaudited Consolidated Balance Sheet as of June 30, 1999
Unaudited Consolidated Income Statements for the six months
ended June 30, 1999 and 1998
Unaudited Consolidated Statements of Cash Flows for the six
months ended June 30, 1999 and 1998
Attached hereto as exhibit 7(b) and incorporated herein by reference:
(b) Pro Forma Financial Information.
Pro forma consolidated balance sheet as of June 30, 1999
Pro forma consolidated statement of income for the six months
ended June 30, 1999.
Pro forma consolidated statement of income for the year ended
December 31, 1998.
Notes to unaudited pro forma consolidated financial
statements.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RAILAMERICA, INC.
Dated: November 8, 1999 By: /s/ Gary O. Marino
--------------------------------
Name: Gary O. Marino
Its: Chairman, CEO and President
<PAGE> 4
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
The Toledo, Peoria and Western Railroad
Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of The
Toledo, Peoria and Western Railroad Corporation and subsidiaries as of December
31, 1998 and 1997, and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Toledo, Peoria and Western Railroad Corporation and subsidiaries at December 31,
1997 and 1998, and the consolidated results of their operations and their cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
February 19, 1999
<PAGE> 5
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(thousands)
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 433 $ 201
Accounts receivable ........................................... 1,631 2,004
Reimbursable construction costs ............................... 29 92
Materials and supplies ........................................ 142 172
Deferred income taxes ......................................... 313 241
Prepaid expenses and other current assets ..................... 61 28
-------- --------
Total current assets ............................................. 2,609 2,738
Property, plant and equipment:
Land .......................................................... 6,915 6,923
Buildings, machinery and equipment ............................ 13,458 15,382
-------- --------
20,373 22,305
Less accumulated depreciation ................................. (1,510) (2,517)
-------- --------
Property, plant and equipment, net................................ 18,863 19,788
Other assets:
Other assets .................................................. 249 230
Intangible assets, net ........................................ 160 151
-------- --------
Total other assets ............................................... 409 381
Total assets ..................................................... $ 21,881 $ 22,907
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable .................................................. $ 500 $ 300
Accounts payable .............................................. 3,709 2,995
Accrued and other current liabilities ......................... 1,484 1,024
Current maturities of long-term debt .......................... 656 849
-------- --------
Total current liabilities ........................................ 6,349 5,168
Long-term liabilities:
Long-term debt ................................................ 7,297 7,608
Other long-term liabilities ................................... 92 91
Deferred income taxes ......................................... 2,206 2,765
-------- --------
Total long-term liabilities ...................................... 9,595 10,464
-------- --------
Total liabilities ................................................ 15,944 15,632
Stockholders' equity:
Common stock, no par value, 1,000 shares authorized, issued
and outstanding in 1997 and 1998 ............................ -- --
Additional paid-in capital .................................... 5,250 5,250
Contributed capital ........................................... 202 216
Retained earnings ............................................. 485 1,809
-------- --------
5,937 7,275
-------- --------
Total liabilities and stockholders' equity ....................... $ 21,881 $ 22,907
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 6
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1998
--------- --------
<S> <C> <C>
OPERATING REVENUES:
Railway operating revenues ....................... $ 11,325 $ 13,058
Real property .................................... 277 278
Other operating revenue .......................... 80 55
-------- --------
Total operating revenues ............................ 11,682 13,391
OPERATING EXPENSES
Maintenance of way and structures ................ 1,362 1,249
Maintenance of equipment ......................... 1,309 1,354
Transportation ................................... 4,875 4,995
Car hire expense ................................. 672 572
Depreciation and amortization .................... 849 1,004
Taxes other than income taxes .................... 130 170
General, administrative and other ................ 1,349 1,383
-------- --------
Total operating expenses ............................ 10,546 10,727
-------- --------
Income from operations .............................. 1,136 2,664
OTHER (EXPENSE) INCOME:
Interest expense, net ............................ (731) (754)
Gain on sale of property, equipment and other .... -- 69
-------- --------
Other expense, net .................................. (731) (685)
-------- --------
Income before income taxes .......................... 405 1,979
Provision for income taxes .......................... (150) (655)
-------- --------
Net income .......................................... $ 255 $ 1,324
======== ========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 7
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Year Ended December 31, 1997 and 1998
(thousands)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN CONTRIBUTED RETAINED
STOCK CAPITAL CAPITAL EARNINGS TOTAL
------ ---------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 .... $ -- $5,250 $158 $ 230 $5,638
Net income ...................... 255 255
Rehabilitation subsidies ........ 44 44
------ ------ ---- ------ ------
Balance at December 31, 1997 .... -- 5,250 202 485 5,937
Net income ...................... 1,324 1,324
Rehabilitation subsidies ........ 14 14
------ ------ ---- ------ ------
Balance at December 31, 1998 .... $ -- $5,250 $216 $1,809 $7,275
====== ====== ==== ====== ======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 8
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------- ---------------
1997 1998
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income ............................................................. $ 255 $ 1,324
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ........................................ 849 1,004
Amortization of deferred financing costs ............................. 31 37
Provision for deferred income taxes .................................. 136 624
Gain on sale of fixed assets ......................................... -- (69)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable and
reimbursable construction costs .................................. 897 (436)
Decrease in materials, supplies, prepaids and other
current assets ................................................... 3 3
Decrease in accounts payable, accrued expenses, and other
liabilities ..................................................... (876) (1,174)
------- -------
Net cash provided by operating activities .............................. 1,295 1,313
INVESTING ACTIVITIES
Additions to property, plant and equipment ............................. (1,525) (1,936)
Proceeds from sale of assets ........................................... -- 71
Contributed capital .................................................... 66 20
Decrease (increase) in other assets .................................... (28) (4)
------- -------
Net cash used in investing activities .................................. (1,487) (1,849)
FINANCING ACTIVITIES
(Decrease) increase in notes payable ................................... 500 (200)
Proceeds from long-term borrowings ..................................... 150 1,200
Principal payments on long-term debt ................................... (483) (696)
------- -------
Net cash provided by financing activities .............................. 167 304
------- -------
Decrease in cash and cash equivalents .................................. (25) (232)
Cash and cash equivalents at beginning of period ....................... 458 433
------- -------
Cash and cash equivalents at end of period ............................. $ 433 $ 201
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 9
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS: The Company's common stock is owned by Delaware Otsego
Corporation ("DOC"), a private investor group, CSX Transportation, Inc.
