Genesee & Wyoming Earnings 2019-09-30

Genesee & Wyoming Earnings 2019-09-30

GWR 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

Document

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________________________________________________________________________

FORM 10-Q

_________________________________________________________________________________________________________________



(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File Number 001-31456

_________________________________________________________________________________________________________________

GENESEE & WYOMING INC.

(Exact name of registrant as specified in its charter)

_________________________________________________________________________________________________________________



Delaware		06-0984624
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

20 West Avenue, Darien, Connecticut 06820

(Address of principal executive offices)(Zip Code)

(203) 202-8900

(Registrant's telephone number, including area code)

_____________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Class A Common Stock	GWR	New York Stock Exchange	(NYSE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

Shares of common stock outstanding as of the close of business on October 31, 2019:



Class		Number of Shares Outstanding
Class A Common Stock		57,037,678
Class B Common Stock		2,072

Table of Contents



INDEX
		Page

	Forward-Looking Statements	3

Part I	Financial Information	4

Item 1.	Financial Statements:

	Consolidated Balance Sheets (Unaudited) - As of September 30, 2019 and December 31, 2018	4
	Consolidated Statements of Operations (Unaudited) - For the Three and Nine Months Ended September 30, 2019 and 2018	5
	Consolidated Statements of Comprehensive Income (Unaudited) - For the Three and Nine Months Ended September 30, 2019 and 2018	6
	Consolidated Statements of Changes in Equity (Unaudited) - For the Three and Nine Months Ended September 30, 2019 and 2018	7
	Consolidated Statements of Cash Flows (Unaudited) - For the Nine Months Ended September 30, 2019 and 2018	9
	Notes to Consolidated Financial Statements (Unaudited)	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	31

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	66

Item 4.	Controls and Procedures	66

Part II	Other Information	67

Item 1.	Legal Proceedings	67

Item 1A.	Risk Factors	67

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69

Item 3.	Defaults Upon Senior Securities	69

Item 4.	Mine Safety Disclosures	69

Item 5.	Other Information	69

Item 6.	Exhibits	69

Index to Exhibits		70

Signatures		71

Table of Contents

Unless the context otherwise requires, when used in this Quarterly Report on Form 10-Q, the terms "Genesee & Wyoming," "G&W," the "Company," "we," "our" and "us" refer to Genesee & Wyoming Inc. and its subsidiaries. All references to currency amounts included in this Quarterly Report on Form 10-Q, including the financial statements, are in United States dollars unless specifically noted otherwise. The term carload represents physical railcars and the estimated railcar equivalents of commodities transported by metric ton or other measure, as well as intermodal units.

From time to time, we may use our website as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible at www.gwrr.com/investors. In addition, you may automatically receive email alerts and other information about us by enrolling your email address in the "Email Alerts" section of www.gwrr.com/investors. The information contained on or connected to our Internet website is not deemed to be incorporated by reference in this Quarterly Report or filed with the Securities and Exchange Commission.

