RRA Railamerica

RailAmerica, Inc. (NYSE:RRA) ("RailAmerica" or the "Company") today reported second quarter 2006 earnings from continuing operations of $5.4 million, or $0.14 per diluted share, compared to $9.0 million, or $0.24 per diluted share, for the second quarter of 2005. The 2006 results include expenses of $3.0 million, or $0.04 per share, relating to the Company's recently announced reorganization, including $1.7 million in employee severance costs. Net income for the three months ended June 30, 2006, which includes discontinued operations, was $7.8 million, or $0.20 per share, compared to $9.3 million, or $0.24 per share in the three months ended June 30, 2005. The 2006 income from discontinued operations includes a pre-tax gain of $2.5 million ($2.4 million net of tax) on the disposition of the Company's E & N Railway on June 30. Additionally, a change in Canadian tax laws resulted in a continuing operations tax benefit of $1.7 million, or $0.04 per share, in the second quarter of 2006. Revenue for the second quarter of 2006 increased $13.4 million, or 13%, to $116.8 million, from $103.4 million in the second quarter of 2005. On a "same railroad" basis, revenue for the second quarter of 2006 increased $7.0 million, or 7%, from the second quarter of 2005, while "same railroad" carloads declined 4%. Operating income for the second quarter of 2006 decreased 37%, to $9.2 million, from $14.5 million in the second quarter of 2005. The operating ratio for the second quarter of 2006 was 92.2% compared to 86.0% in the 2005 second quarter. For the six months ended June 30, 2006, the Company reported earnings from continuing operations of $12.0 million, or $0.31 per diluted share, compared to earnings from continuing operations of $13.9 million, or $0.36 per diluted share for the six months ended June 30, 2005. Net income for the six months ended June 30, 2006, which includes discontinued operations, was $22.9 million, or $0.59 per share, compared to $15.5 million, or $0.40 per share in the six months ended June 30, 2005. The 2006 results include the recognition of a $13.4 million pre-tax gain ($8.3 million net of tax) for the expiration of the warranty period related to the sale of Freight Australia and a resulting adjustment to the reserves in discontinued operations. Revenue for the six months ended June 30, 2006, increased $26.7 million, or 13%, to $231.2 million, from $204.5 million in 2005. On a "same railroad" basis, revenue for the six months ended June 30, 2006 increased $14.2 million, or 7%, while "same railroad" carloads declined 2%, from the six months ended June 30, 2005. Operating income for the six months ended June 30, 2006 was $23.4 million, compared to $24.4 million for the six months ended June 30, 2005. Michael Howe, RailAmerica's Chief Financial Officer, said, "Our financial results in the second quarter were impacted by several isolated factors, including a work stoppage at a paper facility in Nova Scotia, the Native Indian blockade in Southern Ontario, costs related to our reorganization, an accrual for a final contingent obligation to our former CEO and the costs of disposing of industrial waste in a Canadian landfill from a derailment in Alabama. Additionally, our revenue was affected by a decline in shipments of lumber, attributable to a slowdown in housing starts." Charles Swinburn, RailAmerica's Chief Executive Officer, said, "While our financial results lagged last year's results, we made significant progress during the second quarter toward achieving our improvement objectives for the next several years. We carried out our reorganization and have begun the process of consolidating our customer service, dispatching and revenue functions. Those steps will make our company more efficient and effective going forward. Additionally, our marketing initiatives to increase traffic on our existing railroads have begun to significantly payoff. I am very pleased to say that Honda has recently announced its' intention to build an automobile assembly plant on one of our railroads in Indiana. Our marketing people worked hard with the state of Indiana to assist Honda in their decision. This plant should generate as many as 13,000 additional rail carloads annually for us, beginning in mid to late 2008. To the best of our knowledge, this is the only new automobile assembly plant to be located on a short line anywhere in the country in recent years. Other marketing and sales initiatives have resulted in significant commercial gains on our Ohio railroads, where two shippers have agreed to ship in excess of 8,000 carloads per year, commencing this month." RailAmerica, Inc. (NYSE:RRA) is a leading short line and regional rail service provider with 42 railroads operating approximately 7,800 miles in the United States