(collectively "The Investor Group"), and Creditanstalt American Corporation
("CAC").
The Company operates a 284-mile Class III regional railroad which
provides rail service on a generally East-West rout across one of the top grain
producing regions in the world. It stretches from Fort Madison, Iowa through
Central Illinois (approximately 70 miles south of Chicago) to Logansport,
Indiana and includes service to two company-operated intermodal facilities. The
TP&W hauls agricultural products, chemicals, coal, fertilizer, food products,
steel, manufactured goods and consumer products for such customers as Archer
Daniels Midland, Central Illinois Power, Witco, Lonza and Caterpillar. The
Company also has operations over (i) 52 miles of track between Peoria, Illinois
and Galesburg, Illinois owned by Burlington Northern Santa Fe pursuant to a
Trackage Rights Agreement and a Haulage Agreement, and (ii) 33 miles of track in
Indiana pursuant to a Lease Agreement with subsidiaries of Cargill, Inc.
The Investor Group is currently negotiating for the possible sale of
the Company in the first half of 1999.
PRINCIPLES OF CONSOLIDATION: The accompanying consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries, Marksman Corporation (inactive) and Toledo, Peoria and Western
Railway Corporation (operating subsidiary). All significant intercompany
transactions and balances have been eliminated in consolidation.
ACCOUNTS RECEIVABLE AND REVENUE RECOGNITION: Accounts receivable and
accounts payable in the balance sheet reflect interline transactions with other
railroads which the Company is required to enter into as part of settling
freight payments received from customers. The system follows Railway Accounting
Rules as adopted by member railroads of The Association of American Railroads,
of which the Company is a member. At year end, in accordance with industry
practice, accrued revenue on a completed service basis is reflected in the
statement of income for unsettled freight not yet part of the interline
accounting system.
At December 31, 1998 and 1997, the Company's trade receivables are $2.0
million and $1.6 million, which is net of an allowance for doubtful accounts of
$43 and $115, respectively.
Two major customers accounted for approximately 44% and 38% of the
Company's operating revenues for the year ended December 31, 1998 and 1997,
respectively. The loss of either customer could have an adverse effect on the
Company's results of operations. At December 31, 1998 and 1997, respectively,
the Company's trade receivables include approximately $721 and $733 or 36% and
45% of total receivables, representing balances due from the two major
customers. The Company does not require collateral and the credit risk
associated with this concentration is not deemed significant.
COMMODITY AGREEMENT USED TO HEDGE PRICE FLUCTUATIONS: The Company
enters into a diesel fuel supply agreement to hedge its exposure to price
fluctuations on approximately 53% of its anticipated fuel requirements during a
six-month period, from Fall to early Spring, for its freight transportation
business. The nature of the hedging transaction does not result in any
significant risk to the Company.
MATERIALS AND SUPPLIES: Materials and supplies are stated at the lower
of cost or market determined by the average cost method.
Materials and supplies are charged to expense, construction-in-progress
or property, plant and equipment at the time of use.
<PAGE> 10
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is
recorded at cost including capitalized interest during periods of construction.
Depreciation is provided over the estimated useful lives of the related assets
and is computed principally by the straight-line method for financial statement
purposes.
Costs of reimbursable rehabilitation projects not yet complete are
recorded in reimbursable construction costs. Charges incurred during the project
phase are billed to the respective state or federal government agency. The
proceeds from these subsidies are recorded in the statement of stockholders'
equity as contributed capital at the time of receipt, net of applicable income
taxes.
The cost of property retired or sold and related accumulated
depreciation are removed from the asset and allowance accounts. Gain or loss on
disposition of property is reflected in earnings. Maintenance and repairs are
charged to earnings as incurred. Renewals and betterments are capitalized
INTANGIBLE ASSETS: Intangibles are amortized by the straight-line
method over a period of 20 years. Accumulated amortization was $25 and $17 at
December 31, 1998 and 1997, respectively.
ESTIMATED SELF-INSURANCE LIABILITY: The Company is self-insured to
various limits for public liability and property loss. The liability for
self-insurance is generally accrued based on occurrence, with liability for
possible escalation on unsettled claims being estimated based on individual
situations. In the opinion of management, after review with attorneys for the
Company, such claims are of a nature that they will not have a material adverse
effect on the financial position of the Company.
