SEC Info  
   Home     Search     My Interests     Help     Sign In     Please Sign In  

Railamerica Inc/DE · 10-K405 · For 12/31/00

Filed On 4/2/01, 3:34pm ET   ·   Accession Number 950144-1-4642   ·   SEC File 0-20618

Previous ‘10-K405’:  None   ·   Next & Latest:  ‘10-K405’ on 4/1/02 for 12/31/01

  in   Show  and 
Help... Wildcards:  ? (any letter),  * (many).  Logic:  for Docs:  & (and),  | (or);  for Text:  | (anywhere),  "(&)" (near).    Bottom
 
  As Of                Filer                Filing    For/On/As Docs:Size              Issuer               Agent

 4/02/01  Railamerica Inc/DE                10-K405    12/31/00    8:283K                                   Bowne of Atlanta Inc/FA

Annual Report — [X] Reg. S-K Item 405   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K405     Railamerica, Inc. Form 10-K405 Dated 12/31/00         78    368K 
 2: EX-3.3      Amendment Certificate of Incorporation                 1      7K 
 3: EX-10.77    Waiver & Amendment No.1 to Credit Agreement           70     59K 
 4: EX-10.78    Waiver & Amendment No.2 to Credit Agreement           61     52K 
 5: EX-10.79    Employment Agreement/ Gary O. Marino                   9     55K 
 6: EX-21.1     Subsidiaries of the Company                            2     10K 
 7: EX-23.1     Consent of Pricewaterhousecoopers LLP                  1      6K 
 8: EX-23.2     Consent of Arthur Andersen Langton Clarke              1      7K 


10-K405   —   Railamerica, Inc. Form 10-K405 Dated 12/31/00
Document Table of Contents

Page (sequential) | (alphabetic) Top
 
11st Page   -   Filing Submission
3Item 1. Business
17Item 2. Properties
22Item 3. Legal Proceedings
"Item 4. Submission of Matters to A Vote of Security Holders
23Item 5. Market for Common Equity and Related Stockholder Matters
24Item 6. Selected Financial Data
25Item 7. Management's Discussion and Analysis
29Ferronor
34Item 7A. Market Risk
35Item 8. Financial Statements and Supplementary Data
"Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
"Item 10. Directors and Executive Officers of the Registrant
"Item 11. Executive Compensation
"Item 12. Security Ownership of Certain Beneficial Owners and Management
"Item 13. Certain Relationships and Related Transactions
36Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
10-K4051st Page of 78TOCTopPreviousNextBottomJust 1st
 

U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Commission File Number December 31, 2000 0-20618 ---------- RAILAMERICA, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 65-0328006 --------------------------- ----------------------- (State or Other Jurisdiction (IRS Employer of Incorporation) Identification Number) 5300 Broken Sound Blvd, N.W. BOCA RATON, FLORIDA 33487 ----------------------------------- ------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (561) 994-6015 Securities Registered Pursuant to Section 12(b) of the Act: None Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.001 Par Value Common Stock Purchase Rights Check 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 [X] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the registrant as of March 23, 2001 computed by reference to the average bid and asked prices of registrant's common stock reported on NASDAQ on such date was $149.4 million. The number of shares outstanding of registrant's Common Stock, $.001 par value per share, as of March 23, 2001 was 18,668,002. DOCUMENTS INCORPORATED BY REFERENCE The registrant's proxy statement for the 2001 Annual Meeting of Stockholders (the "Definitive Proxy Statement") to be filed with the Commission pursuant to Regulation 14A is incorporated by reference into Part III of this Form 10-K.
10-K4052nd Page of 78TOC1stPreviousNextBottomJust 2nd
TABLE OF CONTENTS [Download Table] PAGE ---- PART I Item 1. Business 3 Item 2. Properties 17 Item 3. Legal Proceedings 22 Item 4. Submission of Matters to a Vote of Security Holders 22 PART II Item 5. Market for Common Equity and Related Stockholder Matters 23 Item 6. Selected Financial Data 24 Item 7. Management's Discussion and Analysis 25 Item 7a. Market Risk 34 Item 8. Financial Statements 35 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 35 PART III Item 10. Directors and Executive Officers of the Registrant 35 Item 11. Executive Compensation 35 Item 12. Security Ownership of Certain Beneficial Owners and Management 35 Item 13. Certain Relationships and Related Transactions 35 PART IV Item 14. Exhibits and Reports on Form 8-K 36 Signatures 2
10-K4053rd Page of 78TOC1stPreviousNextBottomJust 3rd
This Form 10-K contains certain "forward-looking" statements within the meaning of The Private Securities Act of 1995 and information relating to RailAmerica, Inc. and its subsidiaries that are based on the beliefs of our management and that involve known and unknown risks and uncertainties. When used in this report, the terms "anticipate," "believe," "estimate," "expect" and "intend" and words or phrases of similar import, as they relate to us or our subsidiaries or our management, are intended to identify forward-looking statements. These statements reflect the current risks, uncertainties and assumptions related to various factors including, without limitation, currency risk, competitive factors, general economic conditions, customer relations, relationships with vendors, fuel costs, the interest rate environment, governmental regulation and supervision, seasonality, technological change, changes in industry practices, the inability to successfully integrate acquired operations, the ability to successfully market and sell non-core properties and assets, the liability to consummate sale/leaseback transactions, the ability to service debt, one-time events and other factors described in this report and in other filings made by us with the Securities and Exchange Commission. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, believed, estimated or intended. We undertake no obligation to update, and we do not have a policy of updating or revising, these forward-looking statements. Except where the context otherwise requires, the terms "we," "us," or "our" refer to the business of RailAmerica, Inc. and its consolidated subsidiaries. PART I  ITEM 1. BUSINESS GENERAL We are the largest owner and operator of short line freight railroads in North America and a leading owner and operator of regional freight railroads in Australia and Chile. We own, operate or have an equity interest in, a diversified portfolio of 39 railroads with approximately 11,000 miles of track located in the United States, Australia, Canada, Chile and Argentina. Through our diversified portfolio of rail lines, we operate in numerous geographic regions with varying concentrations of commodities hauled. We believe that individual economic and seasonal cycles in each region may partially offset each other. All dollar amounts in this report are in U.S. dollars unless otherwise indicated. We were incorporated in Delaware on March 31, 1992 as a holding company for two pre-existing railroad companies. Our principal executive office is located at 5300 Broken Sound Blvd, N.W., Boca Raton, Florida 33487, and our telephone number at that location is (561) 994-6015. 3
10-K4054th Page of 78TOC1stPreviousNextBottomJust 4th
RECENT DEVELOPMENTS Since January 1, 2000, we have completed the following significant transactions: o In February 2000, we acquired RailTex, Inc., a leading owner and operator of short line freight railroads concentrated in the Southeastern, Midwestern, Great Lakes and New England regions of the United States and in eastern Canada, with approximately 4,100 miles of rail lines in North America. The total consideration was approximately $128 million in cash, approximately 6.6 million shares of our common stock, valued at $60.8 million, and assumption of approximately $111 million in debt. o In August 2000, we sold 130,000 units, each consisting of $1,000 of 12.875% senior subordinated notes due 2010 of our wholly owned subsidiary, RailAmerica Transportation Corp. ("RTC"), and warrants to purchase 10.873 shares of our common stock. Each unit was priced at $940.38. o During 2000, we sold several non-core railroads and various other non-core assets for total proceeds of approximately $44.0 million. In addition, we will receive a newly built 13.5 mile rail line in Texas pursuant to an agreement with the State and Local Governments. The cost of that rail line to the Government is expected to be approximately $24 million. o In December 2000, we sold the U.S.-based subsidiary of our specialty truck trailer manufacturing operations, for $32.5 million, subject to adjustments, to the Heil Company of Chattanooga, Tennessee. We also sold substantially all of the assets of the Canadian based subsidiary of our specialty truck trailer manufacturing operations, to the Canam Manac Group in Saint-Georges, Quebec for approximately $6.0 million. o In December 2000, we completed the first phase of our sale/leaseback program realizing $22.2 in proceeds on the sale of certain locomotives. NORTH AMERICAN RAILROAD OPERATIONS We currently own, lease and/or operate 37 rail properties in North America. All of our North American rail properties are short line railroads that provide transportation services for both on-line customers and Class I railroads, which interchange with our rail lines. Short line railroads are typically less than 350 miles long, serve a particular class of customers in a small geographic area and interchange with Class I railroads. Short line rail operators primarily serve customers on their line by transporting products to and from the Class I interchanges. Each of our North American rail lines is typically the only rail carrier directly serving its customers. The ability to 4
10-K4055th Page of 78TOC1stPreviousNextBottomJust 5th
haul heavy and large quantities of freight as part of a long-distance haul makes our rail services generally a more effective, lower-cost alternative to other modes of transportation, including motor carriers. UNITED STATES. We own, lease and/or operate 29 short line rail properties in the United States with approximately 4,400 miles of track. Our properties are geographically diversified and operate in 22 states. We have clusters of rail properties in the southeastern, Midwestern, Great Lakes and New England regions of the United States. We believe that this cluster strategy provides economies of scale and helps achieve operational synergies. CANADA. We own, lease and/or operate 8 short line rail properties in Canada with approximately 1,800 miles of track. Our Canadian properties are geographically diversified and operate in six provinces and/or territories. We have clusters of rail properties in Alberta and southern Ontario/Quebec. SALES AND MARKETING. We focus on providing rail service to our customers that is easily accessible, reliable and cost-effective. Following commencement of operations, our railroads generally have attracted increased rail shipments from existing customers and obtained traffic from new customers who had not previously shipped by rail or had ceased rail shipments. We believe our ability to generate additional traffic is enhanced by our marketing efforts which are aimed at identifying and responding quickly to the individual business needs of customers along our rail lines. As part of our marketing efforts, we often schedule more frequent rail service, help customers negotiate price and service levels with interchange partners and assist customers in obtaining the quantity and type of rail equipment required for their operations. We also provide non-scheduled train service on short notice to accommodate customers' special or emergency needs. Our decentralized management structure is an important element of our marketing strategy. We give significant discretion with respect to sales and marketing activities to our North American regional marketing managers and international marketing managers. Each regional marketing manager works closely with personnel of our railroads and with other members of senior management to develop marketing plans to increase shipments from existing customers and to develop business from new customers. We also work with the marketing staffs of the connecting Class I carriers to develop an appropriate array of rail-oriented proposals to meet customers' needs and with industrial development organizations to locate new rail users. We consider all of our employees to be customer service representatives and encourage them to initiate and maintain regular contact with shippers. TRAFFIC. Rail traffic may be categorized as interline, local or bridge traffic. Interline traffic either originates or terminates with customers located along a rail line and is interchanged with other rail carriers. Local traffic both originates and terminates on the same rail line and does not involve other carriers. Bridge traffic passes over the line from one connecting rail carrier to another. 5
10-K4056th Page of 78TOC1stPreviousNextBottomJust 6th
Traffic which originated or terminated on our lines generated 89% of our total freight revenue in both 2000 and 1999. We believe that higher levels of interline and local traffic provide us with greater stability of revenues because this traffic represents shipments to or from customers located along our lines and cannot be easily diverted to other rail carriers, unlike bridge traffic. The following table summarizes freight revenue by type of traffic carried by our railroads in 2000 and 1999, in dollars and as a percent of total freight revenue. NORTH AMERICA FREIGHT REVENUE (DOLLARS IN THOUSANDS) [Download Table] 2000 1999 ----------------------- ----------------------- Interline ....................... $146,184 72.0% $ 31,905 86.5% Local ........................... 27,404 13.5% 945 2.6% Bridge .......................... 29,396 14.5% 4,019 10.9% -------- -------- -------- -------- $202,984 100.0% $ 36,869 100.0% ======== ======== ======== ======== CONNECTING CARRIERS. All of our short line properties interchange traffic with Class I railroads. The following table summarizes our significant connecting carriers in 2000 and 1999 by freight revenues and carloads as a percentage of total interchanged (interline and bridge) traffic. NORTH AMERICA INTERCHANGED TRAFFIC [Enlarge/Download Table] 2000 1999 ----------------------- ---------------------- FREIGHT FREIGHT ----------------------- ---------------------- REVENUES CARLOADS REVENUES CARLOADS -------- -------- -------- -------- Canadian National Railway 24.7% 24.7% 20.4% 21.6% Union Pacific Railroad 24.0% 21.8% 3.5% 3.3% CSXT Transportation 18.9% 15.0% 14.6% 10.0% Canadian Pacific Railway 10.3% 16.6% 28.5% 24.4% Burlington Northern Sante Fe Railway 8.5% 7.3% 26.6% 34.2% Norfolk Southern 7.2% 7.3% -- -- All other railroads 6.4% 7.3% 6.4% 6.5% --------------- ------------- ------------- ------------- Total interchanged traffic 100.0% 100.0% 100.0% 100.0% =============== ============= ============= ============= 6
10-K4057th Page of 78TOC1stPreviousNextBottomJust 7th
Charges for interchanged traffic are generally billed to the customers by the connecting carrier and cover the entire transportation of a shipment from origin to destination, including the portion that travels over our lines. Our revenues from this traffic are generally collected through fees paid directly to us by the connecting carriers rather than by customers on our lines and are payable regardless of whether the connecting carriers are able to collect from the customers. The fees payable by connecting carriers are set forth in contracts entered into by each of our railroads with their respective connecting carriers and are subject to periodic adjustments. CUSTOMERS. In 2000, we served approximately 1,500 customers in North America who shipped and/or received a wide variety of products. Our railroads are typically the only rail carriers directly serving our customers. Although most of our North American railroads have a well-diversified customer base, several of the smaller rail lines have one or two dominant customers. In 2000, our 10 largest North American customers accounted for approximately 28% of North American transportation revenue. Three of these customers accounted for approximately 15% of our North American transportation revenue. COMMODITIES. The following table sets forth by number and percentage the carloads hauled by our North American railroads during the years ended December 31, 2000 and 1999. CARLOADS CARRIED BY COMMODITY GROUP [Download Table] YEAR ENDED YEAR ENDED DECEMBER 31, 2000 DECEMBER 31, 1999 ---------------------- ----------------------- COMMODITY CARLOADS % OF TOTAL CARLOADS % OF TOTAL --------- -------- ---------- -------- ---------- Railroad equipment/ Intermodal ............. 192,323 23% 37,023 24% Lumber, paper and forest products ............... 149,226 18% 29,991 19% Agriculture ............ 76,593 9% 28,140 18% Metals ................. 61,049 7% 10,956 7% Food products .......... 39,313 5% 9,736 6% Chemicals/fertilizer ... 66,827 8% 8,522 6% Petroleum products ..... 26,840 3% 5,678 4% Coal ................... 71,945 9% 5,504 4% Containers ............. 30,134 3% 5,033 3% Minerals, ores & stones 53,173 6% 4,066 3% Auto parts ............. 47,900 6% 3,415 2% Other .................. 24,128 3% 6,927 4% ------- --- ------- ------- Total .......... 839,451 100% 154,991 100% ======= === ======= ======= 7
10-K4058th Page of 78TOC1stPreviousNextBottomJust 8th
EMPLOYEES. Currently, we have approximately 1,320 full-time railroad employees in North America. Approximately 260 of the 400 Canadian employees are subject to collective bargaining agreements as well as approximately 260 of the 920 United States employees. SAFETY. We endeavor to conduct safe railroad operations for the benefit and protection of employees, customers and the communities served by our railroads. Our safety program, led by the Vice President of Safety and Operating Practices, involves all of our employees and is administered on a daily basis by each Regional Vice President. Operating personnel are trained and certified in train operations, hazardous materials handling, personal safety and all other areas subject to governmental rules and regulations. Each U.S. employee involved in train operations is subject to pre-employment and random drug testing whether or not required by federal regulation. We believe that each of our North American railroads complies in all material respects with federal, state, provincial and local regulations. Additionally, each railroad is given flexibility to develop more stringent safety rules based on local requirements or practices. We also participate in governmental and industry sponsored safety programs including Operation Lifesaver (the national grade crossing awareness program) and the American Short Line and Regional Railroad Association Safety Committee. COMPETITION. In acquiring rail properties, we compete with other short line and regional railroad operators, some of which have greater financial resources than us. Competition for rail properties is based primarily upon price, operating history and financing capability. We believe our established reputation as a successful acquirer and operator of short line rail properties, combined with our managerial resources, effectively positions us to take advantage of future acquisition opportunities. Our railroads are typically the only rail carriers directly serving their customers; however, our railroads compete directly with other modes of transportation, principally motor carriers and, to a lesser extent, ship and barge operators. The extent of this competition varies significantly among our railroads. Competition is based primarily upon the rate charged and the transit time required, as well as the quality and reliability of the service provided, for an origin-to-destination package. To the extent other carriers are involved in transporting a shipment, we cannot control the cost and quality of service. Cost reductions achieved by major rail carriers over the past several years have generally improved their ability to compete with alternate modes of transportation. 8
