Genesee & Wyoming Inc. 2009 Annual Report

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Genesee & Wyoming Inc. 2009 Annual Report Genesee & Wyoming Inc. 2009 Annual Report WLRS Western Labrador Rail Services Canada Region Port Operations Switching Québec, QC QGRY Chemins de fer Trois-Rivières, QC Québec-Gatineau SLQ Chemin de fer St-Laurent HCRY Huron Central Railway Oregon Region & Atlantique (Québec) PNWR Portland & Western Railroad TR SLR St. Lawrence & Atlantic Railroad RSR New York/Ohio/ Contract Coal Illinois Region MVRY Pennsylvania Loading IMRR Illinois & Midland Railroad WTRM Region AOR Aliquippa & Ohio River Railroad TR Tomahawk Railway YB BPRR Rocky Mountain BPRR Buffalo & Pittsburgh Railroad TZPR Tazewell & Peoria Railroad OHCR YARR YRC CUOH Columbus & Ohio River Rail Road Region CUOH MMID TZPR MVRY Mahoning Valley Railway UTAH Utah Railway AOR POHC OSRR OHCR Ohio Central Railroad IMRR Portsmouth, VA OSRR Ohio Southern Railroad CWRY POHC Pittsburgh & Ohio Central Railroad RSR Rochester & Southern Railroad Southern Region WKRL ALM Arkansas Louisiana & Mississippi Railroad WTRM Warren & Trumbull Railroad ETRY ATW YARR Youngstown & Austintown Railroad AN AN Railway KWT BAYL The Bay Line Railroad YB Youngstown Belt Railroad CAGY Columbus & Greenville Railway LRWN CCKY Wilmington, NC CCKY Chattooga & Chickamauga Railway LXVR CHAT Chattahoochee Bay Railroad CAGY Rail Link Region CIRR Chattahoochee Industrial Railroad FP GC ATW Atlantic & Western Railway MNBR GSWR Savannah, GA FP Fordyce & Princeton Railroad RSOR CWRY Commonwealth Railway ALM CHAT GSWR Georgia Southwestern Railroad CIRR Brunswick, GA ETRY East Tennessee Railway BAYL Fernandina, FL FCRD First Coast Railroad KWT Kentucky West Tennessee Railway VR FCRD LDRR Louisiana & Delta Railroad LDRR AN GC G eor g ia Central Railway LRWN Little Rock & Western Railway Jacksonville, FL MMID Maryland Midland Railway St. Joe, FL LXVR Luxapalila Valley Railroad Panama City, FL RSOR Riceboro Southern Railway MNBR Meridian & Bigbee Railroad Baton Rouge, LA YRC York Railway Galveston, TX VR Valdosta Railway Port Operations WKRL Western Kentucky Railway Corpus Christi, TX Short Line Railroads Industrial Switching Port Operations Dashed lines indicate trackage rights Netherlands Region Darwin Port Operations Shunting Contracts UNITED KINGDOM Rotterdam Barneveld Ede GERMANY Rhine River Antwerp Alice BELGIUM Springs FRANCE Australia Region Genesee & Wyoming Australia (GWA) GWA-Operated Track FreightLink Interstate Lines with Open Access Brisbane Tarcoola Whyalla Perth Sydney Port Lincoln Adelaide Genesee & Wyoming Inc. (GWI) owns and operates short line and regional freight railroads in the United States, Canada, Australia and the Netherlands. Operations currently include 62 railroads Melbourne organized in nine regions, with approximately 6,000 miles of owned and leased track and approximately 3,400 additional miles under track access arrangements. GWI provides rail service at 16 ports in North America and Europe and performs contract coal loading and railcar switching for industrial customers. Financial Highlights (In thousands, except per share amounts) Years Ended December 31 2009 2008 2007 2006 2005 Income Statement Data Operating revenues $544,866 $601,984 $516,167 $450,683 $350,401 Income from operations 99,322 115,931 96,828 81,657 69,441 Income from continuing operations, net of tax 60,075 72,975 69,247 172,647 50,511 Net income 61,473 72,474 55,175 134,003 50,135 Net income attributable to Genesee & Wyoming Inc. 61,327 72,231 55,175 134,003 50,135 Diluted earnings per common share attributable to Genesee & Wyoming Inc. common stockholders: Diluted earnings per common share from continuing operations 1.54 2.00 1.77 4.07 1.21 Diluted earnings/(loss) per common share from discontinued operations 0.04 (0.01) (0.36) (0.91) (0.01) Weighted average shares - Diluted 38,974 36,348 39,148 42,417 41,712 Balance Sheet Data as of Period End Total assets $1,697,032 $1,587,281 $1,077,801 $1,141,064 $980,598 Long-term debt (excluding portion due within one year) and capital leases 421,616 535,231 270,519 241,313 333,625 Equity 688,877 479,414 430,981 520,187 397,820 Operating Revenues Operating Income Net Income from Diluted Earnings Per Share ($ In Millions) ($ In Millions) Continuing Operations from Continuing Operations ($ In Millions) $602.0 $115.9 $600 $172.6* $544.9 $4.07* $100 $99.3 $516.2 $96.8 500 $450.7 $81.7 $2.00 400 75 75 $73.0 $2.00 $69.4 $69.2 $350.4 $1.77 $60.1 $1.54 300 1.50 $50.5 50 50 $1.21 200 1.00 25 25 100 0.50 0 0 0 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 * Net Income and Diluted Earnings Per Share for 2006 include a gain on the sale of certain Australian assets. From the Chairman To Our Shareholders: In the crucible of 2009’s economic turmoil, I am enormously pleased with the performance of Genesee & Wyoming’s leadership team and all GWI personnel. Last year in my letter to you, I wrote: “We face the current economic turmoil from a