Forward-Looking Statements

This report and other documents referred to in this report contain forward-looking statements regarding future events and the future performance of Genesee & Wyoming Inc. that are based on current expectations, estimates and projections about our industry, our business and our performance, management's beliefs and assumptions made by management. Words such as "anticipates," "intends," "plans," "believes," "could," "should," "seeks," "expects," "will," "estimates," "trends," "outlook," variations of these words and similar expressions are intended to identify these forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast, including the following: the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with affiliates of Brookfield Infrastructure and GIC; the inability to complete the proposed merger due to the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; risks related to disruption of management’s attention from G&W's ongoing business operations due to the transaction; the effect of the proposed merger on G&W's ability to retain and hire key personnel or maintain relationships with its customers, operating results and business generally; the risk that the proposed merger will not be consummated in a timely manner; exceeding the expected costs of the merger; risks related to the operation of our railroads; severe weather conditions and other natural occurrences, which could result in shutdowns, derailments, railroad network and port congestion or other substantial disruption of operations; customer demand and changes in our operations or loss of important customers; exposure to the credit risk of customers and counterparties; changes in commodity prices; consummation and integration of acquisitions; implementation of restructuring plans; economic, political and industry conditions, including employee strikes or work stoppages; retention and contract continuation; our ability to attract and retain skilled workers; legislative and regulatory developments, including changes in environmental and other laws and regulations to which we or our customers are subject; increased competition in relevant markets; funding needs and financing sources, including our ability to obtain government funding for capital projects; international complexities of operations, currency fluctuations, finance, tax and decentralized management; challenges of managing rapid growth, including retention and development of senior leadership; unpredictability of fuel costs; susceptibility to and outcome of various legal claims, lawsuits and arbitrations; increase in, or volatility associated with, expenses related to estimated claims, self-insured retention amounts and insurance coverage, collectability and limits; consummation of new business opportunities; decrease in revenues and/or increase in costs and expenses; susceptibility to the risks of doing business in foreign countries; uncertainties arising from a referendum in which voters in the United Kingdom (U.K.) approved an exit from the European Union (E.U.), commonly referred to as Brexit; our ability to integrate acquired businesses successfully or to realize the expected synergies associated with acquisitions; risks associated with our substantial indebtedness; failure to maintain satisfactory working relationships with partners in Australia; failure to maintain an effective system of internal control over financial reporting as well as disclosure controls and procedures and other risks including, but not limited to, those set forth in Part II Item 1A of this Quarterly Report on Form 10-Q, if any, and those noted in our 2018 Annual Report on Form 10-K under "Risk Factors." Therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Forward-looking statements speak only as of the date of this report or as of the date they were made. We do not undertake, and expressly disclaim, any duty to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2019 and DECEMBER 31, 2018 (Unaudited)

(dollars in thousands, except per share and share amounts)



	September 30, 2019			December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	86,912		$	90,387
Accounts receivable, net	437,062			426,305
Materials and supplies	58,476			56,716
Prepaid expenses and other	36,275			54,185
Total current assets	618,725			627,593
PROPERTY AND EQUIPMENT, net	4,664,837			4,613,014
GOODWILL	1,096,095			1,115,849
INTANGIBLE ASSETS, net	1,362,963			1,430,197
DEFERRED INCOME TAX ASSETS, net	5,102			4,616
OTHER ASSETS	536,657			77,192
Total assets	$	8,284,379		$	7,868,461
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	38,951		$	28,303
Accounts payable	278,418			288,070
Accrued expenses	245,874			165,280
Total current liabilities	563,243			481,653
LONG-TERM DEBT, less current portion	2,176,563			2,425,235
DEFERRED INCOME TAX LIABILITIES, net	884,402			877,721
DEFERRED ITEMS - grants from outside parties	344,813			326,520
OTHER LONG-TERM LIABILITIES	608,101			127,280
COMMITMENTS AND CONTINGENCIES
EQUITY:
Class A Common Stock, $0.01 par value, one vote per share; 180,000,000 shares authorized at September 30, 2019 and December 31, 2018; 75,696,850 and 75,240,513 shares issued and 56,663,012 and 56,349,327 shares outstanding (net of 19,033,838 and 18,891,186 shares in treasury) on September 30, 2019 and December 31, 2018, respectively	757			752
Class B Common Stock, $0.01 par value, ten votes per share; 30,000,000 shares authorized at September 30, 2019 and December 31, 2018; 376,392 and 517,138 shares issued and outstanding on September 30, 2019 and December 31, 2018, respectively	4			5
Additional paid-in capital	1,812,085			1,785,005
Retained earnings	2,638,043			2,482,252
Accumulated other comprehensive loss	(230,108		)	(146,456		)
Treasury stock, at cost	(711,922		)	(699,852		)
Total Genesee & Wyoming Inc. stockholders' equity	3,508,859			3,421,706
Noncontrolling interest	198,398			208,346
Total equity	3,707,257			3,630,052
Total liabilities and equity	$	8,284,379		$	7,868,461

The accompanying notes are an integral part of these consolidated financial statements.