10-K4059th Page of 78TOC1stPreviousNextBottomJust 9th
INTERNATIONAL RAILROAD OPERATIONS AUSTRALIAN RAILROAD OPERATIONS We own Freight Australia, a regional freight railroad operating in and around the State of Victoria, Australia. Formerly known as Freight Victoria, Freight Australia is our wholly owned Australian subsidiary that purchased the assets and business of V/Line Freight Corporation from the Government of the State of Victoria, Australia on April 30, 1999 for total consideration of approximately $103 million. The assets purchased from V/Line Freight Corporation included 106 locomotives and over 2,600 rail cars. As part of the transaction, Freight Australia prepaid to the State of Victoria the rental payments of a 45-year lease to operate 3,150 miles of track. The present value of the lease payments totaling approximately $49 million is included in the $103 million purchase price. CUSTOMERS. Freight Australia's customers span a variety of industries, with particular emphasis on companies in the Australian agricultural industry for whom we carry bulk grain and other agricultural products. One customer represented 19% of Freight Australia's transportation revenue in 2000. Additionally, track access fees from V/Line Passenger represented 17% of Freight Australia's transportation revenue in 2000. COMMODITIES/SERVICES. The following table sets forth by dollar amount (in thousands) and percentage Freight Australia's transportation revenue for the year ended December 31, 2000 and the period from May 1, 1999 to December 31, 1999. [Enlarge/Download Table] 2000 2000 1999 1999 COMMODITY/SERVICE US$ AMOUNT % OF TOTAL US$ AMOUNT % OF TOTAL ----------------- ---------- ---------- ---------- ---------- Agricultural products $ 45,440 46% $ 24,613 40% Track access fees 16,309 16% 12,430 21% Intermodal containers 13,540 14% 7,470 12% Fast Track* 8,210 8% 6,744 11% Bulk (i.e. cement, gypsum, stone, logs) 9,540 10% 6,213 10% Interstate 5,954 6% 3,484 6% ----- ---- ---------- ---- Total transportation revenue $ 98,993 100% $ 60,954 100% ======== ==== ========= ==== * Fast Track - Freight Australia's Fast Track business transports products which typically are less than a container load of freight. The majority of traffic is either parcels or pallets. Services offered to customers include depot-to-depot, depot-to-door, and door-to-door. The Fast Track business has six metropolitan sites and services 24 regional freight centers. Road contractors perform local pick-up and delivery to and from the freight centers. 9
10-K40510th Page of 78TOC1stPreviousNextBottomJust 10th
EMPLOYEES. Freight Australia currently has approximately 650 employees. A majority of these employees are subject to collective bargaining agreements. CHILEAN RAILROAD OPERATIONS In February 1997, we acquired 55% of the outstanding voting stock of Ferronor for approximately $7.2 million. Ferronor owns and operates approximately 1,400 miles of rail line serving northern Chile. The remaining 45% of Ferronor was purchased by Andres Pirazzoli y Cia, Ltda., a Chilean contractor providing equipment and mechanized services to the forest industry. Ferronor owns and operates the only north-south railroad in northern Chile, extending from La Calera near Santiago, where it connects with Chile's southern railway, Ferrocarril del Pacifico, S.A., to its northern terminus at Iquique, approximately 120 miles south of the Peruvian border. It also operates several east-west branch lines that link a number of iron, copper and mineral salt mines and production facilities with several Chilean Pacific port cities. Ferronor also serves Argentina and Bolivia through traffic interchanged with the Belgrano Cargas Railroad and the Antofagasta (Chile)-Bolivia Railway. During the fourth quarter of 2000, Ferronor entered into an agreement with Belgrano Cargas, S.A., the operator of the General Belgrano railroad in Argentina. Under the new agreement, Ferronor will operate freight trains from Chile's border city of Socompa to Guemes, Argentina. Ferronor will, for the first time, be permitted to negotiate and sign transportation contracts with customers on this portion of track and develop the Chilean export market into Argentina and Bolivia. The agreement has an initial term of one year and automatically renews for successive one-year terms unless either party gives notice of termination. CUSTOMERS. Ferronor's customers are principally in the mining industry. Ferronor had two customers who each represented more than 10% of the transportation revenue in Chile. The customers represented 44% and 38% of the Chilean transportation revenue for 2000. EMPLOYEES. Ferronor currently has approximately 260 full-time employees. A majority of Ferronor's employees are subject to collective bargaining agreements. BUSINESS STRATEGY Our strategy is to expand our position as a leading owner and operator of short line and regional railroads in selected markets worldwide. Key elements of this strategy include: GROW INTERNALLY THROUGH FOCUSED SALES, MARKETING EFFORTS AND CUSTOMER SERVICE. We continue to focus on increasing traffic in each of our markets by aggressively marketing our customer service to our customers and bolstering 10
10-K40511th Page of 78TOC1stPreviousNextBottomJust 11th
sales efforts. In many cases, customer service and sales and marketing at railroads that we acquire have been neglected by the previous owners. The Company has purchased a number of rail lines from Class I railroads. Due to the size of the Class I railroads and their concentration on long-haul traffic, the Class I operators typically have not effectively marketed to customers on these branch line operations. Once we acquire a rail property, we undertake steps to improve the local sales and marketing efforts and to increase the railroad's focus on customer service. Due to our decentralized management structure and a flexible, cross-trained employee base, we are able to provide flexible and customized solutions that were not previously available to the customers under the ownership of a Class I operator. This increased focus on service enables us to reestablish relationships with customers who had previously cancelled service. In addition, we have been successful at increasing shipments from the acquired railroad's existing customer base. As a result, typically, revenues increase and profitability improves once we acquire and integrate a railroad. Our management intends to continue this strategy by deepening our relationships with customers and further improving upon our local sales and marketing efforts. MAINTAIN CLOSE RELATIONSHIPS WITH CLASS I RAILROADS. Since all of our North American short line properties interchange with at least one Class I railroad, we maintain close relationships with all of the North American Class I railroads. We believe that these relationships will enable us to pursue new business opportunities on existing rail properties and potentially acquire additional short line freight lines from the Class I railroads. CONTINUE TO GROW THROUGH SELECTIVE ACQUISITIONS. We believe that the market for domestic short line rail acquisitions is starting to expand as mergers between Class I's and consolidations among short line and regional railroads have opened up several thousand miles of rail lines for sale. Opportunities also exist in international markets as certain government-owned railway systems are being privatized. We intend to pursue those acquisitions that meet our stringent criteria, particularly in regions where we currently operate and can achieve cost savings and synergies. Any rail acquisitions that we pursue must be accretive to earnings and not result in increasing our debt leverage and coverage ratios. DIVERSIFICATION. We believe that our revenue diversification limits our exposure to geographic, economic and customer related risks, while positioning us to take advantage of a broad range of business opportunities. This diversification, and the stability it provides to our operations, differentiates us from other regional and short line carriers. Diversification also enables us to develop and maintain close relationships with essentially all Class I's in North America. DIVESTITURES. In order to capitalize on opportunities more profitable to our overall portfolio, minimize the amount of management time and effort on the smaller properties in our portfolio and to reduce debt, we may from time to 11
10-K40512th Page of 78TOC1stPreviousNextBottomJust 12th
time divest certain of our non-core railroad properties. We believe there is a market for these divestitures among other smaller short line operating companies and selected strategic buyers. REGULATION UNITED STATES. Our subsidiaries in the United States are subject to various safety and other laws and regulations by numerous government agencies, including (1) regulation by the Surface Transportation Board, or STB, and the Federal Railroad Administration, or FRA, (2) labor related statutes including the Railway Labor Act, Railroad Retirement Act, the Railroad Unemployment Insurance Act, and the Federal Employer's Liability Act, and (3) regulation by agencies in the states in which we do business. Additionally, we are subject to STB regulation in connection with our acquisition of new railroad properties. As a result of the enactment in 1980 of the Staggers Rail Act, which amended the Interstate Commerce Act, and the enactment of the ICC Termination Act of 1995, there has been a significant relaxation in regulation governing rail carriers, which management believes has greatly simplified the purchase and sale of short line railroad properties and expedited the closing of those transactions. The STB has jurisdiction over, among other matters, the construction, acquisition, or abandonment of rail lines, the consolidation or merger of railroads, the assumption of control of one railroad by another railroad, the use by one railroad of another railroad's tracks through lease, joint use or trackage rights, the rates charged for their transportation services, and the service provided by rail carriers. The ICC Termination Act replaced the Interstate Commerce Commission, or ICC, with the STB. The ICC Termination Act also abolished labor protective conditions applicable to numerous types of rail transactions. Labor protective conditions cannot be imposed on the sale of a railroad line to a new carrier. In the sale of a railroad line to a regional railroad, which is a railroad with annual revenues between $20 million and $250 million, as adjusted by the railroad revenue deflator, labor protection consists of the payment of up to one year of severance pay for employees affected by the transaction. In some instances of the sale of a railroad line to a small railroad, which is a railroad with annual revenues that are less than $20 million, as adjusted by the railroad revenue deflator, labor protection also consists of the payment of up to one year of severance pay for employees affected by the transaction. While imposition of labor protective conditions on line sales and transfers does not subject a rail line buyer to the seller's collective bargaining agreements, rates of pay, and other labor practices and does not unionize the buyer's operating and maintenance employees, it does entitle employees of the buyer or seller who are "adversely affected" by the transaction in terms of job loss, pay cuts, loss of overtime, loss of hours, loss of benefits, and moving expenses, to receive over a period of up to six years payments representing compensation for those losses. Generally, in a line sale or transfer, only the seller's or transferor's employees are affected. As a result of the Staggers Rail Act, railroads have received considerable rate and market flexibility including the ability to obtain wholesale exemptions from numerous provisions of the Interstate Commerce Act. The Staggers Rail Act allowed the deregulation of all containerized and truck 12
10-K40513th Page of 78TOC1stPreviousNextBottomJust 13th
trailer traffic handled by railroads. On regulated traffic, railroads and shippers are permitted to enter into contracts for rates and provision of transportation services without the need to file tariffs. Moreover, on regulated traffic, the Staggers Rail Act allows railroads considerable freedom to raise or lower rates without objection from captive shippers. While the ICC Termination Act retained maximum rate regulation on traffic over which railroads have exclusive control, the new law relieved railroads from the requirements of filing tariffs and rate contracts with the STB on all traffic other than agricultural products. The FRA regulates railroad safety and equipment standards, including track maintenance, handling of hazardous shipments, locomotive and rail car inspection and repair requirements, and operating practices and crew qualifications. AUSTRALIA. Our Australian railroad, Freight Australia, is subject to regulation in the State of Victoria by the Office of the Regulator-General. The Office of the Regulator-General, known as ORG, was established by the Office of the Regulator-General Act. The purpose of the ORG is to create a regulatory framework for regulated industries which promotes and safeguards competition and fair and efficient market conduct or, if there is no competitive market, promotes the simulation of competitive market conduct and the prevention of misuse of monopoly power. These objectives were expanded by the Victorian Government in the RAIL CORPORATIONS ACT 1996 to ensure that rail users have fair and reasonable access to declared railway services. The RAIL CORPORATIONS ACT 1996, known as RCA, regulates the operation of the State of Victoria's passenger trains and trams and rail network. Part 2A of the RCA outlines an access regime which potentially applies to railways and rail infrastructure and gives power to the ORG to regulate access to relevant services. At present, however, no rail transport services have been declared to be subject to the regime. The Ministers for Transport and Ports jointly announced on February 1, 2001 that the access regime will be declared effective July 1, 2001. Draft pricing orders were issued on February 1, 2001 as well. In the event that any services are declared to be "declared rail transport services" and thus become subject to the Part 2A access regime, Part 2A provides that: A manager of rail infrastructure and a provider and operator of rolling stock must: (1) use all reasonable endeavors to meet the requirements of persons seeking access to the declared rail transport services; (2) make a formal proposal of terms and conditions for access within 14 days after receiving a request for it to do so; and (3) at the request of a person seeking, or considering seeking, access provide to that person information as prescribed by ORG. 13
10-K40514th Page of 78TOC1stPreviousNextBottomJust 14th
In the following circumstances, an application may be made in writing to ORG, by the operator or a person seeking access, for a determination: (1) if the operator has not made a formal proposal within 14 days after receiving a request for it to do so; (2) if the operator and a person seeking access cannot agree on the terms and conditions on which access is to be provided; and (3) a person considers that their right of access to a declared rail transport service has been hindered. A determination of ORG may, among other things: (1) require the operator to provide access to the service to the person seeking access; (2) deal with the terms and conditions of access; and (3) specify the extent to which the determination overrides an earlier determination. In addition, the Governor in the Council may specify policies or principles which ORG must apply in: (1) determining any amount to be paid for access to a specified declared rail transport service; or (2) determining the terms and conditions of access. The Rail Corporations Act was amended in October 2000 to strengthen the powers of the ORG, particularly in respect to the information the ORG may require to be supplied by the access provider in order for the ORG to make a determination. In addition to complying with the above-described regulations, a manager of rail infrastructure and a provider and operator of rolling stock must be accredited under the TRANSPORT ACT 1993. A corporation which manages rail infrastructure or operates rolling stock without accreditation is liable for a fine of $140,000. The Secretary to the Department of Infrastructure may take disciplinary action against an accredited person if the person has failed to comply with the requirements of accreditation or has permitted an unsafe practice or acted negligently. Disciplinary action which the Secretary may take includes disqualifying the person from holding an accreditation for a period specified by the Secretary, suspension of the accreditation, early expiry of the accreditation and immediate or future cancellation of the accreditation. 14
10-K40515th Page of 78TOC1stPreviousNextBottomJust 15th
The person has a right of review concerning accreditation decisions and may apply to the Victorian Civil and Administrative Tribunal for a review of a decision made by the Secretary. An accreditation is personal to a person who holds it, is not capable of being transferred of assigned or otherwise dealt with by the person who holds it and does not vest by operation of law in any other person. The TRANSPORT ACT contains detailed provisions authorizing the Secretary of the Department of the Infrastructure to carry out inspections and giving inspectors powers to enter and inspect premises (including, testing equipment and seizing property if appropriate). All actions must be reasonably necessary to determine compliance with the Transport Act. A search warrant or prior written consent of the occupier is necessary for entry into premises. The Secretary must conduct safety audits of every person accredited at least once every twelve months, to ensure that the accredited person is complying with the requirements of accreditation. The Secretary may charge the accredited person a fee for the safety audit service, subject to the limits set out in the relevant regulations. An accredited person has a duty to inquire into accidents and incidents. CANADA. Our Canadian railroad subsidiaries are subject to regulation by various governmental departments and regulatory agencies at the federal or provincial level depending on whether the railroad operated by us in question falls within federal or provincial jurisdiction. A Canadian railroad generally falls within the jurisdiction of federal regulation if the railroad crosses provincial or international borders or if the Parliament of Canada has declared the railroad to be a federal work or undertaking and in selected other circumstances. Any company which proposes to construct or operate a railway in Canada which falls within federal jurisdiction is required to obtain a certificate of fitness under the Canada Transportation Act, or CTA, which is issued on proof of insurance. Under the CTA, the sale of a federally regulated railroad line is not subject to federal approval, although a process of advertising and negotiations may be required in connection with any proposed discontinuance of a federal railway. Federal railroads are governed by federal labor relations laws. Short lines located within the boundaries of a single province which do not otherwise fall within the federal jurisdiction are regulated by the laws of the province in question, including laws as to licensing and labor relations. Most of Canada's ten provinces have enacted new legislation, which is more favorable to the operation of short line railroads than previous provincial laws. Many of the provinces require as a condition of licensing under the short line railroads acts that the licensees comply with federal regulations applicable to safety and other matters and remain subject to inspection by federal railway inspectors. Under some provincial legislation, the sale of a provincially regulated railroad line is not subject to provincial approval, although a process of advertising and negotiations may be required in connection with any proposed discontinuance of a provincial railway. 15