and Canada. The Company is a member of the Russell 2000(R) Index. Its website may be found at http://www.railamerica.com. DISCLAIMER REGARDING FORWARD-LOOKING STATEMENTS: This press release contains forward-looking statements regarding future events that involve risks and uncertainties that could cause actual results to differ materially. Forward-looking statements speak only as of the date the statement was made. The Company assumes no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. If the Company does update any forward-looking statement, no inference should be drawn that the Company will make additional updates with respect to that statement or any other forward-looking statements. We refer you to the documents that RailAmerica files from time to time with the Securities and Exchange Commission, such as the Form 10-K, Form 10-Q and Form 8-K, which contain additional important factors that could cause its actual results to differ from its current expectations and from the forward-looking statements contained in this press release. -0- *T RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the three and six months ended June 30, 2006 and 2005 (in thousands, except earnings per share) (unaudited) Three months ended Six months ended June 30, June 30, 2006 2005 2006 2005 ---------------------------------------------------------------------- Operating revenue $116,833 $103,409 $231,183 $204,466 ---------------------------------------------------------------------- Operating expenses: Transportation 71,998 60,627 139,349 123,078 Selling, general and administrative 26,887 20,772 50,515 42,414 Net loss (gain) on sale of assets (535) 323 (1,003) 242 Depreciation and amortization 9,315 7,171 18,948 14,340 ---------------------------------------------------------------------- Total operating expenses 107,665 88,893 207,809 180,074 ---------------------------------------------------------------------- Operating income 9,168 14,516 23,374 24,392 Interest expense (6,689) (4,623) (13,463) (8,933) Other expense -- -- (480) -- ---------------------------------------------------------------------- Income from continuing operations before income taxes 2,479 9,893 9,431 15,459 Provision for (benefit from) income taxes (2,927) 865 (2,593) 1,514 ---------------------------------------------------------------------- Income from continuing operations 5,406 9,028 12,024 13,945 Gain from sale of discontinued operations, net of income taxes 2,354 -- 10,667 239 Income from discontinued operations, net of income taxes 74 250 163 1,310 ---------------------------------------------------------------------- Net income $ 7,834 $ 9,278 $ 22,854 $ 15,494 ====================================================================== Basic earnings per common share: Continuing operations $ 0.14 $ 0.24 $ 0.31 $ 0.37 Discontinued operations 0.06 0.01 0.28 0.04 ---------------------------------------------------------------------- Net income $ 0.20 $ 0.25 $ 0.59 $ 0.41 ====================================================================== Diluted earnings per common share: Continuing operations $ 0.14 $ 0.24 $ 0.31 $ 0.36 Discontinued operations 0.06 -- 0.28 0.04 ---------------------------------------------------------------------- Net income $ 0.20 $ 0.24 $ 0.59 $ 0.40 ====================================================================== Weighted average common shares outstanding: Basic 38,534 37,691 38,485 37,568 Diluted 38,969 38,302 38,894 38,261 *T -0- *T RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, 2006 and December 31, 2005 (in thousands, except share data) (unaudited) June 30, December 31, 2006 2005 ---------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 13,191 $ 14,310 Accounts and notes receivable, net 80,486 82,395 Current assets of discontinued operations -- 3,140 Other current assets 11,633 14,114 ---------------------------------------------------------------------- Total current assets 105,310 113,959 Property, plant and equipment, net 922,381 904,588 Long-term assets of discontinued operations -- 25,879 Other assets 100,395 102,950 ---------------------------------------------------------------------- Total assets $1,128,086 $1,147,376 ====================================================================== Liabilities and Stockholders' Equity Current liabilities: Current maturities of long-term debt $ 4,990 $ 6,079 Accounts payable 64,940 75,222 Accrued expenses 31,145 43,524 Current liabilities of discontinued operations -- 4,275 ---------------------------------------------------------------------- Total current liabilities 101,075 129,100 Long-term debt, less current maturities 401,011 427,794 Deferred income taxes 143,690 141,606 Long-term liabilities of discontinued operations -- 2,261 Other liabilities 18,833 15,337 ---------------------------------------------------------------------- Total liabilities 664,609 716,098 ---------------------------------------------------------------------- Commitments and contingencies Stockholders' equity: Common stock 39 39 Additional paid-in capital and other 333,729 330,919 Retained earnings 90,482 67,628 Accumulated other comprehensive income 39,227 32,692 ---------------------------------------------------------------------- Total stockholders' equity 463,477 431,278 ---------------------------------------------------------------------- Total liabilities and stockholders' equity $1,128,086 $1,147,376 ====================================================================== *T -0- *T RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the six months ended June 30, 2006 and 2005 (in thousands) (unaudited) Six months ended June 30, 2006 2005 ---------------------------------------------------------------------- Cash flows from operating activities: Net income $ 22,854 $ 15,494 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization, including amortization of deferred loan costs 20,432 15,461 Net gain on sale or disposal of properties (16,946) (33) Equity compensation costs 1,612 -- Deferred income taxes and other 911 834 Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable 2,997 1,647 Other current assets 2,484 3,837 Accounts payable (10,139) (13,556) Accrued expenses 1,573 (903) Other assets and liabilities 63 496 ---------------------------------------------------------------------- Net cash provided by operating activities 25,841 23,277 ---------------------------------------------------------------------- Cash flows from investing activities: Purchase of property, plant and equipment (32,363) (29,509) Proceeds from sale of assets, net of cash on-hand 31,402 6,253 Deferred transaction costs and other -- (19) ---------------------------------------------------------------------- Net cash used in investing activities (961) (23,275) ---------------------------------------------------------------------- Cash flows from financing activities: Proceeds from issuance of long-term debt 39,700 7,800 Principal payments on long-term debt (67,573) (11,455) Proceeds from exercise of stock options and warrants 1,791 4,220 ---------------------------------------------------------------------- Net cash provided by (used in) financing activities (26,082) 565 ---------------------------------------------------------------------- Effect of exchange rates on cash 83 (34) ---------------------------------------------------------------------- Net increase (decrease) in cash (1,119) 533 Cash, beginning of period 14,310 24,331 ---------------------------------------------------------------------- Cash, end of period $ 13,191 $ 24,864 ====================================================================== *T -0- *T RAILAMERICA, INC. AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION (amounts in thousands) (unaudited) For the three months ended June 30, Functional Classification 2006 2005 ---------------------------------------------------------------------- Operating revenue $116,833 100.0% $103,409 100.0% ---------------------------------------------------------------------- Operating expenses: Maintenance of way 15,456 13.2% 12,044 11.7% Maintenance of equipment 4,474 3.9% 4,011 3.9% Transportation 39,034 33.4% 33,066 32.0% Equipment rental 13,034 11.2% 11,506 11.1% Selling, general and administrative 26,887 23.0% 20,772 20.1% Net (gain) loss on sale of assets (535) -0.5% 323 0.3% Depreciation and amortization 9,315 8.0% 7,171 6.9% ---------------------------------------------------------------------- Total operating expenses 107,665 92.2% 88,893 86.0% ---------------------------------------------------------------------- Operating income $ 9,168 7.8% $ 14,516 14.0% ====================================================================== For the three months ended June 30, Natural Classification 2006 2005 ---------------------------------------------------------------------- Operating revenue $116,833 100.0% $103,409 100.0% ---------------------------------------------------------------------- Operating expenses: Labor and benefits 38,307 32.8% 32,038 31.0% Equipment rents 13,881 11.9% 12,193 11.8% Purchased services 9,786 8.4% 7,802 7.6% Diesel fuel 14,434 12.4% 10,689 10.3% Casualties and insurance 6,151 5.2% 4,221 4.1% Materials 2,783 2.4% 2,600 2.5% Joint facilities 3,407 2.9% 3,192 3.1% Other expenses 10,136 8.7% 8,664 8.4% Net (gain) loss on sale of assets (535) -0.5% 323 0.3% Depreciation and amortization 9,315 8.0% 7,171 6.9% ---------------------------------------------------------------------- Total operating expenses 107,665 92.2% 88,893 86.0% ---------------------------------------------------------------------- Operating