INCOME TAXES: The Company provides for income taxes in accordance with
the liability method as set forth in Statement of Financial Accounting Standards
No. 109, ACCOUNTING FOR INCOME TAXES. Under the liability method, deferred taxes
are determined based on the difference between the financial statement and tax
basis of assets and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse. (See Note 5.)
CASH EQUIVALENTS: The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
<PAGE> 11
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES: At the date of the Company's
acquisition of Marksman Corporation and Toledo, Peoria and Western Railway,
January 31, 1996, certain levels of accruals, primarily related to unsettled
interline liabilities, were carried forward to cover uncertainties associated
with the ultimate settlement of these amounts. During 1998, the Company made a
final determination that these interline liabilities existing at the acquisition
date were subsequently settled at amounts less than the established accrual.
Accordingly, $350 of the accrual that was established at the acquisition date
was reversed in 1998 and is reflected in the 1998 statement of income in railway
operating revenues. Additionally, the Company in 1998 favorably settled a
liability for certain facility costs which resulted in approximately $136 of an
accrual established at the acquisition date being reversed and is reflected in
the 1998 statement of income in maintenance of way and structures expense.
USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
PENDING ADOPTION OF RECENTLY ISSUED ACCOUNTING STANDARD: In April 1998,
the AICPA issued SOP 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES. The SOP
is effective beginning on January 1, 1999, and requires that start-up costs
capitalized prior to January 1, 1999 be written off and any future start-up
costs be expenses as incurred. The unamortized balance of start-up costs ($151
as of December 31, 1998) will be written off as a cumulative effect of an
accounting change during 1999.
RECLASSIFICATION: Certain amounts in the 1997 financial statements have
been reclassified to conform with the 1998 presentation.
NOTE 2. PROPERTY, PLANT AND EQUIPMENT
A summary of property, plant and equipment balances by major classes at
December 31 is as follows:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Land $ 6,915 $ 6,923
Buildings and bridges 2,599 2,618
Machinery, equipment and roadway 10,859 12,764
-------- --------
20,373 22,305
Less: allowance for depreciation (1,510) (2,517)
-------- --------
Property, plant and equipment, net $ 18,863 $ 19,788
======== ========
</TABLE>
During the year ended December 31, 1997, the Company entered into capital lease
obligations totaling $101, for the acquisition of equipment.
NOTE 3. NOTE PAYABLE
The Company has available up to a $1 million line of credit, which matures on
January 31, 2001, which is secured by eligible accounts receivable. Interest on
these borrowings is at prime plus 1.00% (prime at December 31, 1998 was 7.75%).
At December 31, 1998 and 1997, respectively, eligible accounts receivable were
$931 and $975 and the Company had drawn down $300 and $500 of the available
line.
<PAGE> 12
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. LONG-TERM DEBT
Long-term debt obligations at December 31 are summarized as follows:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Term loan payable to Bank Austria Creditanstalt Corporate Finance, Inc.
("BACCF") in quarterly principal installments escalating from $56 to $200
plus interest through 2002, with a balloon payment of $3.37 million in 2003
Interest on the term loan is based on the prime rate plus 1.5% (prime at
December 31, 1998 was 7.75%). The agreement also stipulates if certain
thresholds of net income are met, the Company must make
mandatory prepayments of principal ............................................. $ 6,532 $ 6,021
Loan payable to Bank Austria Creditanstalt Corporate Finance, Inc.
("BACCF") in monthly principal installments of $16 plus interest through
2005. Interest based on prime rate plus 1.5% (prime at December 31,
1998 was 7.75%) ................................................................ 150 1,296
Loan payable to the State of Illinois, acting through its Department of
Transportation, in annual installments of $104 including interest, through
2011, with interest at a rate of 3% secured by liens on
improvements made to rail structures paid for from the loan proceeds ........... 1,175 1,107
Capital lease obligations, due through September 2000 in monthly installments
with interest varying from 6.81% to 9.27% at December 31,
1998. The leases are secured by equipment ..................................... 96 33
------- -------
7,953 8,457
Less current portion .............................................................. (656) (849)
------- -------
Long-term debt .................................................................... $ 7,297 $ 7,608
======= =======
</TABLE>
In connection with the term loan between the Company and BACCF, the
Investor Group entered into a cash collateral agreement and a deficiency
guarantee with BACCF. The cash collateral agreement required cash collateral
deposits of $1 million to be made which secure the loan in the event of default
by the Company. The deposits were funded $951 by the Investor Group and $49 by
the Company. The deficiency guarantee obligates each member of the Investor
Group, severally, to guarantee payment of a portion of the term loan in
accordance with the terms of the loan agreement. The Investor Group has also
pledged a security interest in the shares of the Company's common stock owned to
BACCF.
Substantially all assets of the Company are pledged as collateral under
debt agreements. In addition to other requirements, the Company is required to
meet certain covenant ratio requirements, such as minimum net worth and annual
capital expenditure limits, under its primary debt agreement. At December 31,
1998, the Company met all the minimum requirements. The Company is restricted
from paying dividends during the term of the BACCF term loan agreement.
Interest expense, net, is comprised of interest expense of $802 for the
year ended December 31, 1998 and $783 for the year ended December 31, 1997, net
of respective amounts for capitalized interest of $32 in both years and interest
income of $16 and $20. Interest paid was $762 and $736, respectively, for the
same periods.