10-K40516th Page of 78TOC1stPreviousNextBottomJust 16th
Acquisition of additional railroad operations in Canada, whether federally or provincially regulated, may be subject to review by the Investment Canada Act, or ICA, a federal statute which applies to every acquisition of a Canadian business or establishment of a new Canadian business by a non-Canadian. Whether or not an acquisition is subject to review under the ICA is dependent on the book value of the assets of the Canadian business being acquired. Acquisitions that are subject to review must, before their completion, satisfy the Minister responsible for administering the ICA that the acquisition is of net benefit to Canada. Any contemplated acquisitions may also be subject to the provisions of the Competition Act federal antitrust legislation of general application. The Competition Act contains merger control provisions which apply to certain acquisitions. As a result, acquisitions exceeding specified asset and/or revenue thresholds may be subject to pre-merger notification and subsequent substantive review prior to their completion. NORTH AMERICAN RAILROAD INDUSTRY The U.S. railroad industry is dominated by major Class I railroads, which operated approximately 121,000 miles of track in 1999. In addition to large railroad operators, there were more than 500 short line and regional railroads, which operated approximately 50,000 miles of track in 1999. The railroad industry is subject to regulations of various government agencies, primarily the STB. For regulatory purposes, the STB classifies railroads into three groups: Class I, Class II and Class III, based on annual operating revenue. For 1999, the Class I railroads had operating revenues of at least $258.5 million, Class II railroads had revenues of $20.7 million to $258.4 million, and Class III railroads had revenues of less than $20.7 million. In compiling data on the U.S. railroad industry, the Association of American Railroads uses the STB's revenue threshold for Class I railroads. Regionals are railroads operating at least 350 miles of rail line and/or revenues between $40 million and the Class I revenue threshold. Locals are railroads falling below the Regional criteria, plus switching and terminal railroads. 1999 INDUSTRY OVERVIEW [Download Table] NUMBER OF (IN BILLIONS) TYPE OF RAILROAD CARRIERS 1999 REVENUES % OF REVENUES ---------------- -------- ------------- ------------- Class I 9* $32.7 91.1% Regional 36 1.8 5.0 Local 510 1.4 3.9 --- ----- ----- Total 555 $35.9 100.0% === ===== ===== *As of December 31, 2000, there were 7 Class I railroads. As a result of deregulation, Class I railroads have been able to concentrate on core, long-haul routes, while divesting many of their low-density 16
10-K40517th Page of 78TOC1stPreviousNextBottomJust 17th
branch lines to smaller and more cost-efficient freight railroad operators such as our company. Divesting branch lines allows Class I railroads to increase traffic density, improve railcar utilization and avoid rail line abandonment. The proportion of total track miles operated by short line and regional railroads in the U.S. has increased dramatically as a result of these divestitures. Because of the focus by short line railroads on increasing traffic volume through increased customer service and more efficient operations, traffic volume on short line railroads frequently increases after divestiture by Class I operators. Consequently, these transactions often result in net increases in divesting carriers' freight traffic because much of the business originating or terminating on branch lines feeds into divesting carriers' core routes. INTERNATIONAL RAILROAD INDUSTRY Freight railroad services in countries other than the United States and Canada are typically operated by governments and conducted at a loss. Government-run railroads are often unresponsive to market needs and inefficiently operated. Due to economic necessity and a lack of cost-effective solutions, many countries are privatizing their rail operations. Recent examples include Mexico, the United Kingdom and Australia. In the last few years several states in Australia have privatized their rail systems. It is anticipated that other state rail systems as well as the Australian national rail system will be privatized in the foreseeable future.  ITEM 2. PROPERTIES NORTH AMERICAN RAILROAD PROPERTIES The following table sets forth information with respect to the North American railroad properties that we owned as of December 31, 2000: [Enlarge/Download Table] ------------------------------- -------------- -------- ------------ --------------- ------------------------------- DATE OF TRACK PRINCIPAL RAILROAD ACQUISITION MILES STRUCTURE LOCATION COMMODITIES ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Cape Breton & Central Nova Feb 2000 245 Owned Nova Scotia Coal, paper, metals, railroad Scotia Railway equipment ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Carolina Piedmont Railroad Feb 2000 49 Owned South Carolina Chemicals, minerals, stones, food products, turbines ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Cascade and Columbia River Sept. 1996 130 Owned; Washington Wood products, paper Railroad Trackage products, limestone, rights agricultural products ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Central Oregon & Pacific Feb 2000 449 Owned; Oregon Lumber, paper and farm Railroad Leased; products, food, chemicals Trackage rights ------------------------------- -------------- -------- ------------ --------------- ------------------------------- 17
10-K40518th Page of 78TOC1stPreviousNextBottomJust 18th
[Enlarge/Download Table] ------------------------------- -------------- -------- ------------ --------------- ------------------------------- DATE OF TRACK PRINCIPAL RAILROAD ACQUISITION MILES STRUCTURE LOCATION COMMODITIES ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Central Railroad of Indiana Feb 2000 81 Owned Indiana, Ohio Chemicals, minerals, stones, farm products, metals ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Central Railroad of Feb 2000 73 Leased; Indiana Farm and food products, Indianapolis Trackage chemicals, railroad equipment rights ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Central Western July 1999 23 Owned Alberta Agricultural products ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Connecticut Southern Feb 2000 78 Owned; Connecticut Lumber, paper products, Trackage chemicals, metal products rights ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Dakota Rail Sept. 1995 44 Contract Minnesota Plastics, lumber, scrap steel, for Deed chemicals ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Dallas Consolidated (2 rail Feb 2000 284 Leased Texas Food products, non-metallic lines) ores, paper products ------------------------------- -------------- -------- ------------ --------------- ------------------------------- E&N Railway Jan. 1999 61 Owned British Lumber, paper products, 120 Leased Columbia propane ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Georgia Southwestern Railroad Feb 2000 286 Leased Georgia, Non-metallic ores, lumber, Alabama chemicals, forest products ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Goderich-Exeter Railway Feb 2000 159 Owned; Ontario Auto parts, chemicals, Leased non-metallic ores ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Huron and Eastern Railway March 1986 171 Owned; Michigan Agricultural products, sugar May 1988 leased; products, fertilizer, scrap trackage steel, auto parts rights ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Indiana & Ohio Railway Feb 2000 577 Owned; Michigan, Autos, railroad equipment, Leased Ohio, Indiana agricultural products, chemicals ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Indiana Southern Railroad Feb 2000 176 Owned; Indiana Coal, farm products, chemicals Trackage rights ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Lakeland & Waterways July 1999 125 Owned Alberta Forest products, agricultural products, bridge traffic ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Mackenzie Northern July 1999 650 Owned Alberta, Fuel, forest products, Northwest agricultural products Territory ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Michigan Consolidated (3 rail Feb 2000 118 Owned Michigan, Agricultural products, lines) Ohio, Indiana non-metallic ores, chemicals, auto parts ------------------------------- -------------- -------- ------------ --------------- ------------------------------- 18
10-K40519th Page of 78TOC1stPreviousNextBottomJust 19th
[Enlarge/Download Table] ------------------------------- -------------- -------- ------------ --------------- ------------------------------- DATE OF TRACK PRINCIPAL RAILROAD ACQUISITION MILES STRUCTURE LOCATION COMMODITIES ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Missouri & Northern Arkansas Feb 2000 497 Owned Missouri, Lumber, paper products, coal, Railroad Arkansas, agricultural products Kansas ------------------------------- -------------- -------- ------------ --------------- ------------------------------- New England Central Railroad Feb 2000 330 Owned Vermont, Lumber, paper products, coal, Massachusetts copper, bridge traffic ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Ottawa Valley Railway July 1999 389 Leased Ontario Bridge traffic, forest products, mining ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Otter Tail Valley Railroad Oct. 1996 72 Owned Minnesota Coal, agricultural products, fertilizer ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Saginaw Valley Railway Jan. 1991 65 Owned Michigan Agricultural products, Apr. 1998 fertilizer, sand, stone ------------------------------- -------------- -------- ------------ --------------- ------------------------------- San Diego & Imperial Valley Feb 2000 124 Trackage California, Petroleum, paper products, Railroad rights Mexico non-metallic ores, lumber ------------------------------- -------------- -------- ------------ --------------- ------------------------------- South Carolina Central Feb 2000 97 Owned South Carolina Chemicals, metals, coal, Railroad paper products, waste ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Southern Ontario July 1999 54 Leased Ontario Fuel, metals, agricultural products ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Texas-New Mexico Railroad Feb 2000 107 Owned Texas, New Non-metallic ores, waste, Mexico petroleum ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Toledo, Peoria and Western Sept 1999 298 Owned; Indiana, Intermodal, agricultural Railroad Trackage Illinois, Iowa products, fertilizers, rights chemicals ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Ventura County Railroad Aug. 1998 13 Leased California Automobiles, chemicals, paper products ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Virginia Consolidated (3 rail Feb 2000 211 Leased; Virginia, Coal, lumber, limestone, lines) Owned North Carolina aggregates ------------------------------- -------------- -------- ------------ --------------- ------------------------------- West Texas & Lubbock Railroad Nov. 1995 104 Owned Texas Fertilizer, chemicals, cotton products, scrap iron , steel ------------------------------- -------------- -------- ------------ --------------- ------------------------------- Total track miles 6,260 ------------------------------- -------------- -------- ------------ --------------- ------------------------------- CHILEAN RAILROAD PROPERTIES Ferronor, which we acquired in 1997, owns and operates the only north-south railroad in northern Chile, extending from La Calera near Santiago, where it connects with Chile's southern railway, Ferrocarril del Pacifico, S.A., to its northern terminus at Iquique, approximately 120 miles south of the Peruvian border. It also operates several east-west branch lines that link a 19
10-K40520th Page of 78TOC1stPreviousNextBottomJust 20th
number of iron, copper and mineral salt mines and production facilities with several Chilean Pacific port cities. Ferronor also serves Argentina and Bolivia through traffic interchanged with the Belgrano Cargas Railroad and the Antofagasta (Chile)-Bolivia Railway. Ferronor owns approximately 1,400 miles of track. AUSTRALIAN RAILROAD PROPERTIES On April 30, 1999, through our wholly owned subsidiary Freight Australia, we prepaid a 45-year lease to operate 3,150 miles of track in the State of Victoria, Australia. Freight Australia's principal commodity is agricultural products for use in Southwestern Australia as well as export markets. NORTH AMERICAN ROLLING STOCK The following tables summarize the composition of our North American railroad equipment fleet as of December 31, 2000: [Download Table] FREIGHT CARS ---------------------------------------- TYPE OWNED LEASED TOTAL ---- ----- ------ ----- Covered hopper cars 32 1,257 1,289 Open top hopper cars 0 405 405 Box cars 34 1,267 1,301 Flat cars 114 464 578 Tank cars 138 -- 138 Gondolas 0 525 525 Intermodal 0 35 35 ---- ----- ------ 318 3,953 4,271 === ===== ===== [Download Table] LOCOMOTIVES ---------------------------------------- HORSEPOWER/UNIT OWNED LEASED TOTAL --------------- ----- ------ ----- Over 2000 100 138 238 1500 to 2000 99 9 108 Under 1500 13 9 22 ---- ---- --- 212 156 368 ==== ===== ==== 20
10-K40521st Page of 78TOC1stPreviousNextBottomJust 21st
INTERNATIONAL ROLLING STOCK The following tables summarize the composition of our Australian and Chilean railroad equipment fleet as of December 31, 2000: [Download Table] FREIGHT CARS ---------------------------------------- TYPE CHILE AUSTRALIA TOTAL ---- ----- --------- ----- Covered hopper cars -- 1,157 1,157 Open top hopper cars 198 173 371 Box cars 140 249 389 Intermodal containers 500 646 1,146 Tank cars -- 335 335 Flat cars 70 84 154 Gondolas 55 -- 55 ---- ------ ------ 963 2,644 3,607 ==== ====== ====== [Download Table] LOCOMOTIVES ---------------------------------------- HORSEPOWER/UNIT CHILE AUSTRALIA TOTAL --------------- ----- --------- ----- Over 2000 -- 40 40 1500 to 2000 -- 23 23 Under 1500 31 43 74 ---- ------ ---- 31 106 137 ==== ====== === We own all of our international equipment fleet. Based on current and forecasted traffic levels on our railroads, management believes that our present equipment, combined with the availability of other rail cars and/or locomotives for hire, is adequate to support its operations. We believe that our insurance coverage with respect to our property and equipment is adequate. ADMINISTRATIVE OFFICES AND OTHER In 1998, we purchased a 59,500 square foot office building, located in Boca Raton, Florida, where our executive offices are located. Of this space, approximately 30,000 square feet are leased or available for lease to others. Our North American railroad headquarters, located in San Antonio, Texas, leases approximately 24,000 square feet of office space for approximately $455K annually. The lease expires December 31, 2005. Freight Australia's administrative office is in Melbourne, Australia. Freight Australia leases approximately 20,000 square feet of space from the Victorian Government for $173,600 annually. The lease expires May 31, 2004. Ferronor's administrative office is in Coquimbo, Chile, where Ferronor owns a three-story 21,600 square foot office building. 21
10-K40522nd Page of 78TOC1stPreviousNextBottomJust 22nd
We also own a building totaling approximately 45,000 square feet in Quebec, Canada and own a terminal in Ontario, Canada, which includes an office building and 5 acres.  ITEM 3. LEGAL PROCEEDINGS In the second quarter of 2000, certain parties filed property damage claims totaling approximately $32.5 million against Mackenzie Northern Railway, a wholly-owned subsidiary of RailAmerica, and others in connection with fires that allegedly occurred in 1998. The Company intends to vigorously defend these claims, and has insurance coverage to approximately $13.0 million to cover these claims. The Company's insurer has reserved $9.8 million for these matters. A loss, if any, in excess of our insurance policy coverage may adversely affect the Company's cash flow and financial condition. In the ordinary course of conducting our business, we become involved in various legal actions and other claims some of which are currently pending. Litigation is subject to many uncertainties and we may be unable to accurately predict the outcome of individual litigated matters. Some of these matters possibly may be decided unfavorably to us. It is the opinion of management that the ultimate liability, if any, with respect to these matters will not be material. Other than ordinary routine litigation incidental to our business, no other litigation exists.  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of 2000. 22
10-K40523rd Page of 78TOC1stPreviousNextBottomJust 23rd
PART II  ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our common stock trades on the Nasdaq National Market under the symbol "Rail". Set forth below is high and low price information for the common stock as reported on the NASDAQ system for each period presented. All quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not reflect actual transactions. 1999 HIGH SALES PRICE LOW SALES PRICE ----------------- ------------------ First Quarter $10.250 $7.688 Second Quarter 10.313 8.750 Third Quarter 10.750 9.125 Fourth Quarter 9.938 7.063 2000 HIGH SALES PRICE LOW SALES PRICE ----------------- ------------------ First Quarter $ 9.063 $5.750 Second Quarter 6.938 4.625 Third Quarter 7.875 5.750 Fourth Quarter 8.000 5.688 2001 HIGH SALES PRICE LOW SALES PRICE ----------------- ------------------ First Quarter (through March 23) $ 9.250 $7.500 As of March 23, 2001, there were 519 holders of record of the common stock. We have never declared or paid a dividend on our common stock. Certain of our financial agreements limit our ability to pay dividends. 23
10-K40524th Page of 78TOC1stPreviousNextBottomJust 24th