income $ 9,168 7.8% $ 14,516 14.0% ====================================================================== *T -0- *T RAILAMERICA, INC. AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION (amounts in thousands) (unaudited) For the six months ended June 30, Functional Classification 2006 2005 ---------------------------------------------------------------------- Operating revenue $231,183 100.0% $204,466 100.0% ---------------------------------------------------------------------- Operating expenses: Maintenance of way 28,466 12.3% 26,032 12.7% Maintenance of equipment 8,786 3.8% 7,723 3.8% Transportation 76,485 33.1% 65,980 32.3% Equipment rental 25,612 11.1% 23,343 11.4% Selling, general and administrative 50,515 21.8% 42,414 20.8% Net (gain) loss on sale of assets (1,003) -0.4% 242 0.1% Depreciation and amortization 18,948 8.2% 14,340 7.0% ---------------------------------------------------------------------- Total operating expenses 207,809 89.9% 180,074 88.1% ---------------------------------------------------------------------- Operating income $ 23,374 10.1% $ 24,392 11.9% ====================================================================== For the six months ended June 30, Natural Classification 2006 2005 ---------------------------------------------------------------------- Operating revenue $231,183 100.0% $204,466 100.0% ---------------------------------------------------------------------- Operating expenses: Labor and benefits 73,586 31.8% 65,055 31.8% Equipment rents 27,235 11.8% 24,582 12.0% Purchased services 18,033 7.8% 15,128 7.4% Diesel fuel 28,734 12.4% 21,711 10.6% Casualties and insurance 10,631 4.6% 10,197 5.0% Materials 5,468 2.4% 5,183 2.6% Joint facilities 6,597 2.8% 6,381 3.1% Other expenses 19,580 8.5% 17,255 8.5% Net (gain) loss on sale of assets (1,003) -0.4% 242 0.1% Depreciation and amortization 18,948 8.2% 14,340 7.0% ---------------------------------------------------------------------- Total operating expenses 207,809 89.9% 180,074 88.1% ---------------------------------------------------------------------- Operating income $ 23,374 10.1% $ 24,392 11.9% ====================================================================== *T -0- *T RAILAMERICA, INC. AND SUBSIDIARIES Railroad Freight Revenue, Carloads and Average Revenue Per Carload Comparison by Commodity Group (dollars in thousands, except average revenue per carload) (unaudited) Three months ended June 30, 2006 2005 ------------------------- --------------------------- Average Average Revenue Revenue Commodity Freight per Freight per Group Revenue Carloads Carload Revenue Carloads Carload ---------------------------------------------------------------------- Lumber & Forest Products $ 14,870 31,752 $ 468 $ 14,435 33,135 $ 436 Chemicals 11,989 26,513 452 11,425 27,883 410 Metal 10,173 22,848 445 9,801 25,648 382 Agricultural & Farm Products 9,592 27,945 343 8,089 26,385 307 Coal 9,206 39,148 235 8,159 36,335 225 Paper Products 7,870 20,172 390 8,222 22,840 360 Food Products 7,774 21,039 370 7,066 21,251 333 Metallic/Non- metallic Ores 7,720 23,611 327 4,492 16,694 269 Railroad Equipment/Bridge Traffic 7,120 49,091 145 6,094 50,177 121 Minerals 6,419 14,801 434 5,920 15,267 388 Petroleum Products 4,270 9,991 427 4,284 12,262 349 Other 3,853 10,618 363 3,169 10,894 291 Autos 1,466 4,927 298 1,546 5,946 260 Intermodal 999 8,255 121 917 8,137 113 ---------------------------------------------------------------------- Totals $103,321 310,711 $ 333 $ 93,619 312,854 $ 299 ====================================================================== *T -0- *T Six months ended June 30, 2006 2005 --------------------------- ------------------------- Average Average Revenue Revenue Commodity Freight per Freight per Group Revenue Carloads Carload Revenue Carloads Carload ---------------------------------------------------------------------- Lumber & Forest Products $ 29,540 63,798 $ 463 $ 27,586 63,961 $ 431 Chemicals 24,197 55,468 436 23,104 57,421 402 Metal 19,768 45,876 431 18,366 49,136 374 Agricultural & Farm Products 18,955 55,639 341 16,847 54,706 308 Coal 18,232 79,044 231 16,190 74,447 217 Food Products 15,594 43,478 359 14,452 43,974 329 Paper Products 14,896 39,690 375 16,154 45,291 357 Metallic/Non- metallic Ores 14,620 44,382 329 8,571 30,304 283 Railroad Equipment/Bridge Traffic 14,391 108,037 133 12,740 105,798 120 Minerals 12,664 29,890 424 10,955 28,902 379 Petroleum Products 9,167 21,998 417 8,593 24,678 348 Other 7,459 21,597 345 5,801 19,299 301 Autos 3,044 10,739 283 3,074 12,691 242 Intermodal 2,070 16,329 127 1,963 17,636 111 ---------------------------------------------------------------------- Totals $204,597 635,965 $ 322 $184,396 628,244 $ 294 ====================================================================== *T