position of relative strength: ■ We manage the business for the long term with a simple, straightforward business model. The basic tenets are: _ Maximize the free cash flow of core businesses. Mortimer B. Fuller III _ Reduce expenses when revenues soften. Chairman _ Make acquisitions with discipline. ■ We have a broad revenue base highly diversified by customer, commodity and geography and augmented by our acquisitions in 2008. Approximately 60% of that base is not highly economically sensitive. ■ We have a strong, seasoned management team and dedicated employees.” So it is with satisfaction that I reflect on the following measures of our actual performance in 2009: ■ $127 million of cash flow from operating activities and $75 million of free cash flow,1 ■ a stronger balance sheet today than last year, ■ effective expense management reflected by an operating ratio virtually the same as last year’s, ■ the downside cushioned by a diversified revenue base, and ■ 0.74 injuries per 200,000 man hours worked. These are impressive results in the context of the 2009 economy. Genesee & Wyoming’s Core Purpose is to be the safest and most respected rail service provider in the world. In safety, our quest is for zero injuries. Note that 0.74 is a lower frequency rate than has been achieved by any current Class I railroad. That accomplishment is a testament to the focus and morale of our personnel. In 2007, after 30 years as Chief Executive Officer of Genesee & Wyoming Inc., the Board and I passed the mantle of leadership to Jack Hellmann and a management team relatively new in their positions. Carefully chosen, that team had already demonstrated their ability to manage growth, and, in 2009, they successfully dealt with the major challenges of this severe recession. As I transition in 2010 from Executive Chairman to Chairman, my interest in GWI continues as a major shareholder. I am excited about our future, and I look forward to assisting with the continuing transformation of the Company toward its Core Purpose. My thanks to our Board of Directors, our customers, shareholders and, particularly, to my coworkers for the constancy of your help and support over the last 32 years. Mortimer B. Fuller III Chairman 1 Free cash flow is a non-GAAP financial measure and is not intended to replace net cash provided by operating activities, its most directly comparable GAAP measure. The infor- mation required by Regulation G under the Securities Exchange Act of 1934, including a reconciliation to net cash provided by operating activities, is included on page 12. 2009 Annual Report 3 From the CEO John C. Hellmann President and Chief Executive Officer To Our Shareholders: The past year has been like no other. In 2009, North American rail shipments declined to the lowest level since the Association of American Railroads began issuing its traffic report in 1988. At GWI, we felt the sharpest impact of the recession in two distinct periods. First, our freight shipments declined approximately 12% over the course of the fourth quarter of 2008. Second, our shipments dropped an additional 12% in the second quarter of 2009. Our rail traffic then stabilized for the final six months of 2009, and we have seen some areas of modest improvement as we enter 2010. In this dismal economic environment, I am pleased to report that GWI generated $127 million of cash flow from operating activities and $75 million of free cash flow in 2009,1 the second highest in our history. We reduced our costs at the same rate as our revenues declined; we maintained our operating margins; and, with $106 million in cash and an undrawn $300 million credit facility, we are financially stronger today than when the recession began. These accomplishments were the direct result of the extraordinary dedica- tion and hard work of our management and employees. As we enter 2010, I would like to start by thanking our people for getting us through this difficult period by making GWI more efficient than we have ever been. Safety In 2009, we achieved the best safety performance in our history as 52 out of 62 GWI railroads were injury-free. Our injury-frequency rate per 200,000 man hours was 0.74, a 44% improvement over 2008. For context, GWI’s safety performance was nearly five times better than the short line peer group average and more than twice as good as the Class I railroad average. While we have now reached levels of safety performance that many thought unattainable for short line railroads due to the heavy switching nature of our work (i.e., frequently getting on and off equipment), we continue to strive to be an injury-free company. To extend our safety culture deeper into the communities where we operate, we significantly expanded our participation in Operation Lifesaver, a nonprofit education and awareness program dedicated to ending collisions, fatalities and injuries at highway- rail grade crossings and on railroad rights of way.
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