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GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 and 2018 (Unaudited)

(in thousands, except per share amounts)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
OPERATING REVENUES	$	583,694		$	603,304		$	1,713,263		$	1,772,955
OPERATING EXPENSES:
Labor and benefits	175,500			175,853			539,751			539,407
Equipment rents	30,926			35,325			95,169			104,214
Purchased services	51,055			53,717			156,337			178,864
Depreciation and amortization	63,026			65,392			188,169			197,127
Diesel fuel used in train operations	41,533			45,713			127,674			137,487
Electricity used in train operations	1,794			2,742			6,344			7,020
Casualties and insurance	11,658			9,912			34,869			32,862
Materials	32,435			32,744			94,949			97,589
Trackage rights	21,266			22,838			64,633			67,119
Net gain on sale and impairment of assets	(641		)	(642		)	(1,151		)	(2,501		)
Restructuring and related costs	3,561			3,286			18,756			12,931
Other expenses, net	38,825			28,604			101,097			82,978
Total operating expenses	470,938			475,484			1,426,597			1,455,097
OPERATING INCOME	112,756			127,820			286,666			317,858
Interest income	1,244			417			2,615			1,499
Interest expense	(25,386		)	(26,429		)	(80,395		)	(80,605		)
Other income/(loss), net	1,132			1,515			4,165			(237		)
Income before income taxes	89,746			103,323			213,051			238,515
Provision for income taxes	(19,975		)	(31,013		)	(53,101		)	(41,569		)
Net income	$	69,771		$	72,310		$	159,950		$	196,946
Less: Net income attributable to noncontrolling interest	2,979			2,720			3,011			8,090
Net income attributable to Genesee & Wyoming Inc.	$	66,792		$	69,590		$	156,939		$	188,856
Basic earnings per common share attributable to Genesee & Wyoming Inc. common stockholders:	$	1.18		$	1.18		$	2.78		$	3.13
Weighted average shares – Basic	56,638			59,168			56,497			60,343
Diluted earnings per common share attributable to Genesee & Wyoming Inc. common stockholders:	$	1.16		$	1.16		$	2.74		$	3.08
Weighted average shares – Diluted	57,532			60,131			57,297			61,255

The accompanying notes are an integral part of these consolidated financial statements.

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GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 and 2018 (Unaudited)

(dollars in thousands)



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
NET INCOME	$	69,771		$	72,310		$	159,950		$	196,946
OTHER COMPREHENSIVE INCOME/(LOSS):
Foreign currency translation adjustment, net of tax provision of ($2,068), $0, ($1,885) and $0, respectively	(36,647		)	(9,501		)	(32,641		)	(59,042		)
Net unrealized (loss)/gain on qualifying hedges, net of tax benefit/(provision) of $8,720, ($1,583), $19,430 and ($4,612), respectively	(27,462		)	5,153			(61,139		)	14,756
Changes in pension and other postretirement benefits, net of tax (provision)/benefit of ($8), ($14), $74 and ($42), respectively	60			43			(94		)	129
Other comprehensive loss	(64,049		)	(4,305		)	(93,874		)	(44,157		)
COMPREHENSIVE INCOME	$	5,722		$	68,005		$	66,076		$	152,789
Less: Comprehensive loss attributable to noncontrolling interest	(4,759		)	(2,179		)	(7,211		)	(9,495		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO GENESEE & WYOMING INC.	$	10,481		$	70,184		$	73,287		$	162,284

The accompanying notes are an integral part of these consolidated financial statements.