<PAGE> 13
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. LONG-TERM DEBT, CONTINUED.
A summary of maturities of long-term debt at December 31, 1998 is as
follows:
1999 $ 849
2000 905
2001 961
2002 1,034
2003 3,645
Thereafter 1,063
------
$8,457
======
NOTE 5. INCOME TAXES
The components of the provision for federal and state income taxes are
as follows:
YEAR ENDED
DECEMBER 31,
----------------
1997 1998
---- ----
Current tax expense ........... $ 14 $ 31
Deferred tax expense .......... 136 624
---- ----
Total income tax expense .... $150 $655
==== ====
The Company's effective tax rate differs from the statutory U.S.
federal income tax rate due primarily to the effects of state taxes and certain
expenses not deductible for federal tax purposes.
State taxes are based on a combination of pre-tax earnings, allocated
capital and gross transportation receipts. Amounts included in current tax
expense were $16 for the year ended December 31, 1998 and $14 for the year ended
December 31, 1997. Current tax expense for 1998 also includes a $326 benefit
from the utilization of federal net operating loss carryforwards.
The Company has operating loss carryforwards of $286 at December 31,
1998 which expire at various dates through 2012. Due to a change in ownership as
defined under IRC section 382, $266 of the net operating loss carryforward is
subject to an annual limitation of $22. A valuation allowance has been
established for operating loss carryforwards attributable to the acquired
company due to uncertainties regarding their future realization.
Net income tax payments amounted to $16 for the year ended December 31,
1998 and $14 for the year ended December 31, 1997.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant
<PAGE> 14
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
components of the Company's deferred tax liabilities and assets as of
December 31 are as follows:
NOTE 5. INCOME TAXES, CONTINUED
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Book basis in excess of tax basis of property, plant and equipment .... $ 2,518 $ 2,786
DEFERRED TAX ASSETS:
Vacation reserve ...................................................... 69 54
Bad debt reserve ...................................................... 39 36
Litigation reserve .................................................... 107 85
Deferred revenue ...................................................... 46 46
Accrued health claims ................................................. 28 21
Other ................................................................. 24 14
Net operating loss carryforwards ...................................... 385 97
------- -------
698 353
Valuation allowance ................................................... (73) (91)
------- -------
Total deferred tax assets ................................................ 625 262
Net deferred tax liabilities ............................................. $ 1,893 $ 2,524
======= =======
CLASSIFICATION OF DEFERRED TAXES:
Non-current liabilities ............................................... $ 2,206 $ 2,765
Current assets ........................................................ (313) (241)
------- -------
$ 1,893 $ 2,524
======= =======
</TABLE>
NOTE 6. LEASES
The Company leases certain equipment under operating lease agreements
for periods ranging from one to three years. Rental expense was $758 and $604
for the years ended December 31, 1998 and 1997, respectively.
Future minimum lease payments for noncancellable operating leases as of
December 31, 1998 are $196 in the year ending December 31, 1999.
NOTE 7. COMMITMENTS AND CONTINGENT LIABILITIES
The Company has outstanding at December 31, 1998 commitments of
approximately $1.1 million in connection with the completion of various
rehabilitation projects and construction in progress. Completion dates range
from six months to three years. The commitments are expected to be partially
offset by government agency funding of approximately $985.
Certain claims have been filed against the Company or its subsidiaries
and have not been finally adjudicated. These claims when finally concluded and
determined, will not, in the opinion of management based upon information that
it presently possesses, have a material adverse effect on the consolidated
financial position or results of operations.
The U.S. Environmental Protection Agency ("USEPA") has performed a
screening site inspection at one of the Company's properties. The site
inspection report raises the possibility that at some date the USEPA may assert
claims for remediation against the Company. Some properties are presently and
have in the past been leased or licensed to others who are or have maintained
hazardous materials handling facilities on the properties, which may have
resulted in spills on the property or operation in violation of certain federal
or state laws. The Company's policy is to make provision for the cost of
environmental matters when it is probable that a liability has been incurred and
such liability can be reasonably estimated.
<PAGE> 15
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Under an operating lease with a third party, the Company is committed
to repair a bridge estimated to cost $70. This repair is expected to be
completed by the middle of the year 2000.
NOTE 8. RELATED PARTY TRANSACTIONS
The Company entered into an Administrative Services Agreement by and
between the Company and DOC on January 31, 1996. Under this agreement, the DOC
performs certain administrative services for the Company. Such services
performed by the DOC totaled $1.1 million for the year ended December 31, 1998
and $1.1 million for the year ended December 31, 1997 and are included primarily
in general and administrative expense. In the normal course of business,
transactions exist between the Company and the DOC. For the above mentioned
periods, respectively, these types of charges (primarily related to locomotive
and equipment rental and capital work) totaled approximately $1.3 million and
$791, offset in part by Company billings to the DOC of approximately $21 and
$55.
At December 31, 1998 and 1997 the Company had a net payable to the DOC
of approximately $764 and $638, respectively. Of these amounts, for the
respective periods, $331 and $270 represent amounts payable under the
Administrative Services Agreement and the remaining $433 and $368 are various
direct costs incurred or services performed by DOC, net of direct receivables
from them.