 ITEM 6. SELECTED FINANCIAL DATA The results of our continuing operations for the years ended December 31, 2000 and 1999 include the results of certain railroads from the dates they were acquired as follows: RailTex, effective February 1, 2000, Freight Australia, effective April 30, 1999, RaiLink, effective August 1, 1999, The Toledo, Peoria, and Western Railroad, which we refer to as TPW, effective September 1, 1999, and Ferronor, effective February 1, 1997. The income statement data for the years ended December 31, 2000, 1999 and 1998 and the balance sheet data at December 31, 2000 and 1999 are derived from, and are qualified by reference to, audited financial statements included elsewhere in this report and should be read in conjunction with those financial statements and the notes thereto. The income statement data set forth below for the periods ended December 31, 1997 and 1996 and the balance sheet data as of December 31, 1998, 1997 and 1996 are derived from our audited financial statements not included (in thousands, except operating and per share data). [Enlarge/Download Table] YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- 2000 1999 1998 1997 1996 ---------- ---------- ---------- ---------- ---------- INCOME STATEMENT DATA Operating revenue ................... $ 357,936 $ 129,818 $ 39,136 $ 24,496 $ 12,020 Operating income .................... 70,034 25,279 5,781 3,365 2,529 Income from continuing operations ...... 9,608 6,025 113 288 478 Basic earnings per ommon share from continuing operations ............... $ 0.50 $ 0.45 $ 0.01 $ 0.02 $ 0.10 Diluted earnings per common share from continuing operations ............... $ 0.49 $ 0.43 $ 0.01 $ 0.02 $ 0.09 Weighted average common shares - Basic 18,040 11,090 9,553 8,304 4,966 Weighted average common shares - Diluted 18,267 11,665 9,778 8,587 4,966 BALANCE SHEET DATA Total assets ........................... $ 839,703 $ 443,929 $ 130,964 $ 95,141 $ 65,215 Long-term obligations .................. 358,856 162,827 66,327 47,603 37,788 Subordinated debt ...................... 141,411 122,449 -- 2,212 2,212 Redeemable convertible preferred stock 6,613 8,830 -- -- -- Stockholders' equity ................... 129,908 69,467 34,760 26,814 15,992 OPERATING DATA Freight carloads ....................... 1,125,897 394,177 117,535 69,140 25,871 Track mileage .......................... 11,000 8,400 2,400 2,330 930 Number of full time employees .......... 2,230 1,707 652 542 275 24
10-K40525th Page of 78TOC1stPreviousNextBottomJust 25th
 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS GENERAL Our principal operations consist of the operations of North American short line freight railroads and international regional railroads. We haul various products for our customers corresponding to their local operating areas. We recognize railroad transportation revenue after services are provided. On February 4, 2000, we acquired RailTex for approximately $128 million in cash, assumption of $105.3 million in debt and approximately 6.6 million shares of our common stock, valued at $60.8 million. RailTex owned and operated 25 short line freight railroads with approximately 4,100 miles of track concentrated in the southeastern, midwestern, Great Lakes and New England regions of the United States and eastern Canada. In connection with the acquisition, we entered into a credit agreement providing $330 million of senior term loans and $50 million of senior revolving loans. In addition, one of our wholly owned subsidiaries issued $95 million of subordinated bridge notes and another wholly owned subsidiary issued $55 million of asset sale bridge notes in connection with the acquisition. All of the bridge notes were repaid in 2000. Set forth below is a discussion of the historical results of operations for our North American and international railroad operations as well as a discussion of corporate overhead. NORTH AMERICAN RAILROAD OPERATIONS Our historical results of operations include the operations of our acquired railroads from the dates of acquisition as follows: NAME OF RAILROAD DATE OF ACQUISITION Ventura County Railroad September 1998 E&N Railway January 1999 RaiLink properties (6 railroads) August 1999 Toledo, Peoria and Western Railroad September 1999 RailTex properties (25 railroads) February 2000 We disposed of certain 2000 railroads during 2000 as follows: Minnesota Northern Railroad August 2000 St Croix Valley Railroad August 2000 South Central Tennessee Railroad December 2000 Pittsburgh Industrial Railroad December 2000 Ontario L'Orignal Railway December 2000 25
10-K40526th Page of 78TOC1stPreviousNextBottomJust 26th
As a result, the results of operations for the years ended December 31, 2000, 1999 and 1998 are not comparable in various material respects and are not indicative of the results which would have occurred had the acquisitions or dispositions been completed at the beginning of the periods presented. The following table sets forth the operating revenues and expenses (in thousands) for our North American railroad operations for the periods indicated. All results of operations discussed in this section are for our North American railroads only, unless otherwise indicated. YEARS ENDED DECEMBER 31, ---------------------------------------- 2000 1999 1998 --------- --------- --------- Total operating revenue $ 231,445 $ 44,924 $ 18,067 --------- --------- --------- Operating Expenses: Maintenance of way 25,448 5,920 1,974 Maintenance of equipment 13,101 2,068 682 Transportation 70,958 12,232 3,605 Equipment rental 15,842 4,512 2,296 (Gain) loss on sale of assets (12,063) 355 (79) General and administrative 41,062 6,496 3,095 Depreciation and amortization 16,430 3,594 1,570 --------- --------- --------- Total operating expenses 170,778 35,177 13,143 --------- --------- --------- Operating income $ 60,667 $ 9,747 $ 4,924 ========= ========= ========= COMPARISON OF NORTH AMERICAN RAILROAD OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 OPERATING REVENUES. Operating revenue increased by $186.5 million, or 415%, to $231.4 million for the year ended December 31, 2000 from $44.9 million for the year ended December 31, 1999. North American carloads totaled 839,451 for the year ended December 31, 2000, an increase of 684,460 compared to 154,991 carloads in the prior year. These increases were primarily due to the acquisitions of TPW, RaiLink and RailTex which on a combined basis contributed $206.9 million in revenue and 782,614 carloads for the year ended December 31, 2000 compared to $18.1 million in revenue and 94,309 carloads for the year ended December 31, 1999. Transportation revenue per carload remained fairly constant at $239 and $238 for the years ended December 31, 2000 and 1999 respectively. OPERATING EXPENSES. Operating expenses increased by $135.6 million, or 385%, to $170.8 million for the year ended December 31, 2000 from $35.2 million for the year ended December 31, 1999. The increase was due to the acquisitions of TPW, RaiLink and RailTex which on a combined basis contributed $164.6 million 26
10-K40527th Page of 78TOC1stPreviousNextBottomJust 27th
in operating expenses for the year ended December 31, 2000 compared to $14.4 million for the year ended December 31, 1999. The increase was partially offset by a $9.1 million gain on sale of land on a Texas railroad and a $3.0 million gain on the sale of certain railroad subsidiaries. Additionally, increased fuel costs impacted our operating expenses by approximately $4.4 million over expected amounts during 2000. Operating expenses, as a percentage of operating revenue, exclusive of the gain on sale of assets, were 79.0% and 77.5% for the years ended December 31, 2000 and 1999, respectively. COMPARISON OF NORTH AMERICAN RAILROAD OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 OPERATING REVENUES. Operating revenue increased $26.9 million, or 149%, to $44.9 million for the year ended December 31, 1999 from $18.1 million for the year ended December 31, 1998. The increase was primarily due to increased carloads resulting from 1999 acquisitions. The transportation revenue per carload decreased to $238 from $303 per car primarily due to the acquisition of a rail line in Canada that hauls a significant amount of bridge traffic at a lower rate per car than the Company's other rail lines and intermodal traffic on the newly acquired TPW which also moves at a lower rate per car than the Company's other rail lines. Carloads handled totaled 154,991 for the year ended December 31, 1999, an increase of 105,472, or 213%, compared to 49,519 for the year ended December 31, 1998. The increase was primarily due to the acquisitions of E&N Railroad, the RaiLink properties and TPW, which moved 7,839, 77,328 and 16,981 carloads, respectively, for the year ended December 31, 1999. OPERATING EXPENSES. Operating expenses increased $22.0 million, or 168%, to $35.2 million for the year ended December 31, 1999 from $13.1 million for the year ended December 31, 1998. The increase was primarily due to the acquisitions of E&N Railroad, the RaiLink properties and TPW, which had $4.4 million, $11.1 million and $3.4 million, respectively, in operating expenses for the year ended December 31, 1999 and the write-off of $0.6 million in costs related to the discontinuance of the Delaware Valley Railway. Operating expenses, exclusive of gains and losses on sales, as a percentage of operating revenue, were 77.5% and 73.2% for 1999 and 1998, respectively. Exclusive of the write-off of costs at the Delaware Valley Railway, the operating ratio was 76.9% for 1999. INTERNATIONAL RAILROAD OPERATIONS FREIGHT AUSTRALIA The results of operations for the years ended December 31, 2000 and 1999 include the operations of Freight Australia from its date of acquisition, May 1, 1999. Therefore, the results of operations for the year ended December 31, 2000 are not comparable to the prior year in certain material respects and are not indicative of the results which would have occurred had the acquisition been consummated January 1, 1999. The following table sets forth the operating revenues and expenses (in thousands) for Freight Australia's railroad operations for the year ended December 31, 2000 and the period from May 1, 1999 to December 31, 1999. 27
10-K40528th Page of 78TOC1stPreviousNextBottomJust 28th
2000 1999 -------- -------- Revenues: $102,204 $ 63,358 -------- -------- Operating expenses: Transportation 70,118 42,742 General and administrative 6,253 5,169 Depreciation and amortization 5,438 3,429 -------- -------- Total operating expenses 81,809 51,340 -------- -------- Operating income $ 20,395 $ 12,018 ======== ======== COMPARISON OF FREIGHT AUSTRALIA'S OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 OPERATING REVENUES. Operating revenues increased $38.8 million, or 61%, to $102.2 million for the year ended December 31, 2000 from $63.4 million for the year ended December 31, 1999. The increase in operating revenue was primarily due to the 1999 period including only eight months of operations. Freight Australia's carloads were 203,536 for the year ended December 31, 2000, an increase of 71,051, or 35%, compared to 132,485 for the year ended December 31, 1999. Revenue per carload was $406 for 2000 versus $366 for 1999. The increase in revenue per carload was primarily due to a change in commodity mix from 1999 to 2000. OPERATING EXPENSES. Operating expenses increased $30.5 million, or 59%, to $81.8 million for the year ended December 31, 2000 from $51.3 million for the period May 1, 1999 through December 31, 1999. The increase in operating expenses was primarily due to the 1999 period including only eight months of operations. Operating expenses, as a percentage of operating revenue, were 80.0% and 81.0%for the years ended December 31, 2000 and 1999. Operating expenses were negatively impacted in 2000 by rising fuel prices in the amount of $2.5 million. Operating income was lower in 2000 by $2.0 million due to the decline in the Australian dollar exchange rate. 28
10-K40529th Page of 78TOC1stPreviousNextBottomJust 29th
 FERRONOR The following table sets forth the operating revenues and expenses (in thousands) for Ferronor's railroad operations for the years ended December 31, 2000, 1999 and 1998. 2000 1999 1998 ------- ------- ------- Revenues: $22,873 $19,115 $15,924 ------- ------- ------- Operating expenses: Transportation 15,505 11,964 8,982 General and administrative 2,494 2,222 1,724 Depreciation and amortization 2,278 1,231 706 ------- ------- ------- Total operating expenses 20,277 15,417 11,412 ------- ------- ------- Operating income $ 2,596 $ 3,698 $ 4,512 ======= ======= ======= COMPARISON OF FERRONOR'S OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 OPERATING REVENUES. Operating revenue increased $3.8 million, or 20%, to $22.9 million for the year ended December 31, 2000 from $19.1 million for the year ended December 31, 1999. Ferronor's carloads handled totaled 98,991 for the year ended December 31, 2000, an increase of 5,156, or 5%, compared to 93,835 for the year ended December 31, 1999. The increase in both carloads and revenue is related to the commencing of operations in the fourth quarter of 1999 on a new long-term contract. OPERATING EXPENSES. Operating expenses increased $4.9 million, or 32%, to $20.3 million for the year ended December 31, 2000 from $15.4 million for the year ended December 31, 1999. The increase was due to start up costs related to a new long-term contract which commenced in late 1999. Depreciation expense increased in 2000 by $1 million over prior year due to capital expenditures relating to new contracts. Operating expenses, as apercentage of operating revenue, were 89% and 81% for the years ended December 31, 2000 and 1999, respectively. COMPARISON OF FERRONOR'S OPERATING RESULTS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 OPERATING REVENUES. Operating revenue increased $4.2 million, or 28%, to $19.1 million for the year ended December 31, 1999 from $14.9 million for the year ended December 31, 1998. Ferronor's carloads handled totaled 93,835 for the year ended December 31, 1999, an increase of 25,819, or 38%, compared to 68,016 for the year ended December 31, 1998. The increase in both carloads and revenue is due to Ferronor commencing movement of iron ore out of the El Algarrabo mine in late March 1998 and the Los Colorados mine in July 1998 and nitrates out of the Minsal mine during 1999. These increases were offset slightly by a decrease in the international traffic out of Argentina and Bolivia due to the slow down in the world economy in the second quarter of 1998. 29
10-K40530th Page of 78TOC1stPreviousNextBottomJust 30th
OPERATING EXPENSES. Operating expenses increased $4.0 million, or 35%, to $15.4 million for the year ended December 31, 1999 from $11.4 million for the year ended December 31, 1998. The increase was due to Ferronor commencing movement of iron ore out of the El Algarrabo mine in late March 1998 and the Los Colorados mine in July 1998 and nitrates out of the Minsal mine during 1999. Operating expenses, as a percentage of operating revenue, were 80.7% and 76.5% for the years ended December 31, 1999 and 1998, respectively. The operating ratio increase was due primarily to the loss in 1999 of international traffic which is typically higher margin business. CORPORATE OVERHEAD AND OTHER CORPORATE OVERHEAD. Corporate overhead services performed for our subsidiaries include overall strategic planning, marketing, accounting, finance, cash management, payroll, engineering and tax return preparation. Corporate overhead, which is included in selling, general and administrative expenses in the consolidated statements of income, increased $7.2 million, or 138%, to $12.4 million for the year ended December 31, 2000 from $5.2 million for the year ended December 31, 1999. Corporate overhead increased $1.1 million, or 27%, to $5.2 million for the year ended December 31, 1999 from $4.1 million for the year ended December 31, 1998. The increases in each of the specified periods were related to the additional costs incurred to manage the acquired rail roads and to establish a strong management team to handle our continued growth. For the year ended December 31, 2000, we incurred $4.8 million of costs related to our acquisition of RailTex and our unsuccessful acquisition bid for Westrail, an Australian railroad. We also recognized a $2.9 million non-cash foreign exchange loss related to the debt associated with the acquisition of Freight Australia. Such debt was refinanced in February 2000. INTEREST EXPENSE. Interest expense, including amortization of financing costs, has increased from $4.9 million in 1998 to $20.5 million in 1999 and $56.0 million in 2000. This increase is primarily attributable to the financing of our acquisitions of V/Line Freight, TPW and Railink in 1999 and RailTex in 2000. INCOME TAXES. Our effective tax rate in 2000 was 23.5%. This rate, as well as the rates in 1999 and 1998, are impacted by the allocation of income taxes between continuing operations, discontinued operations and extraordinary items. We believe our effective tax rate for 2001 will be approximately 31%. EXTRAORDINARY LOSS. Pursuant to the refinancing of our debt in February 2000, we recorded an extraordinary charge for the year ended December 31, 2000 for the loss on early extinguishment of debt of $2.9 million, after-tax. In connection with the issuance of subordinated debt in August 2000 we recorded an extraordinary charge of $1.1 million for early extinguishment of debt, net of income taxes. DISCONTINUED OPERATIONS. We recorded net earnings from our discontinued operations of $8.3 million in 2000 compared to $3.9 million in 1999 and $4.3 million in 1998. In connection with the acquisition of RailTex, we refinanced 30
10-K40531st Page of 78TOC1stPreviousNextBottomJust 31st
our investment in our trailer manufacturing operations resulting in additional interest expense of $7.3 million in 2000. In December 2000, we sold our trailer manufacturing operations for $38.5 million resulting in a gain of approximately $11.5 million, net of income taxes. CUMULATIVE EFFECT OF ACCOUNTING CHANGE. We recorded a $2.3 million charge associated with a change in accounting principle. Such charge resulted from a beneficial conversion feature associated with warrants in connection with the junior convertible subordinated debentures issued in 1999. This was a result of a change during 2000 of the applicable accounting literature. LIQUIDITY AND CAPITAL RESOURCES - COMBINED OPERATIONS The discussion of liquidity and capital resources that follows reflects our consolidated results and includes all subsidiaries. Our cash provided by operating activities was $44 million for the year ended December 31, 2000. This amount includes $12 million in net income and $35 million in depreciation and amortization. Cash used in investing activities was $122 million for the year ended December 31, 2000. The primary uses of cash during 2000 were for the acquisition of RailTex, including costs, of $149 million, and the purchase of property, plant and equipment with an aggregate cost of $63 million. These were partially offset by the proceeds of $97 million from sale of certain assets. Cash provided by financing activities was $80 million for 2000. This consisted primarily of net borrowings under debt agreements of $101 million used to fund the RailTex acquisition, partially offset by cash used for deferred loan costs of $19 million. In August 2000, RTC sold units consisting of $130.0 million of 12-7/8% senior subordinated notes due 2010 and warrants to purchase 1,411,414 shares of our common stock in a private offering, for gross proceeds of $122.2 million after deducting the initial purchasers' discount. The net proceeds received from the issuance of the units were used to repay all $95.0 million of subordinated bridge notes issued by RTC, $20.0 million of the asset sale bridge notes issued by PBRH and approximately $1.8 million of term loans under our senior credit facilities. All of our U.S. subsidiaries are guarantors of the senior subordinated debt. In February 2000, we entered into a credit agreement and two bridge note facilities in connection with the acquisition of RailTex and the refinancing of substantially all of both our and RailTex's existing debt. The credit agreement provides (1) a $125 million Term A loan, (2) a $205 million Term B loan, and (3) a $50 million revolving credit facility which includes $30 million of U.S. dollar denominated loans, $10 million of Canadian dollar denominated loans and $10.0 million of Australian dollar denominated loans. The Term A loan and the revolving loans mature on December 31, 2005 and the Term B loans mature December 31, 2006. At our option, the senior credit facilities will bear interest at either (1) the alternative base rate, or ABR, (defined as greater of (i) The 31
