Operating revenues increased 23.9% to $514.9 million from $415.6 million.
Same railroad operating revenues, excluding a $16.6 million negative impact of foreign currency depreciation, declined 13.8%, primarily due to weakness in iron ore, coal, metals and agricultural products shipments.
Adjusted income from operations (adjusted operating income) decreased 16.9% to $94.2 million; Reported income from operations (operating income) decreased 16.6% to $94.6 million.(1)
Adjusted diluted earnings per common share (EPS) decreased 24.1%, to $0.85, or 20.6%, excluding a $0.05 negative impact of foreign currency; Reported diluted EPS decreased 3.9% to $1.47, including a $0.47 impact from the Short Line Tax Credit and a $0.17 impact from a reduction in U.K. tax rates.(1)
Comments on Fourth Quarter
Jack Hellmann, President and CEO of G&W, commented, “Our financial results for the fourth quarter of 2015 were consistent with our updated guidance, with adjusted diluted EPS of $0.85 down 24% versus last year, or down 21% excluding the impact of foreign currency. Each of our three operating segments, North America, Australia and the U.K./Europe, continued to face weak shipments in most commodity groups with same railroad carloads down approximately 16%. The weakness in our rail shipments has been largely driven by three overarching trends: i) the collapse in the prices of global commodities such as iron ore, copper, manganese and crude oil, ii) the rapid shift of U.S. and U.K. power generation away from coal to cheaper natural gas, and iii) a strong U.S. dollar, which has been making our industrial customers, such as steel manufacturers, as well as our agricultural customers less competitive in global markets.”
“The trends that made 2015 difficult show few signs of abating in 2016. In North America, we anticipate our operating income to be down slightly as sustained weakness in coal and steel shipments is expected to offset positive trends such as core pricing. In Australia, we expect a decline in operating income due to the recent closure of a manganese mine and continued pressure on our remaining iron ore business. In the U.K./Europe, we expect operating income to be flat, but to improve in the second half of 2016 after we complete the restructuring of the U.K. coal business. The net impact of these trends and weaker foreign currencies is that we expect our adjusted diluted EPS to be down approximately 10% in 2016.”
“In response to this environment, we have been intensely focused on enhancing our free cash flow and positioning the business for improving trends in the future. With respect to costs, we have made expense reductions in every operating region, with Australia now initiating a second round of cost cuts and the U.K./Europe planning significant cost reductions and a restructuring of our U.K. coal business in the first half of 2016. With respect to revenues, we continue to concentrate on commercial development worldwide, and have achieved strong revenues per carload in North America led by effective yield management. With respect to capital expenditures, we have been reducing our investment in plant and equipment to be consistent with our lower traffic levels. As a result of these measures, we expect to increase our free cash flow by approximately 10% to around $285 million in 2016, prior to capital for new business investments.”
“Regarding acquisitions and investments, we continue to evaluate multiple opportunities worldwide and will weigh the relative value of these potential investments versus the intrinsic value of our own shares.” (1)
Fourth Quarter Financial Results
G&W's operating revenues increased $99.2 million, or 23.9%, to $514.9 million, in the fourth quarter of 2015, compared with $415.6 million in the fourth quarter of 2014. G&W's income from operations in the fourth quarter of 2015 was $94.6 million, compared with $113.5 million in the fourth quarter of 2014. G&W's operating ratio in the fourth quarter of 2015 was 81.6%, compared with an operating ratio of 72.7% in the fourth quarter of 2014, including lower operating margins from Freightliner Group Limited (Freightliner). G&W's same railroad operating ratio in the fourth quarter of 2015 was 76.1%, compared with 72.7% in the fourth quarter of 2014.
G&W reported net income in the fourth quarter of 2015 of $84.9 million, compared with net income of $87.4 million in the fourth quarter of 2014. Excluding the net impact of certain items affecting comparability between periods as discussed below, G&W’s adjusted net income in the fourth quarter of 2015 was $49.1 million, compared with adjusted net income of $63.8 million in the fourth quarter of 2014.(1)
G&W’s reported diluted EPS in the fourth quarter of 2015 were $1.47 with 57.9 million weighted average shares outstanding, compared with diluted EPS in the fourth quarter of 2014 of $1.53 with 57.1 million weighted average shares outstanding. Excluding the net impact of certain items affecting comparability discussed below, G&W’s adjusted diluted EPS in the fourth quarter of 2015 were $0.85 with 57.9 million weighted average shares outstanding, compared with adjusted diluted EPS in the fourth quarter of 2014 of $1.12 with 57.1 million weighted average shares outstanding.(1)