NOTE 9. YEAR 2000 (UNAUDITED)
The Year 2000 Issue (Y2K) is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
the Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
Based on recent assessments, the Company determined that its most
significant data processing suppliers (Delaware Otsego Corporation, Railcar
Management, Inc. and Railinc) require modification or replacement of portions of
their software and certain hardware so that those systems will properly utilize
dates beyond December 31, 1999. If such modifications and replacements are not
made, or are not completed timely, the Y2K problem could have a material impact
on the operations of the Company. The Company continues to monitor the efforts
of these suppliers and believes that all necessary modifications will be
completed.
The Company's assessment also indicated that software and hardware
(embedded chips) used in Company-owned telephone switching and dispatching
software (hereafter also referred to as operating equipment) may also be at
risk, but there is no material exposure as it relates to locomotive power or
grade crossing protection. The Company intends to replace or upgrade this
operating equipment.
Except as noted above, the Company is not aware of any suppliers or
subcontractors with a Y2K problem that would materially impact the Company's
results of operations, liquidity, or capital resources. However, the Company has
no means of ensuring that suppliers or subcontractors will be Y2K ready. The
effect of noncompliance by external agents is not determinable.
Management of the Company believes it has an effective program in place
to resolve the Y2K issue in a timely manner. As noted above, the Company has not
yet completed all necessary phases of the Y2K program. In the event that the
Company does not complete any additional phases, the Company may be unable to
take customer orders, ship products, invoice customers or collect payments. In
addition, disruptions in the economy generally resulting from Y2K issues could
also materially adversely affect the Company. The Company could be subject to
litigation for computer systems product failure, for example, equipment shutdown
or failure to properly date business records. The amount of potential liability
and lost revenue cannot be reasonably estimated at this time.
<PAGE> 16
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company currently has no contingency plan in place in the event it
does not complete all phases of the Year 2000 program. The Company plans to
evaluate the status of its completion in 1999 and determine whether such a plan
is necessary.
<PAGE> 17
THE TOLEDO, PEORIA AND WESTERN RAILROAD
CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
As of June 30, 1999
(in thousands)
(unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash .................................................................... $ 516
Accounts and notes receivable ........................................... 1,401
Inventory ............................................................... 158
Deferred income taxes ................................................... 241
Other current assets .................................................... 110
-------
Total current assets ............................................ 2,426
Property, plant and equipment, net ........................................ 19,558
Other assets .............................................................. 290
-------
Total assets .................................................... $22,274
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt .................................... $ 1,377
Accounts payable ........................................................ 2,556
Accrued expenses ........................................................ 988
-------
Total current liabilities ...................................... 4,921
-------
Long-term debt ............................................................ 7,133
Other liabilities ......................................................... 227
Deferred income taxes ..................................................... 2,752
Stockholders' equity:
Common stock ............................................................ --
Additional paid in capital .............................................. 5,518
Retained earnings ....................................................... 1,723
-------
Total stockholders' equity ...................................... $ 7,241
-------
Total liabilities and stockholders' equity ...................... $22,274
=======
</TABLE>
<PAGE> 18
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
for the Six Months Ended June 30, 1998 and 1999
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1998 1999
------- -------
<S> <C> <C>
OPERATING REVENUES:
Transportation ........................ $ 5,425 $ 4,882
Other ................................. 687 880
------- -------
Total operating revenue ....... 6,112 5,762
------- -------
OPERATING EXPENSES:
Transportation ........................ 4,297 4,192
General and administrative ............ 775 783
Depreciation and amortization ......... 470 511
------- -------
Total operating expenses ...... 5,542 5,486
------- -------
Operating income .............. 570 276
Interest and other expenses ........... (337) (385)
------- -------
Income (loss) before income
taxes ....................... 233 (109)
Provision for income taxes ............ 83 (24)
------- -------
Net (loss) income ............. $ 150 $ (85)
======= =======
</TABLE>
<PAGE> 19
THE TOLEDO, PEORIA AND WESTERN RAILROAD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months ended June 30, 1998 and 1999
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1998 1999
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................... $ 150 $ (85)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ........................................ 470 510