10-K40532nd Page of 78TOC1stPreviousNextBottomJust 32nd
Bank of Nova Scotia's prime rate and (ii) the Federal Funds Effective Rate plus 0.005%) plus 1.75% for the revolving credit facilities and for the Term A loan facility and 2.00% for the Term B loan facility, or (2) LIBOR plus 3.00% for the revolving credit facility and for the Term A loan facility and the 3.25% for the Term B loan facility; provided, that the additional amounts added to ABR and the LIBOR for the revolving credit facility and the Term A loan facility is subject to adjustment based on changes in our leverage ratio. The loans are collateralized by substantially all of our assets other than Ferronor, and the loans are guaranteed by all of our subsidiaries other than Ferronor. Freight Australia guarantees only the Australian dollar revolving loans and our Canadian subsidiaries guarantee only the Canadian dollar revolving loans. Our new credit facilities include numerous covenants imposing significant financial and operating restrictions on our business. The covenants place restrictions on our ability to, among other things: incur more debt; pay dividends, redeem or repurchase our stock or make other distributions; make acquisitions or investments; use assets as security in other transactions; enter into transactions with affiliates; merge or consolidate with others; dispose of assets or use asset sale proceeds; create liens on our assets; and extend credit. The new credit facilities also contain financial covenants that require us to meet a number of financial ratios and tests. Our ability to meet these ratios and tests and to comply with other provisions of the new credit facilities can be affected by events beyond our control. Our failure to comply with the obligations in our new credit facilities could result in an event of default under our new credit facilities, which, if not cured or waived, could permit acceleration of our indebtedness or other indebtedness which would have a material adverse effect on us. As of December 31, 2000, we were in compliance with these financial covenants. Interest on our new credit facility is payable at variable rates. To partially mitigate the interest rate risk on the credit facilities we entered into interest rate swaps in May 2000. The interest rate swaps lock in a LIBOR rate of 7.23% on $212.5 million of debt for a three-year period. Fluctuations in the market interest rate will affect the cost of our remaining borrowings. Assuming current debt levels, the effect of a 1% increase in interest rates on this remaining debt would result in an increase in interest expense of $1.2 million for the year ended December 31, 2001. At the time of our purchase of RailTex, RTC issued a $95 million of subordinated bridge note. The subordinated note was fully paid off in August 2000 with the net proceeds from the issuance of its 12 7/8% senior subordinated notes. In addition, PBRH issued $55 million of asset sale bridge notes. In December 2000, we repaid the asset sale bridge notes with the proceeds from the sale of the truck trailer manufacturing operations. In connection with the issuance of the asset sale bridge notes, the purchasers of these notes received 0.433 million warrants to purchase our common stock at an exercise price of $7.75 per share. The warrants have a five-year maturity. 32
10-K40533rd Page of 78TOC1stPreviousNextBottomJust 33rd
As of December 31, 2000, we had a working capital deficit of $7.6 million compared to working capital of $24.0 million as of December 31, 1999. Cash on hand was $13.1 million as of December 31, 2000 compared to $11.6 million as of December 31, 1999. Our cash flows from operations historically have been sufficient to meet our ongoing operating requirements, capital expenditures for property, plant and equipment, and to satisfy our interest requirements. We expect that our future cash flows will be sufficient for our current and contemplated operations for at least the next twelve months. We anticipate using cash flows and borrowings for anticipated capital expenditures of approximately $45 million for the upgrading of existing rail lines and purchases of locomotives and equipment. We do not presently anticipate any other significant capital expenditures over the next twelve months. Based on our current debt levels, we anticipate debt service for the next twelve months to be approximately $65 million including principal and interest. We anticipate that a portion of the debt service will be paid from the operating cash flow of Freight Australia. A material change in the currency exchange rate between the U.S. dollar and Australian dollar could adversely affect our ability to service the debt. Our long-term business strategy includes the selective acquisition of additional transportation-related businesses. Accordingly, we may require additional equity and/or debt capital in order to consummate acquisitions or undertake major development activities. It is impossible to predict the amount of capital that may be required for those acquisitions or development, and there is no assurance that sufficient financing for those activities will be available on terms acceptable to us, if at all. As of March 23, 2001, we had $34.3 million of availability under our revolving credit facilities. We also had $9.6 million of cash. INFLATION Inflation in recent years has not had a significant impact on our operations. We believe that inflation will not adversely affect us in the future unless it increases substantially and we are unable to pass through the increases in our freight rates. See discussion of fuel prices in Item 7A Market Risk. RECENT ACCOUNTING PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 requires all derivatives to be measured at fair value and recognized as either assets or liabilities on the balance sheet. Furthermore, the accounting for changes in the fair value of a derivative (i.e. gains and losses) depends on 33
10-K40534th Page of 78TOC1stPreviousNextBottomJust 34th
the intended use of the derivative. The Company adopted SFAS No. 133 on January 1, 2001, and will record a liability of approximately $7 million, net of income taxes of $3 million, with a corresponding charge to equity relating to the interest rate swaps in the first quarter of 2001.  ITEM 7A. MARKET RISK FOREIGN CURRENCY. Our foreign currency risk arises from owning and operating railroads in Canada and Australia. At December 31, 2000, we had not entered into any transactions to manage this risk. A decrease in either of these foreign currencies would negatively impact our earnings for the affected period. A majority of our revenue and debt in Chile is U.S. dollar denominated. Therefore, we are not negatively impacted by a decline in the value of the Chilean peso. The financial position and results of operations of our Canadian and Australian subsidiaries are measured using the local currency as the functional currency. Assets and liabilities are translated into U.S. dollars at exchange rates in effect at year-end, while revenues and expenses are translated at average exchange rates prevailing during the year. The resulting translation gains and losses are charged directly to accumulated other comprehensive income, a component of stockholders' equity, and are not included in income until realize through the sale or liquidation of the investment. At December 31, 2000, the accumulated other comprehensive loss totaled $17.8 million. INTEREST RATES. Our interest rate risk results from holding variable rate debt obligations, as an increase in interest rates would result in lower earnings and increased cash outflows. The interest rate on our credit facility is payable at variable rates. To partially mitigate the interest rate risk on the new credit facilities, we entered into interest rate swaps in May 2000. The interest rate swaps lock in a LIBOR rate of 7.23% on $212.5 million of debt for a three-year period. Fluctuation in the market interest rate will affect the cost of our remaining borrowings. The effect of a 1% increase in interest on the remaining borrowings would result in an increase in interest expense of $1.2 million for the twelve months ended December 31, 2001. DIESEL FUEL. We are exposed to fluctuations in diesel fuel prices, as an increase in the price of diesel fuel would result in lower earnings and increased cash outflows. Prior to our acquisition of RailTex, RailTex had entered into a contract to hedge against fuel price increases with a cap which fixed the price of 725,000 gallons of diesel fuel per month for the period July 1999 to June 2000 at $0.45 per gallon. No fuel hedging is in place after June 30, 2000. The effect of a $0.01 increase in fuel prices would result in an increase in fuel expense of approximately $40,000 per month. 34
10-K40535th Page of 78TOC1stPreviousNextBottomJust 35th
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Consolidated Financial Statements of RailAmerica, the accompanying notes thereto and the independent accountants' reports are included as part of this Form 10-K and immediately follow the signature page of this Form 10-K.  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III  ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning directors, executive officers and nominees is incorporated by reference from our definitive proxy statement relating to our 2001 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A on or before April 30, 2001.  ITEM 11. EXECUTIVE COMPENSATION Information concerning executive compensation is incorporated by reference from our definitive proxy statement relating to our 2001 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A on or before April 30, 2001.  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning security ownership is incorporated by reference from our definitive proxy statement relating to our 2001 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A on or before April 30, 2001.  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning certain relationships and related transactions is incorporated by reference from our definitive proxy statement relating to our 2001 Annual Meeting of Stockholders to be filed with the Commission pursuant to Regulation 14A on or before April 30, 2001. 35
10-K40536th Page of 78TOC1stPreviousNextBottomJust 36th
PART IV  ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Exhibits 1.1 Purchase Agreement, dated August 9, 2000, between RailAmerica Transportation Corp., RailAmerica, Inc., the Guarantors named therein, Donaldson, Lufkin & Jenrette Securities Corporation, Barclays Bank PLC and Scotia Capital (USA) Inc. (23) 2.1 Amended and Restated Stock Purchase Agreement, dated as of August 3, 1999 by and among RailAmerica, Inc., Florida Rail Lines, Inc. Bank Austria AG, Grand Cayman Branch, CSX Transportation, Inc., Delaware Otsego Corporation, The Brenner Group and The Toledo, Peoria and Western Railroad Corporation(8) 2.2 Agreement and Plan of merger, dated as of October 14, 1999, among RailAmerica, Inc., Cotton Acquisition Corp. and RailTex, Inc.(9) 3.1 Amended and Restated Certificate of Incorporation of Registrant, as amended(2) 3.2 By-laws of Registrant(1) 3.3 Certificate Of Amendment to Amended and Restated Certificate of Incorporation of the Registrant 4.1 Form of Common Stock Rights Agreement, dated as of January 6, 1998, between the Registrant and American Stock Transfer & Trust Company(6) 4.2 Certificate of Designation of Series A Convertible Redeemable Preferred Stock(19) 4.3 Third Amendment to the Rights Agreement, dated as of January 13, 2000, between the Company and American Stock Transfer & Trust Company(10) 4.4 Warrant Agreement, dated as of February 4, 2000, among the Company and RailAmerica Funding, Inc.(20) 4.5 Asset Bridge Warrant Agreement, dated as of February 4, 2000, among the Company and RailAmerica Holdings Funding, Inc.(20) 4.6 Fourth Amendment to the Rights Agreement, dated as of April 13, 2000, between the Company and American Stock Transfer and Trust Company (21) 4.7 Waiver and Supplemental Agreement, dated as of April 13, 2000, among the Company and EGS Associates, L.P., EGS Partners L.L.C., Bev Partners, L.P., Jonas Partners, L.P., EGS Management, L.L.C., William Ehrman, Frederic Greenberg, Jonas Gerstl and Juli Oliver (22) 4.8 Indenture, dated as of August 14, 2000, between RailAmerica Transportation Corp., the Guarantors named therein and Wells Fargo Bank Minnesota, N.A. (24) 4.9 Notes Registration Rights Agreement, dated as of August 14, 2000, between RailAmerica Transportation Corp., the Guarantors named therein, Donaldson Lufkin & Jenrette Securities Corporation, Barclays Bank PLC and Scotia Capital (USA) Inc. (25) 36
10-K40537th Page of 78TOC1stPreviousNextBottomJust 37th
4.10 Warrants Agreement, dated August 14, 2000, between RailAmerica, Inc. and Wells Fargo Bank Minnesota, N.A. (26) 4.11 Warrant Registration Rights Agreement, dated August 14, 2000, between RailAmerica, Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Barclays Bank PLC and Scotia Capital (USA) Inc. (27) 10.43 Stock Option Agreement, dated November 11, 1994, between RailAmerica, Inc. and Gary O. Marino(7)+ 10.45 RailAmerica, Inc. 1995 Non-Employee Director Stock Option Plan(2) 10.46 RailAmerica, Inc. 1995 Employee Stock Purchase Plan(2) 10.47 RailAmerica, Inc. Corporate Senior Executive Bonus Plan(2)+ 10.56 Stock Purchase Agreement, dated as of September 20, 1996, by and among Otter Tail Valley Railroad Company, Inc. and Dakota Rail, Inc.(4) 10.59 RailAmerica, Inc. Nonqualified Deferred Compensation Trust(5)+ 10.60 Nonqualified Deferred Compensation Agreement between RailAmerica, Inc. and Gary O. Marino(5)+ 10.63 RailAmerica, Inc. 1998 Executive Incentive Compensation Plan(6)+ 10.64 Sale of Assets Agreement dated February 22, 1999 by and among RailAmerica, Inc., Freight Victoria Limited and V/Line Freight Corporation 10.2 Primary Infrastructure (11) 10.65 Lease dated April 30, 1999 by and among the Director of Public Transport and Freight Victoria Limited(12) 10.66 Asset Purchase Agreement, dated December 17, 1998, by and among Canadian Pacific Railway Company and E&N Railway Company (1998) Ltd., a subsidiary of RailAmerica, Inc.(13) 10.67 Noncompete Agreement, dated December 1999, by and between Ronald A. Rittenmeyer and the Company(14) 10.68 Purchase Agreement, dated as of November 4, 1998 by and among RailTex Global Investments, L.L.C., RailTex International Holdings, Inc. and GEEMF II Latin America, L.L.C.(15) 10.69 Memorandum of Understanding, dated as of October 29, 1999, providing for the sale by RailTex Global Investments, LLC of its shares in Ferrovia Centro Atlantica, S.A. (English and Portuguese language versions)(16) 10.70 Purchase Agreement, dated as of November 10, 1999, by and between RailTex International Holdings, Inc. and GEEMF II Latin America, L.L.C.(17) 10.71 Credit Agreement, dated as of February 4, 2000, by and among the Company and Palm Beach Rail Holding, Inc., each as guarantor, RailAmerica Transportation Corp., RaiLink, Ltd. And Freight Victoria Limited, each as a borrower, various financial institutions from time to time parties thereto, as the lenders, DLJ Capital Funding, Inc., as the syndication agent, the lead arranger and the sole book running manager, The Bank of Nova Scotia, as the administrative agent for the Lenders and ING (U.S.) Capital LLC and Fleet National Bank, as the documentation agents for the lenders(20) 37
10-K40538th Page of 78TOC1stPreviousNextBottomJust 38th
10.72 Securities Purchase Agreement, dated as of February 4, 2000, among RailAmerica Transportation Corp., and the Company, Palm Beach Rail Holding, Inc., and all of the Restricted Subsidiaries (as defined in the Credit Agreement) of the Company, each as a guarantor, and RailAmerica Funding, Inc. as the purchaser.(20) 10.73 Asset Bridge Securities Purchase Agreement, dated as of February 4, 2000, among Palm Beach Rail Holdings, Inc., and the Company, Kalyn/Siebert I, Inc., KS Boca, Inc. and Kalyn/Siebert, L.P., each as a guarantor, and RailAmerica Holdings Funding, Inc., as the purchaser(20) 10.74 Equity Registration Rights Agreement, dated as of February 4, 2000, among the Company and RailAmerica Funding, Inc.(20) 10.75 Debt Registration Rights Agreement, dated as of February 4, 2000, among the Company and RailAmerica Funding, Inc.(20) 10.76 Asset Bridge Equity Registration Rights Agreement, dated as of February 4, 2000, among the Company and RailAmerica Funding, Inc.(20) 10.77 Waiver and Amendment No. 1 to Credit Agreement. 10.78 Waiver and Amendment No. 2 to Credit Agreement. 10.79 Employment Agreement, dated as of January 1, 2000, between the Company and Gary O. Marino. 21.1 Subsidiaries of Registrant 23.1 Consent of PricewaterhouseCoopers LLP 23.2 Consent of Arthur Andersen Langton Clarke 25.1 Statement of Eligibility of Trustee (23) 99.1 Petition for Exemption, dated November 8, 1999, filed before the Surface Transportation Board, finance Docket No. 33813, by RailAmerica, Inc. and RailTex, Inc.(18) 99.2 Form of Letter of Transmittal with respect to Exchange Offer(28) 99.3 Form of notice of Guaranteed Delivery(29) (1) Incorporated by reference to the same exhibit number filed as part of the Registrant's Registration Statement on Form S-1, Registration No. 33-49026. (2) Incorporated by reference to the same exhibit number filed as part of the Company's Form 10-QSB for the quarter ended September 30, 1995, filed with the Securities and Exchange Commission on November 12, 1995. (3) Incorporated by reference to the exhibit A filed as part of the Company's Form 8-K as of September 30, 1996, filed with the Securities and Exchange Commission on October 17, 1996. 38
10-K40539th Page of 78TOC1stPreviousNextBottomJust 39th
