Operating revenues increased 30.8% to $542.2 million from $414.6 million.
Same railroad operating revenues, excluding the $18.3 million negative impact of foreign currency depreciation, declined 10.2%, primarily due to weakness in iron ore, utility coal and steel shipments.
Adjusted income from operations (operating income) decreased 9.6% to $99.8 million; Reported income from operations decreased 9.7% to $99.5 million. (1)
Adjusted diluted earnings per common share (EPS) decreased 17.0% to $0.93; Reported diluted EPS decreased 14.0% to $0.92. (1)
Jack Hellmann, President and CEO of G&W, commented, “Our financial results for the second quarter of 2015 were consistent with our updated guidance. However, our results were disappointing with second quarter adjusted diluted earnings per share declining 17% versus last year. At a high level, our North American operating income was down 10%, primarily due to significant weakness in utility coal and steel and scrap shipments in the United States, which more than overcame the benefits of the Pinsly Arkansas acquisition and Rapid City, Pierre & Eastern start-up. In addition, Australian operating income was down 40%, primarily due to the previously announced closures of several customer iron ore mines. Partially offsetting these declines was a positive earnings contribution from the newly-acquired Freightliner Group, which were included in our financial results for the first full period in the second quarter.”
“In North America, our same railroad revenue excluding the impact of foreign currency declined 8.2%, with the two largest areas of weakness being a 31% decline in coal revenue, primarily due to competition from low priced natural gas, and a 22% decline in steel and scrap revenue, primarily due to competition from imported steel. In response to the revenue shortfall, we aggressively reduced expenses, maintaining a North American operating ratio of 75.4%.”
“In Australia, our same railroad revenue excluding the impact of foreign currency decreased over 20% in the second quarter due to reduced iron ore shipments, while our management team continued to intensely manage costs. Meanwhile, the addition of Freightliner Australia in New South Wales is enhancing the scope of new business development opportunities outside of our existing Australian geographies.”
“In the United Kingdom and Europe, the integration of Freightliner is progressing well. Although U.K. coal shipments are expected to remain relatively low into the fourth quarter due to a combination of seasonal electricity consumption patterns and the gradual reduction of high coal stockpiles that preceded the new U.K.carbon tax, we are pleased with the overall trajectory and management of the business.”
“In the second half of 2015, we expect somewhat better financial results based on modest improvements in North American carloads, seasonal improvements in the U.K./Europe business including intermodal shipments, as well as a sharp focus on additional cost reductions. Meanwhile, we continue to generate strong free cash flow and to evaluate a range of acquisition and investment opportunities worldwide.” (1)
G&W reported net income in the second quarter of 2015 of $52.8 million, compared with net income of $60.7 million in the second quarter of 2014. Excluding the net impact of certain items affecting comparability between periods discussed below, G&W’s adjusted net income in the second quarter of 2015 was $53.0 million, compared with adjusted net income of $63.7 million in the second quarter of 2014. (1)
G&W’s reported diluted EPS in the second quarter of 2015 were $0.92 with 57.1 million weighted average shares outstanding, compared with reported diluted EPS in the second quarter of 2014 of $1.07 with 56.9 million weighted average shares outstanding. G&W’s adjusted diluted EPS in the second quarter of 2015 were $0.93 with 57.1 million weighted average shares outstanding, compared with adjusted diluted EPS in the second quarter of 2014 of $1.12 with 56.9 million weighted average shares outstanding. (1)
G&W’s effective income tax rate was 35.7% in the second quarter of 2015, compared with 34.9% in the second quarter of 2014.