Gain on sale of properties ........................................... (34) (18)
Deferred income taxes ................................................ 79 (39)
Changes in operating assets and liabilities, net acquisition and
dispositions:
Accounts receivable ............................................... 191 701
Inventories ....................................................... (114) (76)
Other assets ...................................................... (2) 85
Accounts payable and accruals ..................................... 1 (340)
----- -----
Net cash provided by operating activities ................... 741 738
----- -----
Cash flows from investing activities:
Purchase of property, plant and equipment ............................ (857) (307)
Capital contributions ................................................ 20 79
Proceeds from sale of properties ..................................... 36 47
----- -----
Net cash provided by investing activities ................... (801) (181)
----- -----
Cash flows from financing activities:
Proceeds from issuance of long-term debt ............................. 600 200
Principal payments on debt ........................................... (346) (444)
----- -----
Net cash provided by (used in) financing activities ......... 254 (244)
----- -----
Net increase in cash ................................................... 194 313
Cash, beginning of period .............................................. 433 201
----- -----
Cash end of period ..................................................... $ 627 $ 514
===== =====
</TABLE>
<PAGE> 20
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOLEDO, PEORIA PRO FORMA
RAILAMERICA(a) RAILINK LTD.(a) AND WESTERN(a) ADJUSTMENTS PRO FORMA
-------------- --------------- -------------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash ................................. $ 15,386 $ 549 $ 514 $ $ 16,449
Accounts and notes receivable ........ 27,395 7,347 1,401 36,143
Inventories .......................... 13,589 4,387 158 18,134
Other current assets ................. 2,856 708 351 3,915
--------- --------- --------- --------- ---------
Total current assets ............ 59,226 12,991 2,424 -- 74,641
Property, plant and equipment, net ... 245,540 48,175 19,558 16,413(b) 333,343
3,657(c)
Notes receivable, less current portion 1,301 -- -- 1,301
Investment in affiliates ............. 1,939 3,629 -- 5,568
Excess of cost over net assets of
companies acquired ................. 2,189 -- -- 2,189
Other assets ......................... 10,755 -- 292 (292)(c) 10,755
--------- --------- --------- --------- ---------
Total assets .................... $ 320,950 $ 64,795 $ 22,274 $ 19,778 $ 427,797
========= ========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current maturities of long-term debt.. $ 3,243 $ 4,333 $ -- $ (4,333)(b) $ 3,243
Current maturities of subordinated
debt ............................... 201 -- -- 201
Accounts payable ..................... 18,189 5,986 2,556 26,730
Accrued expenses ..................... 10,390 -- 1,124 490 (b) 12,004
--------- --------- --------- --------- ---------
Total current liabilities ....... 32,023 10,319 3,680 (3,843) 42,179
--------- --------- --------- --------- ---------
Long-term debt ....................... 81,753 20,749 8,601 36,160(b) 148,350
1,087(c)
Subordinated debt .................... 100,000 -- -- 100,000
Convertible debt ..................... 7,018 -- -- 13,362(b) 28,436
8,056(c)
Other liabilities .................... 18,764 -- -- 18,764
Deferred income taxes ................ 7,443 (1,730) 2,752 6,191(b) 16,119
1,463(c)
Minority interest .................... 8,319 -- -- 8,319
Redeemable convertible preferred stock 10,740 -- -- 10,740
Stockholders' equity:
Common stock .................... 12 -- -- 12
Additional paid in capital ...... 43,933 29,563 5,518 (29,563)(d) 43,933
(5,518)(e)
Retained earnings ............... 12,729 5,894 1,723 (5,894)(d) 12,729
(1,723)(e)
Accumulated other comprehensive
income .......................... 2,135 -- -- 2,135
Less treasury stock ............. (3,919) -- -- (3,919)
--------- --------- --------- --------- ---------
Total stockholders' equity ...... 54,890 35,457 7,241 (42,698) 54,890
--------- --------- --------- --------- ---------
Total liabilities and
stockholders' equity .......... $ 320,950 $ 64,795 $ 22,274 $ 19,778 $ 427,797
========= ========= ========= ========= =========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
<PAGE> 21
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
V/LINE FREIGHT RAILINK TOLEDO, PEORIA PRO FORMA
RAILAMERICA(a) CORPORATION(b) LTD.(a) AND WESTERN(a) ADJUSTMENTS PRO FORMA
-------------- -------------- ------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Transportation -
railroad $ 30,304 $ 60,410 $ 25,470 $ 13,058 $ 16,548 (c) $ 145,790
Transportation-motor
carrier 4,252 -- -- -- -- 4,252
Manufacturing 39,887 -- -- -- -- 39,887
Other 2,700 13,124 1,587 333 -- 17,744
---------- ---------- ---------- ---------- -------- ----------
Total operating revenue 77,143 73,534 27,057 13,391 16,548 207,673
---------- ---------- ---------- ---------- -------- ----------
OPERATING EXPENSES:
Transportation - 15,702 80,334 17,447 8,170 (1,322) (d) 120,331
Railroad
Costs of goods sold -
manufacturing 28,583 -- -- -- -- 28,583
Selling, general and
administrative 12,399 -- 4,033 1,553 (783) (f) 17,202
Depreciation and amortization 3,379 2,781 3,024 1,004 4,298 (g) 13,906
(98) (h)
(483) (I)
Motor Carrier 4,438 -- -- -- -- 4,438
---------- ---------- ---------- ---------- -------- ----------
Total operating
expenses 64,501 83,115 24,504 10,727 1,613 184,460
---------- ---------- ---------- ---------- -------- ----------
Operating income 12,642 (9,581) 2,554 2,664 14,935 23,214
Interest and other expense (4,934) (630) (421) (14,247) (j) (26,269)
(685) (4,650) (k)
(702) (l)