(4) Incorporated by reference to the exhibit 2.1 filed as part of the Company's Form 8-K as of October 11, 1996, filed with the Securities and Exchange Commission on October 25, 1996. (5) Incorporated by reference to the same exhibit number filed as part of the Company's Form 10-KSB for year ended December 31, 1995, filed with the Securities and Exchange Commission on March 31, 1997. (6) Incorporated by reference to exhibit No. 4.1 filed as part of the Registrant's Statement on Form 8-A, filed with the Securities and Exchange Commission on January 6, 1998. (7) Incorporated by reference to the same exhibit number filed as part of the Company's Form 10-Q for the quarter ended March 31, 1998, filed with the Securities and Exchange Commission on May 14, 1998. (8) Incorporated by reference to exhibit 2.1 filed as part of the Company's Form 8-K as of September 3, 1999, filed with the Securities and Exchange Commission on September 20, 1999. (9) Incorporated by reference to exhibit 2.1 filed as part of the Company's Form 8-K as of October 14, 1999, filed with the Securities and Exchange Commission on October 19, 1999. (10) Incorporated by reference to exhibit 4.1 filed as part of the Company's Form 8-K as of January 13, 2000, filed with the Securities and Exchange Commission on January 26, 2000. (11) Incorporated by reference to exhibit 10.1 filed as part of the Company's Form 8-K as of April 30, 1999, filed with the Securities and Exchange Commission on May 17, 1999. (12) Incorporated by reference to exhibit 10.2 filed as part of the Company's Form 8-K as of April 30, 1999, filed with the Securities and Exchange Commission on May 17, 1999. (13) Incorporated by reference to exhibit 10.64 filed as part of the Company's Form 10-Q as of March 31, 1999, filed with the Securities and Exchange Commission on May 17, 1999. (14) Incorporated by reference to exhibit 10.1 filed as part of the Company's Registration Statement on Form S-4, Registration No. 333-93611. (15) Incorporated by reference to exhibit 10.56 filed as part of the Form 10-K filed for RailTex, Inc. for the year ended December 31, 1998, filed with the Securities and Exchange Commission on March 30, 1999. (16) Incorporated by reference to exhibit 10.60 filed as part of the Form 10-Q filed for RailTex, Inc. for the quarter ended September 30, 1999, filed with the Securities and Exchange Commission on November 12, 1999. (17) Incorporated by reference to exhibit 10.61 filed as part of the Form 10-Q filed for RailTex, Inc. for the quarter ended September 30, 1999, filed with the Securities and Exchange Commission on November 12, 1999. (18) Incorporated by reference to the exhibit 99.1 filed as part of the Company's Form 8-K as of November 8, 1999, filed with the Securities and Exchange Commission on November 12, 1999. 39
10-K40540th Page of 78TOC1stPreviousNextBottomJust 40th
(19) Incorporated by reference to the exhibit of the same number filed as part of the Company's Form 10-K for the year ended December 31, 1998 filed with the Securities and Exchange Commission on March 31, 1999. (20) Incorporated by reference to the exhibit of the same number filed as part of the Company's Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission on March 30, 2000. (21) Incorporated by reference to Exhibit 4.1 filed as part of the Company's Form 8-K, dated April 13, 2000. (22) Incorporated by reference to Exhibit 4.2 filed as part of the Company's Form 8-K, dated April 13, 2000. (23) Incorporated by reference to the exhibit of the same number filed as part of the Company's Registration Statement on Form S-4, Registration No. 333-45196. (24) Incorporated by reference to the Exhibit 4.1 filed as part of the Company's Registration Statement on Form S-4, Registration No. 333-45196. (25) Incorporated by reference to the Exhibit 4.2 filed as part of the Company's Registration Statement on Form S-4, Registration No. 333-45196. (26) Incorporated by reference to the Exhibit 4.1 filed as part of the Company's Registration Statement on Form S-3, Registration No. 333-45200. (27) Incorporated by reference to the Exhibit 4.2 filed as part of the Company's Registration Statement on Form S-3, Registration No. 333-45200. (28) Incorporated by reference to the Exhibit 99.1 filed as part of the Company's Registration Statement on Form S-4, Registration No. 333-45196. (29) Incorporated by reference to the Exhibit 99.2 filed as part of the Company's Registration Statement on Form S-4, Registration No. 333-45196. + Executive Compensation Plan or Arrangement. (b) Reports on Form 8-K. The Company filed the following reports on Form 8-K during the quarter ended December 31, 2000: None. 40
10-K40541st Page of 78TOC1stPreviousNextBottomJust 41st
SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. RAILAMERICA, INC. By: /s/ GARY O MARINO ------------------------------------------------- Gary O. Marino, Chief Executive Officer (Principal Financial officer) By: /s/ BENNETT MARKS ------------------------------------------------ Bennett Marks, Chief Financial Officer, Sr. Vice President and Principal Accounting Officer Dated April 02, 2001 In accordance with the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Company in the capacities and on the dates indicated. [Enlarge/Download Table] SIGNATURES TITLE DATE ---------- ----- ---- /s/ GARY O. MARINO Chairman, President, Chief Executive April 02, 2001 ----------------------------- Officer and Director Gary O. Marino /s/ DONALD D. REDFEARN Chief Administrative Officer, Executive April 02, 2001 ------------------------- Vice President, Secretary and Director Donald D. Redfearn /s/ JOHN H. MARINO Assistant Secretary and Director April 02, 2001 ---------------------------- John H. Marino /s/ DOUGLAS R. NICHOLS Director April 02, 2001 -------------------------- Douglas R. Nichols /s/ RICHARD RAMPELL Director April 02, 2001 ---------------------------- Richard Rampell /s/ CHARLES SWINBURN Director April 02, 2001 -------------------------- Charles Swinburn 41
10-K40542nd Page of 78TOC1stPreviousNextBottomJust 42nd
[Download Table] SIGNATURES TITLE DATE ---------- ----- ---- /s/ JOHN M. SULLIVAN Director April 02, 2001 --------------------------- John M. Sullivan /s/ FERD. C. MEYER, JR. Director April 02, 2001 ---------------------------- Ferd C. Meyer, Jr. /s/ WILLIAM G. PAGONIS Director April 02, 2001 -------------------------- William G. Pagonis 42
10-K40543rd Page of 78TOC1stPreviousNextBottomJust 43rd
RAILAMERICA, INC. AND SUBSIDIARIES INDEX OF FINANCIAL STATEMENTS ------- The following consolidated financial statements of RailAmerica, Inc. and Subsidiaries are referred to in Item 8: [Download Table] PAGES ----- Reports of Independent Certified Public Accountants F-2 - F-3 Consolidated Balance Sheets - December 31, 2000 and 1999 F-4 Consolidated Statements of Income - For the Years Ended December 31, 2000, 1999 and 1998 F-5 Consolidated Statements of Stockholders' Equity - For the Years Ended December 31, 2000, 1999 and 1998 F-6 Consolidated Statements of Cash Flows - For the Years Ended December 31, 2000, 1999 and 1998 F-7 Notes to Consolidated Financial Statements F-8 - F-36 F-1
10-K40544th Page of 78TOC1stPreviousNextBottomJust 44th
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Stockholders of RailAmerica, Inc. In our opinion, based upon our audits and the report of other auditors, the accompanying consolidated balance sheets and the related consolidated statements of income, stockholders' equity and cash flows present fairly, in all material respects, the financial position of RailAmerica, Inc. and its subsidiaries at December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. As of December 31, 1999 and for the years ended December 31, 1999 and 1998, we did not audit the financial statements of Empresa De Transporte Ferroviario S.A., a 55% owned subsidiary of the Company, which statements reflect total assets of $87,555,000 as of December 31, 1999, and total revenues of $19,115,000 and $15,312,000 for the years ended December 31, 1999 and 1998. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Empresa De Transporte Ferroviario S.A. as of December 31, 1999 and for the years ended December 31, 1999 and 1998, is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion expressed above. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Ft. Lauderdale, Florida March 15, 2001 F-2
10-K40545th Page of 78TOC1stPreviousNextBottomJust 45th
REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders of Ferronor S.A.: We have audited the balance sheet of Empresa De Transporte Ferroviario S.A. ("Ferronor") as of December 31, 1999, and the related statements of income and cash flows for the years ended December 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We have conducted our audits of these statements in accordance with auditing standards generally accepted in Chile, which are substantially consistent with those followed in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ferronor as of December 31, 1999, and the results of operations and its cash flow for the years ended December 31,1999 and 1998 in conformity with generally accepted accounting principles in the United States of America. /s/ Charles A. Bunce Charles A. Bunce ARTHUR ANDERSEN - LANGTON CLARKE February 4, 2000 Santiago, Chile F-3
10-K40546th Page of 78TOC1stPreviousNextBottomJust 46th
RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2000 and 1999 (in thousands) [Enlarge/Download Table] 2000 1999 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 13,090 $ 11,598 Restricted cash in escrow 4,539 -- Accounts and notes receivable 62,864 40,857 Other current assets 19,551 13,429 Net assets of discontinued operations -- 14,996 --------- --------- Total current assets 100,044 80,880 Property, plant and equipment, net 715,020 347,617 Other assets 24,639 15,432 --------- --------- Total assets $ 839,703 $ 443,929 ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $ 20,558 $ 17,811 Accounts payable 39,752 23,732 Accrued expenses 47,305 15,379 --------- --------- Total current liabilities 107,615 56,922 Long-term debt, less current maturities 338,298 145,016 Subordinated debt 141,411 122,449 Deferred income taxes 87,288 15,382 Minority interest and other liabilities 35,044 25,863 --------- --------- 709,656 365,632 --------- --------- Commitments and contingencies Redeemable convertible preferred stock, $0.01 par value, $25 liquidation value; 278,400 issued and outstanding at December 31, 2000 378,400 issued and outstanding at December 31, 1999 6,613 8,830 --------- --------- Stockholders' equity: Common stock, $0.001 par value, 60,000,000 authorized; 18,623,320 issued and outstanding at December 31, 2000 12,610,875 issued and 11,894,136 outstanding at December 31, 1999 19 13 Additional paid-in capital 118,502 47,797 Retained earnings 29,162 18,171 Accumulated other comprehensive income (loss) (24,249) 3,486 --------- --------- Total stockholders' equity 123,434 69,467 --------- --------- Total liabilities, redeemable preferred stock and stockholders' equity $ 839,703 $ 443,929 ========= ========= The accompanying notes are an integral part of the consolidated financial statements. F-4
10-K40547th Page of 78TOC1stPreviousNextBottomJust 47th
RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME For the years ended December 31, 2000, 1999 and 1998 (in thousands, except earnings per share) [Enlarge/Download Table] 2000 1999 1998 --------- --------- --------- Operating revenue $ 357,936 $ 129,818 $ 39,136 --------- --------- --------- Operating expenses: Transportation 210,972 79,439 22,096 Selling, general and administrative 62,093 19,550 9,075 Net gain on sale and impairment of assets (11,184) (3,629) (360) Depreciation and amortization 26,021 9,179 2,544 --------- --------- --------- Total operating expenses 287,902 104,539 33,355 --------- --------- --------- Operating income 70,034 25,279 5,781 Interest expense, including amortization of financing costs of $4,854, $4,203 and $465, respectively (55,950) (20,490) (4,944) Minority interest and other income (expense) (1,526) 449 (1,724) --------- --------- --------- Income (loss) from continuing operations before income taxes 12,558 5,238 (887) Provision (benefit) for income taxes 2,950 (787) (1,000) --------- --------- --------- Income from continuing operations 9,608 6,025 113 Discontinued operations: Gain on disposal of discontinued segment (net of income taxes of $6,850) 11,527 -- -- Income (loss) from operations of discontinued segment (net of income taxes of ($1,650), $2,300, and $2,530, respectively) (3,226) 3,896 4,288 --------- --------- --------- Income before extraordinary item and cumulative effect of accounting change 17,909 9,921 4,401 Extraordinary loss from early extinguishment of debt (net of income taxes of $2,200) (3,996) -- -- Cumulative effect of accounting change (2,252) -- -- --------- --------- --------- Net income $ 11,661 $ 9,921 $ 4,401 ========= ========= ========= --------- Net income available to common stockholders $ 10,991 $ 8,886 $ 4,401 ========= ========= ========= Basic earnings per common share Continuing operations $ 0.50 $ 0.45 $ 0.01 Discontinued operations 0.45 0.35 0.45 Extraordinary item (0.22) -- -- Cumulative effect of accounting change (0.12) -- -- --------- --------- --------- Net income $ 0.61 $ 0.80 $ 0.46 ========= ========= ========= Diluted earnings per common share Continuing operations $ 0.49 $ 0.43 $ 0.01 Discontinued operations 0.45 0.34 0.44 Extraordinary item (0.22) -- -- Cumulative effect of accounting change (0.12) -- -- --------- --------- --------- Net income $ 0.60 $ 0.77 $ 0.45 ========= ========= ========= Weighted average common shares outstanding Basic 18,040 11,090 9,553 ========= ========= ========= Diluted 18,267 11,665 9,778 ========= ========= ========= The accompanying notes are an integral part of the consolidated financial statements. F-5
10-K40548th Page of 78TOC1stPreviousNextBottomJust 48th
RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the years ended December 31, 2000, 1999 and 1998 (in thousands) [Enlarge/Download Table] Stockholders' Equity ------------------------------------------------------------------------------------- Number of Additional Other Shares Par Paid-in Retained Comprehensive Issued Value Capital Earnings Income (loss) Total --------- --------- --------- --------- ------------- --------- Balance, January 1, 1998 9,130 $ 9 $ 21,906 $ 4,884 $ 15 $ 26,814 Net income -- -- -- 4,401 -- 4,401 Cumulative translation adjustments -- -- -- -- 456 456 --------- Total comprehensive income 4,857 --------- Issuance of common stock 138 -- 677 -- -- 677 Purchase of treasury stock -- -- (1,838) -- -- (1,838) Exercise of stock options and warrants 405 -- 1,983 -- -- 1,983 Conversion of debt 534 1 2,267 -- -- 2,268 --------- --------- --------- --------- --------- --------- Balance, December 31, 1998 10,207 10 24,995 9,285 471 34,761 Net income -- -- -- 9,921 -- 9,921 Cumulative translation adjustments -- -- -- -- 3,015 3,015 --------- Total comprehensive income 12,936 --------- Issuance of common stock 1,438 1 12,028 -- -- 12,029 Purchase of treasury stock -- -- (1,224) -- -- (1,224) Exercise of stock options 141 -- 732 -- -- 732 Conversion of debt 564 1 3,332 -- -- 3,333 Conversion of preferred stock 261 1 2,006 -- -- 2,007 Issuance of warrants -- -- 5,928 -- -- 5,928 Preferred stock dividends and accretion -- -- -- (1,035) -- (1,035) --------- --------- --------- --------- --------- --------- Balance, December 31, 1999 12,611 13 47,797 18,171 3,486 69,467 Net income -- -- -- 11,661 -- 11,661 Cumulative translation adjustments -- -- -- -- (27,735) (27,735) --------- Total comprehensive loss (16,074) --------- Issuance of common stock 6,652 7 60,917 -- -- 60,924 Exercise of stock options 49 -- 269 -- -- 269 Conversion of redeemable securities 339 -- 2,669 -- -- 2,669 Warrants issued -- -- 8,841 -- -- 8,841 Purchase of treasury stock -- -- (1,992) -- -- (1,992) Retirement of treasury stock (1,028) (1) 1 -- -- -- Preferred stock dividends and accretion -- -- -- (670) -- (670) --------- --------- --------- --------- --------- --------- Balance, December 31, 2000 18,623 $ 19 $ 118,502 $ 29,162 $ (24,249) $ 123,434 ========= ========= ========= ========= ========= ========= The accompanying notes are an integral part of the consolidated financial statements. F-6
10-K40549th Page of 78TOC1stPreviousNextBottomJust 49th
RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2000, 1999 and 1998 (in thousands) [Enlarge/Download Table] 2000 1999 1998 --------- --------- --------- Cash flows from operating activities: Net income $ 11,661 $ 9,921 $ 4,401 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 34,566 14,134 4,157 Write-off of deferred loan costs 4,857 -- -- Interest paid in kind 5,806 -- -- Minority interest in income of subsidiary 995 1,551 1,672 Equity interest in earnings of affiliate (554) (230) -- Gain on insurance settlement -- (4,069) -- (Gain) loss on sale or disposal of properties (29,554) 118 (360) Cumulative effect of accounting change 2,252 -- -- Deferred income taxes (2,797) 3,402 913 Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable 3,654 (2,246) (886) Other current assets 2,455 (4,102) (8,080) Accounts payable 2,239 3,244 2,411 Accrued expenses 5,759 3,326 720 Other liabilities 4,071 (2,295) -- Deposits and other (977) (1,254) 512 --------- --------- --------- Net cash provided by operating activities 44,433 21,500 5,460 --------- --------- --------- Cash flows from investing activities: Purchase of property, plant and equipment (62,499) (51,391) (28,129) Proceeds from sale of properties and investments 96,654 1,163 2,089 Acquisitions, net of cash acquired (148,922) (8,453) (1,757) Deposit on purchase agreement -- -- (1,962) Cash held in discontinued operations -- (656) (674) Change in restricted cash in escrow (4,539) -- -- Deferred acquisition costs and other (2,711) 639 (613) --------- --------- --------- Net cash used in investing activities (122,017) (58,698) (31,046) --------- --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt 549,235 182,085 56,007 Principal payments on long-term debt (448,107) (150,183) (35,724) Sale of convertible preferred stock -- 4,095 7,515 Sale of common stock -- 11,868 1,032 Proceeds from exercise of stock options 234 581 871 Preferred stock dividends paid (289) (843) -- Purchase of treasury stock (1,992) (1,224) (1,838) Deferred financing costs paid (18,980) (2,755) (937) --------- --------- --------- Net cash provided by financing activities 80,101 43,624 26,926 --------- --------- --------- Net increase in cash 2,517 6,426 1,340 Effect of exchange rates on cash (1,025) 87 -- Cash, beginning of period 11,598 5,085 3,745 --------- --------- --------- Cash, end of period $ 13,090 $ 11,598 $ 5,085 ========= ========= ========= The accompanying notes are an integral part of the consolidated financial statements. F-7
