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Rail News: Financials
Genesee & Wyoming on Q1: Harsh winter plowed into profits, piled up operating costs
Similar to the Class Is, Genesee & Wyoming Inc. (GWI) felt the sting from the severely harsh winter in its first-quarter financial performance.
Although total operating revenue inched up 0.4 percent to $376.3 million and volume rose 3.8 percent to 467,379 carloads, reported net income tumbled 52 percent to $39.6 million, diluted earnings fell 52 percent to 70 cents per share, income from operations dipped 2 percent to $74.9 million, operating expenses climbed 8 percent to $301.4 million and GWI's adjusted operating ratio worsened 3.3 points to 80 while the reported operating ratio increased 0.4 points to 80.1 compared with third-quarter 2013 results.
The company estimates that severe winter weather in North America — which caused significant disruptions in several operating regions — reduced diluted earnings by 23 cents to 26 cents per share. In addition, revenue was reduced by $15 million to $20 million primarily because of temporary line closures, congestion in the North American rail network that impeded interchanges and a reduced supply of available freight cars; and operating costs were driven up about $12 million mainly due to increased overtime, higher fuel consumption and car hire, and extensive snow removal, GWI officials said in a press release.
The Canada, Midwest, Northeast and Ohio Valley regions suffered the most serious weather-related conditions in the quarter, first from the direct impact of a series of storms on the 45 railroads in those units and then from congestion at connecting railroads, said GWI President and Chief Executive Officer Jack Hellmann.
"As a result, rail shipments were reduced and traffic was also diverted to truck," he said. "But through all of this, our employees worked tirelessly and safely under extremely harsh winter conditions."
Business conditions have improved so far in the second quarter: The company has registered sharp increases in traffic levels since late March, said Hellmann. In addition, the company expects its new Rapid City, Pierre & Eastern Railroad (RCP&E) subsidiary — formed from remnants of the former Dakota, Minnesota & Eastern Railroad — to commence operations late in the second quarter.
"We remain optimistic about the outlook for this business. However, we do not expect to recover the significant financial shortfall from the first quarter and congestion continues to impact the overall North American rail network," said Hellmann. "Including the impact of weather and the RCP&E, our revised outlook for growth in pre-tax income in 2014 is now approximately 15 percent, with expected growth in pre-tax income of more than 20 percent over the next nine months."
With integration planning for the RCP&E well advanced, GWI is actively evaluating new acquisition and investment opportunities worldwide, he added.
Contact Progressive Railroading editorial staff.