Minority interest in income of
subsidiary (1,672) -- -- -- -- (1,672)
---------- ---------- ---------- ---------- -------- ----------
Income before income taxes 6,036 (10,211) 2,132 1,979 (4,664) (4,728)
Provision for income taxes 1,570 -- 887 655 (5,540) (m) (2,428)
---------- ---------- ---------- ---------- -------- ----------
Net (loss) income $ 4,466 $ (10,211) $ 1,245 $ 1,324 $ 876 $ (2,300)
========== ========== ========== ========== ======== ==========
Weighted average shares
outstanding:
Basic 9,553 1,415 (n) 10,968
========== ======== ==========
Diluted 10,307 661 (o) 10,968
========== ======== ==========
Earnings per share - Basic $0.47 $(0.31)
========== ==========
Earnings per share - Diluted $0.44 $(0.31)
========== ==========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
<PAGE> 22
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
V/LINE FREIGHT TOLEDO,
RAILAMERICA CORPORATION RAILINK LTD. PEORIA AND PRO FORMA
(a) (b) (a) WESTERN (a) ADJUSTMENTS PRO FORMA
----------- ----------- ------------ ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUE:
Transportation - railroad....... $ 34,846 $ 24,302 $16,142 $ 4,882 $ 5,747 (c) $ 85,918
Manufacturing................... 22,956 -- -- -- -- 22,956
Other........................... 3,468 4,529 1,048 880 -- 9,925
---------- ---------- ---------- --------- -------- ----------
Total operating revenue...... 61,270 28,831 17,190 5,762 5,747 118,799
---------- ---------- ---------- --------- -------- ----------
OPERATING EXPENSES:
Transportation - railroad....... 21,787 31,291 10,098 4,192 (683) (d) 66,685
Costs of goods sold -
manufacturing 16,992 -- -- -- -- 16,992
Selling, general and
administrative 9,606 -- 2,866 783 (277) (e) 12,592
(386) (f)
Depreciation and amortization.... 3,237 1,230 1,801 511 1,206 (g) 7,560
(193) (h)
(232) (i)
---------- ---------- ---------- --------- -------- ----------
Total operating expenses........... 51,622 32,521 14,765 5,486 (566) 103,829
---------- ---------- ---------- --------- -------- ----------
Operating income........... 9,648 (3,690) 2,424 276 6,312 14,971
Interest and other expense......... (3,375) (234) (566) (385) (4,884)(j) (12,092)
(2,309)(k)
(338)(l)
Minority interest in income of
subsidiary..................... (381) -- -- -- -- (381)
---------- ---------- ---------- --------- -------- ----------
Income before income taxes........ 5,892 (3,924) 1,858 (109) (1,220) 2,498
Provision for income taxes........ 1,941 -- 783 (24) (1,968) (m) 732
---------- ---------- ---------- --------- -------- ----------
Net income................. $ 3,951 $ (3,924) $ 1,075 $ (85) $ 748 $ 1,765
========== ========== ========== ========= ======== ==========
Weighted average shares
outstanding:
Basic ..................... 10,617 520 (n) 11,137
========== ======== ==========
Diluted.................... 11,432 92 (o) 11,524
========== ======== ==========
Earnings per share - Basic...... $0.32 $0.11
========== ==========
Earnings per share - Diluted.... $0.31 $0.11
========== ==========
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
<PAGE> 23
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
BALANCE SHEET:
(a) Represents the historical balance sheet at June 30, 1999.
(b) Represents the following estimated adjustments to reflect the
acquisition of RaiLink Ltd. (the final purchase price
allocation will be based upon a final determination of the
fair values of the net assets acquired):
<TABLE>
<CAPTION>
<S> <C> <C>
Cash purchase price $61.4 million
Assumption of existing debt $ 8.8 million
------
Total purchase price $70.2 million
Sources of purchase price:
Revolving line of credit $48.1 million
Issuance of convertible debt $13.3 million
Assumption of existing debt $ 8.8 million
------
Total sources $70.2 million
Adjustments to historical financial statements of RaiLink:
Property, plant and equipment $16.4 million
Accrued liabilities $(0.5) million
Deferred tax liability $(6.2) million
Accrued liabilities represent severance costs which RailAmerica has accrued in
accordance with EITF No. 95-3, "Recognition of Liabilities in Connection with a
Purchase Business Combination."
</TABLE>
(c) Represents the following estimated adjustments to reflect the
acquisition of Toledo, Peoria and Western Railroad (the final
purchase price allocation will be based upon a final
determination of the fair values of the net asset acquired):
<TABLE>
<CAPTION>
<S> <C> <C>
Cash purchase price $17.8 million
Sources of purchase price:
Revolving line of credit $ 9.7 million
Issuance of convertible debt $ 8.1 million
------
Total sources $17.8 million
Adjustments to historical financial statements of Toledo, Peoria and Western Railroad:
Property, plant and equipment $ 3.7 million
Other assets $(0.3) million
Deferred tax liability $(1.5) million
</TABLE>
(d) Reflects elimination of RaiLink Ltd.'s old equity accounts.
(e) Reflects elimination of Toledo, Peoria and Western Railroad's
historical equity accounts.
<PAGE> 24
STATEMENT OF INCOME:
(a) Reflects the historical consolidated statement of income for
the twelve months ended December 31, 1998 and six months ended
June 30, 1999.
(b) Reflects the historical statement of income for the twelve
months ended December 31, 1998 and four months ended April 30,
1999.
(c) Reflects revenue from track access fees at V/Line Freight
Corporation ("VLC") based upon the kilometers traveled times
the agreed upon rate from other railroads with access to
Freight Victoria tracks.
(d) Reflects the reduction of VLC costs resulting from the
following: (i) outsourcing certain maintenance functions and
(ii) reimbursement of certain maintenance costs from a third
party.
(e) Reflects the elimination of costs incurred by RaiLink in
connection with RailAmerica's acquisition of RaiLink. Such
costs had been expensed by RaiLink during 1998. No costs were
incurred in 1998 relating to the RailAmerica acquisition.