10-K40550th Page of 78TOC1stPreviousNextBottomJust 50th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Principles of Consolidation The accompanying consolidated financial statements include the accounts of RailAmerica, Inc. and all of its subsidiaries (the "Company"). All of RailAmerica's consolidated subsidiaries are wholly-owned except Empresa De Transporte Ferroviario S.A. ("Ferronor"), a Chilean railroad, in which the Company has a 55% equity interest. All significant intercompany balances and transactions have been eliminated. Certain prior period amounts have been reclassified to conform to the 2000 presentation. The Company's principal operations consist of rail freight transportation in North America, Chile and Australia. The Company hauls varied products for its customers corresponding to their local operating areas, primarily paper and forest products and agricultural commodities in North America, agricultural commodities in Australia and iron ore and nitrates in Chile. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash and Cash Equivalents The Company considers all highly liquid instruments purchased with a maturity of three months or less at the date of purchase to be cash equivalents. Concentration of Credit Risk The Company maintains its cash in demand deposit accounts which at times may exceed insurance limits. As of December 31, 2000, the Company had approximately $3.9 million of cash in excess of insurance limits. Property, Plant and Equipment Property, plant and equipment are recorded at historical cost. Costs assigned to property purchased as part of an acquisition are based on the fair value of such assets on the date of acquisition. Improvements are capitalized, and expenditures for maintenance and repairs are charged to operations as incurred. Gains or losses on sales and retirements of properties are included in the determination of the results of operations. The Company periodically review its assets for impairment by comparing the projected undiscounted cash flows of those assets to their recorded amounts. Impairment charges are based on F-8
10-K40551st Page of 78TOC1stPreviousNextBottomJust 51st
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued the excess of the recorded amounts over their fair value. Depreciation has been computed using the straight-line method based on estimated useful lives as follows: Buildings and improvements 20-33 years Railroad track 30-40 years Railroad track improvements 3-10 years Locomotives, transportation and other equipment 5-30 years Office equipment 5-10 years Income Taxes The Company utilizes the liability method of accounting for deferred income taxes. This method requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are also established for the future tax benefits of loss and credit carryovers. The liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Revenue Recognition The Company recognizes transportation revenue after services are provided. For the years ended December 31, 2000, 1999 and 1998, 9%, 27% and 62%, and 19%, 15% and 30%, of the Company's North American revenue was derived from interchanging with Burlington Northern Santa Fe Railway and CSX Transportation, respectively. For the years ended December 31, 2000 and 1999, 25% and 20%, 24% and 4%, and 10% and 29%, of the Company's North American revenue was derived from interchanging with Canadian National Railway, Union Pacific Railroad and Canadian Pacific Railway, respectively. The Company had two customers in Chile who represented 38% and 44%, respectively, in 2000 and 43%and 40%, respectively, in 1999 of the Chilean revenue. Two customers in Australia represented 19% and 17% in 2000, and 21% and 19% in 1999, respectively, of the Australian revenue. F-9
10-K40552nd Page of 78TOC1stPreviousNextBottomJust 52nd
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued Foreign Currency Translation The financial statements and transactions of the Company's foreign operations are maintained in their functional currency, except for Chile, where the U.S. dollar is used as the functional currency. Where functional currencies are used, assets and liabilities are translated at current exchange rates in effect at the balance sheet date. Translation adjustments, which result from the process of translating the financial statements into United States dollars, are accumulated in the cumulative translation adjustment account, which is a component of accumulated other comprehensive income. Revenues and expenses are translated at the average exchange rate for each period. Gains and losses from foreign currency transactions are included in net income. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", which establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 requires all derivatives to be measured at fair value and recognized as either assets or liabilities on the balance sheet. Furthermore, the accounting for changes in the fair value of a derivative (i.e. gains and losses) depends on the intended use of the derivative. The Company adopted SFAS No. 133 on January 1, 2001, and will record a liability of approximately $7 million, net of income taxes of $3 million, with a corresponding charge to equity relating to the interest rate swaps in the first quarter of 2001. 2. EARNINGS PER SHARE Basic earnings per share is calculated using the weighted average number of common shares outstanding during the year. For the years ended December 31, 2000 and 1999, income from continuing operations is reduced by preferred stock dividends and accretion for the basic earnings per share computation. Diluted earnings per share is calculated using the sum of the weighted average number of common shares outstanding plus potentially dilutive common shares arising out of stock options and warrants. Options and warrants totaling 4.3 million, 1.8 million and 0.3 million were excluded from the diluted earnings per share calculation for the years ended December 31, 2000, 1999 and 1998, respectively, as well as assumed conversion of $29.2 million in 2000 and $26.5 million in 1999 of convertible preferred stock and convertible debentures, as such securities are anti-dilutive for both periods. F-10
10-K40553rd Page of 78TOC1stPreviousNextBottomJust 53rd
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 2. EARNINGS PER SHARE, continued The following is a summary of the net income available for common stockholders and weighted average shares for the diluted calculation (in thousands): [Download Table] YEAR ENDED DECEMBER 31, -------------------------------------- 2000 1999 1998 -------- -------- -------- Income from continuing operations $ 9,608 $ 6,025 $ 113 Preferred stock dividends and accretion (670) (1,035) -- Interest on convertible debt -- 42 -- -------- -------- -------- Income available to common stockholders $ 8,938 $ 5,032 $ 113 ======== ======== ======== Basic weighted average shares outstanding 18,040 11,090 9,553 Assumed conversion of options and warrants 227 379 225 Assumed conversion of convertible debt -- 196 -- -------- -------- -------- Diluted weighted average shares outstanding 18,267 11,665 9,778 ======== ======== ======== 3. DISCONTINUED OPERATIONS In February 2000, the Company finalized its plan to sell its trailer manufacturing operations. The trailer manufacturing operations consisted of Kalyn/Siebert, L.P. ("KSLP") and Kalyn/Siebert Canada ("KSC"). This business has been accounted for as a discontinued operation and results of operations have been excluded from continuing operations in the consolidated statements of operations for all periods presented. In December 2000, the Company sold KSLP for $32.5 million in cash including $3.5 million which is in escrow at December 31, 2000. A gain of $21.0 was recognized. In December 2000, the Company sold substantially all of the assets and business of KSC for $6 million in cash including $2 million which is in escrow at December 31, 2000. A loss of $2.6 million was recognized. Total revenue for the trailer manufacturing business was $34.7 million, $44.3 million and $39.9 million for the years ended December 31, 2000, 1999 and 1998, respectively. Interest expense of $7.3 million was charged to the manufacturing business in 2000, representing the interest expense for the portion of the asset sale bridge note which was repaid with the proceeds from the sale of the trailer manufacturing business. Income (loss) before income taxes for the trailer manufacturing business was ($5.8) million, $6.2 million and $6.9 million for the years ended December 31, 2000, 1999 and 1998, respectively. Total assets in this business as of December 31, 1999 were $28.8 million. Total liabilities in this business as of December 31, 1999 were $13.9 million. 4. ACQUISITIONS On February 4, 2000, the Company acquired RailTex, Inc. for $128 million in cash, assumption of $105.3 million in debt and 6.6 million shares of the Company's common stock, valued at $60.9 million. RailTex, the operator of 25 railroads over 4,100 miles of rail lines in North America, became a wholly-owned subsidiary of the Company. This transaction was financed partially through the issuance of new debt (see Note 8). F-11
10-K40554th Page of 78TOC1stPreviousNextBottomJust 54th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. ACQUISITIONS, continued As part of the purchase price and in accordance with EITF 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination", the Company recorded liabilities of $11.2 million which related to severance and change of control payments to former RailTex employees. On September 3, 1999, the Company acquired The Toledo, Peoria and Western Railroad Corporation ("TPW") for $18 million (including the repayment of indebtedness), subject to certain adjustments. The Company funded the acquisition through its revolving line of credit. On July 26, 1999, the Company acquired RaiLink Ltd ("RaiLink") for approximately $49.8 million. RaiLink and its 26.3% owned affiliate, Quebec Railway Corporation, operated 11 regional railways covering approximately 2,500 miles of track in Alberta, the Northwest Territories, Ontario, Quebec and New Brunswick. A portion of the funding for the transaction was provided by the Company's revolving line of credit. The balance of the funding came from a private offering of the Company's junior convertible subordinated debt. During the fourth quarter of 2000, the Company sold its interest in the Quebec Railway Corporation(see Note 5). On April 30, 1999, the Company acquired the assets and liabilities comprising the railroad freight business of V/Line Freight Corporation ("VLF"), a corporation established by the Government of the State of Victoria, Australia. VLF was established in March 1997 as part of Victoria's transportation privatization process and assumed many of the activities formerly carried out by the V/Line Freight business unit of the Public Transportation Corporation of the Government of Victoria. Under the Sale of Assets Agreement the Company acquired all of the locomotives, wagons, motor vehicles, equipment, stock, spare parts inventory and accounts receivable, certain business, brand and trade names and trademarks, and the outstanding business contracts of VLF for a purchase price of $49.0 million. In connection with the acquisition, Freight Australia also entered into other agreements, including a primary infrastructure lease with the Director of Public Transport of Australia and various facilities leases, access agreements, maintenance and service agreements and other miscellaneous agreements. Pursuant to the infrastructure lease, Freight Australia received a 45-year lease of the non-electrified intrastate Victorian railway tracks and infrastructure. Freight Australia prepaid in cash the net present value of the rental payments for the infrastructure lease totaling approximately $54.0 million. Freight Australia commenced operations of the rail-based freight business on May 1, 1999. The acquisition of VLF was financed through the issuance of a $100 million bridge note, which has since been repaid. All of the above acquisitions were accounted for as purchases and their results have been included since the dates of acquisition. The following unaudited pro forma summary presents the consolidated results of operations as if these acquisitions had occurred at the F-12
10-K40555th Page of 78TOC1stPreviousNextBottomJust 55th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4. ACQUISITIONS, continued beginning of 2000 and 1999 and do not purport to be indicative of what would have occurred had the acquisitions been made as of those dates or of results which may occur in the future. (In thousands except earnings per share) [Download Table] 2000 1999 -------- -------------- Operating revenue $ 372,010 $ 365,452 Income from continuing operations $ 11,708 $ 12,734 Earnings per share - continuing operations Basic $ 0.59 $ 0.65 Diluted $ 0.57 $ 0.61 The significant adjustments related to the above years represent the inclusion of revenue in Australia for track access fees which were previously paid to the government, elimination of certain operating costs, elimination of costs related to the acquisitions, inclusion of depreciation differences on the revaluation of property, plant and equipment, additional interest expense based on an increase in long-term obligations, amortization of intangible assets and the related income tax effects. 5. DISPOSITIONS During 2000, the Company sold several non-core railroads and various other non-core assets for total proceeds of $44.0 million, resulting in a net gain of $11.2 million. During 1997, the Company sold substantially all the assets of Gettysburg Railway ("GBR") to a company owned by its Vice Chairman, for $1.45 million, which consisted of cash of $0.3 million, an $0.8 million promissory note and a $0.35 million mortgage note at an interest rate of 8.5%. The promissory note and mortgage note were collateralized by the land, buildings and track assets of Gettysburg Railway. A gain of approximately $0.2 million was recognized on the transaction. As of December 31, 2000, $1.15 million of notes receivable from related parties are included in accounts and notes receivable on the consolidated balance sheet. All obligations were paid in full in February 2001. 6. OTHER BALANCE SHEET DATA Other current assets consist of the following as of December 31, 2000 and 1999 (in thousands): [Download Table] 2000 1999 ---------- --------- Track supplies $ 10,068 $ 9,929 Prepaid expenses and other 9,483 3,500 ---------- --------- $ 19,551 $ 13,429 =========== ======== F-13
10-K40556th Page of 78TOC1stPreviousNextBottomJust 56th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. OTHER BALANCE SHEET DATA, continued Accrued liabilities consist of the following as of December 31, 2000 and 1999 (in thousands): [Download Table] 2000 1999 ------------ -------------- Accrued interest expense $ 10,727 $ 820 Accrued compensation and benefits 5,633 1,160 Other accrued liabilities 30,945 13,399 ----------- ---------- $ 47,305 $ 15,379 =========== ========== Other assets consist of the following as of December 31, 2000 and 1999 (in thousands): [Download Table] 2000 1999 ------------ ------------ Deferred loan costs, net $ 16,808 $ 6,657 Deposits and other 7,831 8,775 ----------- ---------- $ 24,639 $ 15,432 =========== ========== Deferred loan costs are being amortized utilizing the interest method over the term of the respective term loans. Other liabilities consist of the following at December 31, 2000 and 1999 (in thousands): [Download Table] 2000 1999 ----------- ------------ Minority interest $ 10,484 $ 9,489 Accrued liabilities 10,970 -- Long service leave 6,565 7,663 Annual leave 3,677 6,087 Other 3,348 2,624 -------- ------- $ 35,044 $25,863 ======== ======= 7. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following as of December 31, 2000 and 1999 (in thousands): [Download Table] 2000 1999 -------------- -------------- Land $ 127,737 $ 34,345 Buildings and improvements 14,665 8,683 Railroad track and improvements 460,108 186,670 Locomotives, transportation and other equipment 151,786 135,309 ------------- ------------ 754,296 365,007 Less accumulated depreciation 39,276 17,390 ------------- ------------ $ 715,020 $ 347,617 ============= ============ Depreciation expense was approximately $25.1 million, $9.2 million and $2.5 million for the years ended December 31, 2000, 1999 and 1998, respectively. F-14
10-K40557th Page of 78TOC1stPreviousNextBottomJust 57th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7. PROPERTY, PLANT AND EQUIPMENT, continued In the fourth quarter of 1999, a $4.1 million gain was recognized on an insurance settlement from an accident which destroyed certain locomotives and railcars in Australia. During 2000, the Company completed $22.2 million in locomotive sale/leaseback transactions. 8. LONG-TERM DEBT Long-term debt consists of the following at December 31, 2000 and 1999 (in thousands): [Enlarge/Download Table] 2000 1999 ---------- ---------- Senior credit facilities. See below $ 319,714 $ 121,005 Credit facility with Banco de Desarrollo, see below 10,462 10,261 Credit facility with Banco Security, interest rate of 7.12% - 8.4% 7,499 5,102 Mortgage note payable, bearing interest at 7.85%, due in fixed monthly installments of $46 (including interest), with a final payment of $4,827 in January 2010. Corporate office building serves as collateral 5,927 6,000 Other long-term debt 15,254 20,459 --------- ---------- 358,856 162,827 Less current maturities 20,558 17,811 --------- ---------- Long-term debt, less current maturities $ 338,298 $ 145,016 ========= ========== In February 2000, the Company entered into a credit agreement and two bridge notes in connection with the acquisition of RailTex and the refinancing of most of the Company's and RailTex's existing debt. The credit agreement provides (i) a $125 million Term A loan, initially bearing interest at LIBOR plus 3.00% (9.72% at December 31, 2000), (ii) a $205 million Term B loan, initially bearing interest at LIBOR plus 3.25% (9.97% at December 31, 2000), and (iii) a $50 million revolving credit facility which includes $30 million of U.S. dollar denominated loans, $10 million of Canadian dollar denominated loans and $10.0 million of Australian dollar denominated loans with an initial interest rate of LIBOR plus 3.00%. All of the capital stock of all the Company's U.S. subsidiaries serve as collateral for the credit facilities. As of December 31, 2000, the two bridge notes have been repaid. (See Note 9). The Term A loan requires principal payments of 5% in 2000, 10% in 2001, 15% in 2002, 20% in 2003, and 25% in both 2004 and 2005. The Term B loan requires principal payments of 1% per year through 2005 and a balloon maturity at December 31, 2006. The revolving loan matures on December 31, 2005. The outstanding balance as of December 31, 2000 of the Term A loan, Term B loan and revolving loan are $110.4 million, $191.6 million and $17.7 million, respectively. F-15
10-K40558th Page of 78TOC1stPreviousNextBottomJust 58th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. LONG-TERM DEBT, continued The Company's borrowings include covenants which impose financial and operating restrictions on the Company's ability to, among other things: incur more debt; pay dividends, redeem or repurchase its stock or make other distributions; make acquisitions or investments; use assets as security in other transactions; enter into transactions with affiliates; merge or consolidate with others; dispose of assets or use asset sale proceeds; create liens on its assets; and extend credit. The facilities also contain financial covenants that require the Company to meet a number of financial ratios and tests. In connection with the February 2000 debt refinancing, including the refinancing of RailTex's debt, the Company recorded an extraordinary charge of $2.2 million for early extinguishments of debt, net of income taxes. In February 1999, Ferronor refinanced certain short-term debt with Banco de Desarrollo. The refinancing consists of two credit lines. The first credit line is a $5.0 million facility which bears interest at the interbank cost plus 1.75% (9.05% at December 31, 2000) with interest to be paid over 120 equal monthly installments and principal to be paid over 96 equal installments beginning two years from the funding. The second credit line is a $7.7 million facility which bears interest at LIBOR plus 2.75%(10.05% at December 31, 2000) and is payable in 120 equal monthly installments (including interest). The aggregate annual maturities of long-term debt are as follows (in thousands): 2001 $ 20,558 2002 26,653 2003 29,251 2004 33,109 2005 52,089 Thereafter 197,196 --------- $ 358,856 ========= During the years ended December 31, 2000, 1999 and 1998 interest of approximately $1,257, $1,386 and $465, respectively, was capitalized for on-going capital improvement projects. On May 4, 2000, the Company entered into two interest rate swap agreements for a total notional amount of $212.5 million. The agreements, which have a term of three years, require the Company to pay a fixed interest rate of 7.23% while receiving a variable interest rate equal to the 90 day LIBOR rate. Leases The Company entered into equipment finance leases for certain tractors, trailers and other equipment expiring at various times through 2003. Certain of these leases are accounted F-16