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GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 and 2018 (Unaudited)

(dollars in thousands)



	G&W Stockholders
	Class A Common Stock		Class B Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive (Loss)/Income			Treasury Stock			Non-controlling Interest			Total Equity
BALANCE, December 31, 2018	$	752	$	5		$	1,785,005		$	2,482,252		$	(146,456	)	$	(699,852	)	$	208,346		3,630,052
Net income	—		—			—			38,706			—			—			100			38,806
Other comprehensive (loss)/income	—		—			—			—			(6,989		)	—			818			(6,171	)
Conversion of 100,000 shares Class B Common Stock to Class A Common Stock	1		(1		)	—			—			—			—			—			—
Value of stock issued for stock-based compensation - 164,732 shares Class A Common Stock	2		—			2,069			—			—			—			—			2,071
Compensation cost related to stock-based compensation	—		—			3,884			—			—			—			—			3,884
Value of treasury stock repurchased - 111,289 shares	—		—			—			—			—			(8,630		)	—			(8,630	)
Other	—		—			(832		)	(1,104		)	—			—			(796		)	(2,732	)
BALANCE, March 31, 2019	$	755	$	4		$	1,790,126		$	2,519,854		$	(153,445	)	$

Price	110.51	EPS	4
Shares	58	P/E	29
MCap	6,358	P/FCF	17
Net Debt	2,090	EBIT	349
TEV	8,448	TEV/EBIT	24
TTM 2019-09-30, in MM, except price, ratios

10-Q	2019-09-30	Filed 2019-11-06
10-Q	2019-06-30	Filed 2019-08-07
10-Q	2019-03-31	Filed 2019-05-09
10-K	2018-12-31	Filed 2019-02-26
10-Q	2018-09-30	Filed 2018-11-06
10-Q	2018-06-30	Filed 2018-08-07
10-Q	2018-03-31	Filed 2018-05-07
10-K	2017-12-31	Filed 2018-02-28
10-Q	2017-09-30	Filed 2017-11-08
10-Q	2017-06-30	Filed 2017-08-07
10-Q	2017-03-31	Filed 2017-05-09
10-K	2016-12-31	Filed 2017-03-01
10-Q	2016-09-30	Filed 2016-11-09
10-Q	2016-06-30	Filed 2016-08-05
10-Q	2016-03-31	Filed 2016-05-05
10-K	2015-12-31	Filed 2016-02-29
10-Q	2015-09-30	Filed 2015-11-06
10-Q	2015-06-30	Filed 2015-08-07
10-Q	2015-03-31	Filed 2015-05-07
10-K	2014-12-31	Filed 2015-02-27
10-Q	2014-09-30	Filed 2014-11-04
10-Q	2014-06-30	Filed 2014-08-06
10-Q	2014-03-31	Filed 2014-05-09
10-K	2013-12-31	Filed 2014-02-27
10-Q	2013-09-30	Filed 2013-11-07
10-Q	2013-06-30	Filed 2013-08-06
10-Q	2013-03-31	Filed 2013-05-09
10-K	2012-12-31	Filed 2013-03-01
10-Q	2012-09-30	Filed 2012-11-09
10-Q	2012-06-30	Filed 2012-08-07
10-Q	2012-03-31	Filed 2012-05-07
10-K	2011-12-31	Filed 2012-02-27
10-Q	2011-09-30	Filed 2011-11-04
10-Q	2011-06-30	Filed 2011-08-05
10-Q	2011-03-31	Filed 2011-05-06
10-K	2010-12-31	Filed 2011-02-25
10-Q	2010-09-30	Filed 2010-11-08
10-Q	2010-06-30	Filed 2010-08-06
10-Q	2010-03-31	Filed 2010-05-05
10-K	2009-12-31	Filed 2010-02-26

8-K	2019-10-24
8-K	2019-10-03
8-K	2019-09-25
8-K	2019-09-17
8-K	2019-08-04
8-K	2019-06-30
8-K	2019-05-22
8-K	2019-04-30
8-K	2019-02-08
8-K	2019-02-06
8-K	2018-11-02
8-K	2018-10-30
8-K	2018-10-17
8-K	2018-07-27
8-K	2018-06-05
8-K	2018-05-23
8-K	2018-05-01
8-K	2018-04-03
8-K	2018-02-08
8-K	2018-01-16

EX-31.1	gwr09302019ex311.htm
EX-31.2	gwr09302019ex312.htm
EX-32.1	gwr09302019ex321.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company