(f) Reflects a reduction in RaiLink costs resulting from the
following: (i) elimination of duplicative CEO, COO, CFO and
CMO positions, (ii) reduction in fuel costs based upon
RailAmerica's negotiated prices and (iii) elimination of fees
paid to directors of RaiLink and related expenses.
(g) Reflects the increased depreciation and amortization due to
the revaluation of VLC's property, plant and equipment and
infrastructure lease.
(h) Reflects the decreased depreciation and amortization due to
the revaluation of RaiLink Ltd.'s property, plant and
equipment.
(i) Reflects the increased depreciation and amortization due to
the revaluation of Toledo, Peoria and Western Railroad's
property, plant and equipment.
(j) Reflects the increased interest expense on the V/Line Freight
acquisition from a bridge loan and convertible debt issued
less the elimination of interest on liabilities not assumed.
The interest rates and debt balances are as follows:
<TABLE>
<CAPTION>
INTEREST EXPENSE
----------------------------
INTEREST BEGINNING DECEMBER 31, JUNE 30,
RATE PRINCIPAL AMOUNT 1998 1999
---- ---------------- ------------ ----------
<S> <C> <C> <C> <C>
Bridge loan...................... 14.50% $100.0 million $14,500,000 $4,992,000
Convertible debt................. 6.00% $6.3 million 377,000 126,000
Historical interest expense
on extinguished debt........... (251,000) (234,000)
----------- ----------
$14,626,000 $4,884,000
=========== ==========
</TABLE>
<PAGE> 25
(k) Reflects the increased interest expense on the RaiLink Ltd.
acquisition from borrowing on the Company's revolver and
convertible debt issued in a private placement less the
elimination of interest on liabilities not assumed. The
interest rates and debt balances are as follows for the six
months ended June 30, 1999:
<TABLE>
<CAPTION>
INTEREST BEGINNING INTEREST
RATE PRINCIPAL AMOUNT EXPENSE
-------- ---------------- ----------
<S> <C> <C> <C>
Revolving line of credit............ 8.30% $48.6 Million $2,025,000
Convertible debt.................... 8.00% $13.3 Million 563,000
Existing debt assumed............... various $8.8 Million 287,000
Historical interest expense
On extinguished debt.............. (566,000)
-----------
$ 2,309,000
===========
</TABLE>
The interest rates and debt balances are as follows for the
year ended December 31, 1998:
<TABLE>
<CAPTION>
INTEREST BEGINNING INTEREST
RATE PRINCIPAL AMOUNT EXPENSE
-------- ---------------- ----------
<S> <C> <C> <C>
Revolving line of credit............ 8.30% $48.6 Million $4,033,000
Convertible debt.................... 8.00% $13.3 Million 1,069,000
Existing debt assumed 6.50% $4.0 Million 248,000
Historical interest expense on
extinguished debt................. (720,000)
----------
$4,650,000
==========
</TABLE>
(l) Reflects the increased interest expense on the Toledo, Peoria
and Western Railroad acquisition from borrowing under the
Company's Revolver and convertible debt issued in a private
placement less the elimination of interest on liabilities not
assumed. The interest rates and debt balances are as follows
for the six months ended June 30, 1999:
<TABLE>
<CAPTION>
INTEREST EXPENSE
--------------------------
INTEREST BEGINNING DECEMBER 31, JUNE 30,
RATE PRINCIPAL AMOUNT 1998 1999
-------- ---------------- ------------- --------
<S> <C> <C> <C> <C>
Revolving line of credit......... 8.30% $9.4 million $811,000 $419,000
Convertible debt................. 8.00% $8.1 million 645,000 322,000
Historical interest expense
on extinguished debt........... (754,000) (403,000)
-------- --------
$702,000 $338,000
======== ========
</TABLE>
(m) Reflects the income tax effect to the pro forma adjustments at
an assumed income tax rate of 36% for V/Line Freight, 44.4%
for RaiLink. and 40% for the Toledo Peoria and Western
Railroad.
<PAGE> 26
PER SHARE DATA:
(n) The weighted average shares-basic gives effect to the 1.4
million shares issued by the Company in a private placement to
partially fund the V/Line Freight acquisition.
(o) The weighted average shares-diluted gives effect to three
private placements, which occurred during 1999, as if the
occurred at the beginning of the respective period.
(1) 464,400 shares of redeemable convertible preferred stock
with a $25 liquidation value and a conversion price of
$8.25.
(2) 1.4 million shares of Common Stock.
(3) $22.5 million of 6% junior convertible subordinated
debentures, convertible at $10 per share.
Pro forma net income (loss) per share is calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
----------------- ----------------
<S> <C> <C>
Net income (loss).......................... $(2,300) $1,765
Preferred stock dividends and accretion.... (1,064) (532)
------- ------
Income available to common stockholders
(basic).................................. (3,364) 1,233
Interest from convertible debt............. -- * -- *
Preferred stock dividends and accretion.... -- * -- *
------- ------
Income available to common stockholders
(diluted)................................ $(3,364) $1,233
======= ======
Weighted average shares outstanding
(basic).................................. 10,968 11,137
Assumed exercise of options and warrants... -- * 387
Assumed conversion of convertible
securities............................... -- * -- *
------- ------
Weighted average shares outstanding
(diluted)................................ 10,968 11,524
======= ======
* Convertible securities, options and warrants are anti-dilutive so they are excluded from the
computation
</TABLE>
