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RailAmerica to sell Australian line, focus on North American operations


On Oct. 30, RailAmerica Inc. issued its third-quarter financials, which included news of revenue and operating income increases — and a plan to get out of the Australian rail business.

"We have made a strategic decision to ... focus our efforts on North America," said Chairman, President and Chief Executive Officer Gary Marino in a prepared statement.

For the quarter ended Sept. 30, RailAmerica reported earnings of $7.1 million, or $0.22 per diluted share, from continuing operations, compared with $6.2 million, or $0.19 per diluted share, for the same period in 2002. Consolidated revenue from continuing operations increased 7.5 percent, or $6.4 million, to $91.2 million, from $84.8 million in 2002. Operating income increased 20 percent, to $20.5 million, compared with $17.1 million in 2002. Net income was $4.2 million, or $0.13 per diluted share, compared with $5.9 million, or $0.18 per diluted share, last year.

The Australian drought negatively impacted third-quarter earnings by $0.06 per share compared with the same 2002 period. (Note: 2002 results included $1.1 million of restructuring charges, net-of-tax.)

In North America, RailAmerica's acquisitions of the Mobile, Ala., line and the Colorado-based San Luis & Rio Grande Railroad, the strengthening Canadian dollar and strong agricultural and coal volumes led to a 7.5 percent revenue increase; revenue increased 2 percent on a "same railroad" basis. But fuel and health insurance costs took their toll on RailAmerica's operating ratio: For the quarter, the company's ratio was 75.4, compared with 74.5 for the same 2002 period.

"We are quite pleased with the results of our North American operations this quarter despite the challenges of the economy and higher fuel and health insurance costs," Marino said. "We have successfully integrated our two most recent acquisitions and believe these acquisitions, coupled with the improving business climate, should enable RailAmerica to continue to improve the results of its North American operations."

Meanwhile, Freight Australia posted a third-quarter operating loss of $2.2 million compared with operating income of $0.8 million for the same 2002 period. As a result of the Australian drought, grain tonnage was down 57 percent compared with the same 2002 period.

But Freight Australia's fortunes might not be RailAmerica's concern for long. The company has "several qualified buyers" kicking the road's tires, Marino said. RailAmerica also officials believe "the timing is right" to put Freight Australia on the market because Australia's 2004 grain outlook is positive.

"A near record grain harvest is anticipated," Marino said.

RailAmerica also could be busy on the M&A closer to home.

"The acquisition environment in North America is stronger than it has been in recent years with several Class I railroads and private rail owners looking to divest of branch/short line rail properties," Marino said. "We believe the anticipated sale of our international railroads positions RailAmerica to take advantage of strategic opportunities as they become available in North America."

RailAmerica owns and operates 50 short line and regional railroads — to the tune of about 17,700 miles — in the United States, Canada, Australia, Chile and Argentina, including track access arrangements.

Contact Progressive Railroading editorial staff.

More News from 10/30/2003