10-K40559th Page of 78TOC1stPreviousNextBottomJust 59th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. LONG-TERM DEBT, continued for as capital leases. The financing of the purchase of the tractors, trailers and equipment under these capital leases was capitalized using the implicit interest rate at the inception of the respective leases. Minimum annual lease commitments at December 31, 2000 are as follows (in thousands): CAPITAL OPERATING LEASES LEASES ------ ------ 2001 $ 1,240 $ 12,587 2002 1,268 11,051 2003 60 10,014 2004 -- 9,219 2005 -- 8,242 Thereafter -- 23,478 ---------- -------- Total $ 2,568 $ 74,591 =========== ======== Rental expense under operating leases was approximately $9.0 million, $3.4 million and $2.7 million for the years ended December 31, 2000, 1999 and 1998, respectively. 9. SUBORDINATED DEBT In August 2000, RailAmerica Transportation Corp. ("RTC"), the Company's wholly-owned subsidiary, sold units consisting of $130.0 million of 12-7/8% senior subordinated notes due 2010 and warrants to purchase 1,411,414 shares of the Company's common stock in a private offering, for gross proceeds of $122.2 million after deducting the initial purchasers' discount. All of the Company's U.S. subsidiaries are guarantors of the senior subordinated notes. The net proceeds received from the issuance of the units were used to pay $115.0 million of bridge notes and approximately $1.8 million of term loans under the Company's senior credit facilities, resulting in an extraordinary charge of $1.8 million, net of taxes, associated with the early extinguishment of debt. In connection with the issuance of the bridge notes for the RailTex acquisition, the purchasers of such notes received 0.433 million warrants to purchase common stock at an exercise price of $7.75 per share, expiring in 2010. In connection with the financing for VLF, the Company issued to a bank warrants to acquire 750,000 shares of the Company's Common Stock at an exercise price of $9.75 per share and warrants to acquire 50,000 shares of the Company's common stock at an exercise price of $7.79 per share. The bridge loan was repaid in February 2000 in conjunction with the acquisition of RailTex. In addition to the bridge loan Freight Australia issued approximately $2.0 million in subordinated debt to a vendor of Freight Australia ("Vendor Debt"). The Company also issued $2.64 million of convertible debt in lieu of cash payments for fees owed to its F-17
10-K40560th Page of 78TOC1stPreviousNextBottomJust 60th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. SUBORDINATED DEBT, continued investment banker in the transaction. The convertible debt was converted in July 1999 into 272,415 shares of common stock. In August 1999, the Company issued $22.5 million aggregate principal amount of junior convertible subordinated debentures. Interest on the debentures accrues at the rate of 6% per annum and is payable semi-annually. The debentures are convertible, at the option of the holder, into shares of RailAmerica at a conversion price of $10. The debentures mature on July 31, 2004, are general unsecured obligations and rank subordinate in right of payment to all senior indebtedness. At RailAmerica's option, the debentures may be redeemed at par plus accrued interest, in whole or in part, if the closing price of RailAmerica's common stock is above 200% of the conversion price for 10 consecutive trading days. During 2000, $350,000 of the junior convertible subordinated debentures were converted into common stock. The Company recognized a $2.3 million charge in the fourth quarter of 2000 for the beneficial conversion feature included in the junior convertible subordinated debentures. This charge is shown as the cumulative effect of accounting change. 10. REDEEMABLE PREFERRED STOCK In January 1999, the Company completed a private offering of $11.6 million of Series A Convertible Redeemable Preferred Stock ("Preferred Stock"). The Company sold 464,400 shares of Preferred Stock at a price of $25 per share. The Preferred Stock pays annual dividends of 7.5%, is convertible into shares of the Company's common stock at a price of $8.25 per share and is non-voting. The Preferred Stock is mandatorily redeemable 5 years from its issuance. During 1999, 86,000 shares of the Preferred Stock were converted and 100,000 shares were converted in 2000. Accretion of costs were $119,681 and $192,510 for the years ended December 31, 2000 and 1999 respectively. A company owned by a director of the Company served as the exclusive placement agent for the Company's private placement which had a final close in January 1999. A portion of the proceeds were received by the Company and closed in December 1998. The Company paid a total of $0.8 million in placement fees and cost reimbursements during December 1998 and the first quarter of 1999 on this transaction and issued two-year warrants to purchase 140,727 shares of common stock at an exercise price of $8.25 per share. The warrants expired unexercised on January 31, 2001. 11. COMMON STOCK TRANSACTIONS In June 2000, the Company engaged an investment banking firm to assist the Company's Board of Directors in evaluating the issuance of the senior subordinated notes, for which it issued three-year warrants to purchase 150,000 shares of the Company's common stock. Of these warrants, 75,000 are at an exercise price of $5.50 and 75,000 are at an exercise price of $6.50. In August 1999, the Company issued warrants to purchase 676,363 shares of common stock to the investors in the private offering of its junior convertible subordinated debentures. The warrants are exercisable through August 5, 2004 at an exercise price of $10.50 per share, subject to adjustment under selected circumstances. Warrants to purchase 200,000 shares of common stock at an exercise price of $10.50 per share through July 31, 2001 were issued to the placement agent in connection with the private offering. F-18
10-K40561st Page of 78TOC1stPreviousNextBottomJust 61st
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. COMMON STOCK TRANSACTIONS, continued In August 1998, the Company's Board of Directors authorized a share repurchase program to buy back up to 1,000,000 shares of its common stock (limited to $2 million per year pursuant to the new senior credit facilities). As of December 31, 2000, the Company had purchased 756,650 shares with a total cost of $5.1 million. The shares were retired in 2000. In March 1999, the Company completed a private placement of approximately $12.5 million of restricted common stock. Pursuant to the offering, the Company sold approximately 1.4 million shares of its common stock at a price of $8.81 per share and issued approximately 212,000 warrants to purchase an equivalent number of shares of common stock at an exercise price of $10.13 per share within one year of the transaction's closing date. A company owned by one of the Company's directors acted as placement agent and received approximately $0.4 million in fees and cost reimbursement and one-year warrants to purchase 141,504 shares of the Company's common stock at an exercise price of $10.13. All of the warrants issued for this transaction expired unexercised on March 3, 2000. 12. INCOME TAX PROVISION Income before income taxes for the years ended December 31, 2000, 1999 and 1998 consists of (in thousands): 2000 1999 1998 -------- -------- -------- Domestic $ (8,723) $ 2,868 $ 3,941 Foreign subsidiaries 26,334 8,566 1,990 -------- -------- -------- $ 17,611 $ 11,434 $ 5,931 ======== ======== ======== The provision for income taxes for the years ended December 31, 2000, 1999 and 1998 consists of (in thousands): 2000 1999 1998 ------- ------- ------- Federal income taxes: Current $ 334 $ 15 $ 232 Deferred 2,494 1,234 1,039 ------- ------- ------- 2,828 1,249 1,271 ------- ------- ------- State income taxes: Current 700 149 281 Deferred (1,548) (106) (55) ------- ------- ------- (848) 43 226 ------- ------- ------- Foreign income taxes: Current 2,435 857 33 Deferred 1,535 2,197 -- Change in tax law -- (2,835) -- ------- ------- ------- 3,970 219 33 ------- ------- ------- Total income tax provision $ 5,950 $ 1,511 $ 1,530 ======= ======= ======= F-19
10-K40562nd Page of 78TOC1stPreviousNextBottomJust 62nd
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. INCOME TAX PROVISION, continued The following summarizes the total income tax provisions for each of the years ended December 31, 2000, 1999 and 1998 (in thousands): 2000 1999 1998 ------- ------- ------- Continuing operations $ 2,950 $ (787) $(1,000) Discontinued operations 5,200 2,298 2,530 Extraordinary item (2,200) -- -- ------- ------- ------- Total income tax provision $ 5,950 $ 1,511 $ 1,530 ======= ======= ======= The differences between the U.S. federal statutory tax rate and the Company's effective rate from continuing operations are as follows (in thousands): [Download Table] 2000 1999 1998 ------- ------- ------- Income tax provision, at 35% $ 4,406 $ 1,833 $ (310) Net benefit due to difference between U.S. & foreign tax rates (206) (561) (334) Net benefit due to tax law changes in Australia -- (2,835) -- Amortization of non-deductible warrants (602) 602 -- Other, net (559) 344 (238) Valuation allowance (89) (170) (118) ------- ------- ------- Tax provision $ 2,950 $ (787) $(1,000) ======= ======= ======= The Company files a consolidated U.S. income tax return with its domestic subsidiaries. For state income tax purposes, the Company and each of its domestic subsidiaries generally file on a separate return basis in the states in which they do business. The Company's foreign subsidiaries file income tax returns in their respective jurisdictions. The components of deferred income tax assets and liabilities as of December 31, 2000 and 1999 are as follows (in thousands): 2000 1999 --------- --------- Deferred tax assets: Net operating loss carry forwards $ 11,829 $ 7,667 Alternative minimum tax credit 1,125 790 Accrued expense/reserves 5,201 4,478 Other 1,128 108 --------- --------- Total deferred assets 19,283 13,043 Less: valuation allowance (999) (321) --------- --------- Total deferred assets, net 18,284 12,722 Deferred tax liabilities: Property, plant and equipment 107,188 29,162 Deferred revenue (2,478) 495 Other 862 1,875 --------- --------- Net deferred tax liability $ (87,288) $ (18,810) ========= ========= F-20
10-K40563rd Page of 78TOC1stPreviousNextBottomJust 63rd
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 12. INCOME TAX PROVISION, continued The liability method of accounting for deferred income taxes requires a valuation allowance against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. It is management's belief that it is more likely than not that a portion of the deferred tax assets will not be realized. The Company has established a valuation allowance of $1.0 million at December 31, 2000 and $0.3 million at December 31, 1999, respectively. Approximately $0.8 million of the increase in the valuation allowance from December 31, 1999 to December 31, 2000 was related to deferred tax assets acquired in the acquisition of RailTex, Inc. The following is a summary of net operating loss carryforwards by jurisdiction as of December 31, 2000 (in thousands): [Download Table] AMOUNT EXPIRATION PERIOD ------ ----------------- U.S. - Federal $ 3,086 2003 - 2020 U.S. - State 48,823 2001 - 2020 Chile 1,336 None Australia 22,322 None Canada 2,666 2004 - 2007 --------- $ 78,233 ========= As part of certain acquisitions, the Company acquired net operating loss carry forwards for federal and state income tax purposes. The utilization of the acquired tax loss carry forwards is further limited by the Internal Revenue Code Section 382. These tax loss carry forwards expire in the years 2001 through 2010. No provision was made in 2000 for U.S. income taxes on undistributed earnings of the Chilean, Canadian or Australian subsidiaries as it is the intention of management to utilize those earnings in their respective operations for an indefinite period of time. 13. STOCK OPTIONS The Company has stock option plans under which employees and non-employee directors may be granted options to purchase shares of Company common stock at the fair market value at the date of grant. Options generally vest in two or three years and expire in ten years from the date of the grant. The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation". Accordingly, no compensation costs have been recognized for the stock options issued during 2000, 1999 and 1998 as all stock options were granted with an exercise price at least equal to the market price on the date of grant. Had compensation cost for the Company's stock options issued been determined based on the fair value at the grant date for awards in 2000, 1999 and 1998 consistent with the F-21
10-K40564th Page of 78TOC1stPreviousNextBottomJust 64th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. STOCK OPTIONS, continued provisions of SFAS No. 123, the Company's net income and net income per share would have been reduced to the pro forma amounts indicated below (in thousands except per share information): [Enlarge/Download Table] 2000 1999 1998 --------------- --------------- --------------- Net income - as reported $ 11,661 $ 9,921 $ 4,401 =============== =============== =============== Net income - pro forma $ 8,076 $ 8,972 $ 3,562 =============== =============== =============== Basic net income per share - as reported $ 0.61 $ 0.80 $ 0.46 =============== =============== =============== Basic net income per share - pro forma $ 0.41 $ 0.72 $ 0.37 =============== =============== =============== Diluted net income per share - as reported $ 0.60 $ 0.77 $ 0.45 =============== =============== =============== Diluted net income per share - pro forma $ 0.41 $ 0.68 $ 0.36 =============== =============== =============== The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2000, 1999 and 1998: dividend yield 0.0%, 0.0% and 0.0%; expected volatility of 41%, 40% and 40%; risk-free interest rate of 6.50%, 5.80% and 5.50%; and expected lives of 5, 10 and 10 years. The weighted average fair value of options granted for 2000, 1999 and 1998 were $4.75, $5.86, and $3.97, respectively. Information regarding the above options for 2000, 1999 and 1998 is as follows: [Enlarge/Download Table] Weighted Weighted Number of Average Number Of Average Outstanding Exercise Shares Exercise Shares Price Exercisable Price -------------- --------------- --------------- --------------- Outstanding at January 1, 1998 1,250,900 $4.10 Granted 551,000 $7.35 Exercised (237,950) $3.66 Forfeited (26,949) $3.58 --------- -------------- Outstanding at December 31, 1998 1,537,001 $5.40 1,234,500 $5.26 Granted 455,000 $8.97 Exercised (141,168) $4.35 Forfeited (10,833) $5.09 ---------- -------------- Outstanding at December 31, 1999 1,840,000 $6.34 1,225,999 $5.40 Granted 1,882,558 $8.08 Exercised (48,969) $4.78 Forfeited (222,498) $7.64 ---------- -------------- Outstanding at December 31, 2000 3,451,091 $7.23 1,937,858 $6.50 ========== ============== Authorized at December 31, 2000 4,525,402 ========== F-22
10-K40565th Page of 78TOC1stPreviousNextBottomJust 65th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. STOCK OPTIONS, continued The following table summarizes information about stock options outstanding at December 31, 2000: [Enlarge/Download Table] OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------------------------------------- --------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED RANGE OF REMAINING AVERAGE AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE PRICE OF OPTIONS LIFE PRICE OF OPTIONS PRICE -------------------------------------------------------------------------------------------------- $3.40-$5.00 782,450 4.91 $4.24 782,450 $4.24 $5.01-$7.00 650,391 9.01 $6.32 282,410 $6.28 $7.01-$9.75 2,018,250 8.61 $8.67 872,998 $8.60 --------- -------- 3,451,091 1,937,858 ========= ========= In January 1995, the Company established an Employee Stock Purchase Plan open to all full-time employees. Each employee may have payroll deductions as a percentage of their compensation, not to exceed $25,000 per year. The purchase price equals 85% of the fair market value of a share of the Company's Common Stock on January 1 or December 31, of any given year, whichever is lower. For the years ended December 31, 2000, 1999 and 1998, 11,749, 16,500 and 18,289 shares of common stock, respectively, were sold to employees under this plan. 14. NONCASH INVESTING AND FINANCING ACTIVITIES Cash paid for interest from continuing operations during 2000, 1999 and 1998 was $41.2 million, $16.3 million and $5.7 million, respectively. Cash paid for income taxes during 2000, 1999 and 1998 was $4.0 million, $1.3 million and $0.2 million, respectively. [Enlarge/Download Table] 2000 1999 1998 --------- --------- --------- Acquisition of businesses (in thousands): Common stock issued for businesses acquired $ 60,773 $ -- $ 453 Warrants issued for business acquired -- 3,031 -- Debt issued for business acquired 105,376 173,493 -- Acquisition costs accrued -- 4,897 31 Details of acquisitions: Working capital components, other than cash 6,109 (5,827) (801) Property and equipment (390,468) (217,965) (2,484) Other assets (6,980) (4,834) (962) Deferred loan costs -- (6,959) -- Goodwill -- (972) (355) Notes payable and loans payable 3,148 35,466 1,921 Deferred income taxes payable 73,120 11,217 440 Minority interest -- -- -- --------- --------- --------- Net cash used in acquisitions $(148,922) $ (8,453) $ (1,757) ========= ========= ========= F-23
10-K40566th Page of 78TOC1stPreviousNextBottomJust 66th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. FAIR VALUE OF FINANCIAL INSTRUMENTS Management believes that the fair value of its senior long-term debt approximates its carrying value for the based on the variable nature of the financing and for all other long-term debt based on current borrowing rates available with similar terms and maturities. The fair value of the senior subordinated notes is $125,450 as of December 31, 2000. 16. PENSION AND OTHER BENEFIT PROGRAMS The Company maintains a pension plan for a majority of its Canadian railroad employees, with both defined benefit and defined contribution components. DEFINED BENEFIT - The defined benefit component applies to approximately 60 employees who transferred employment directly from Canadian Pacific Railway Company ("CPR") to a subsidiary of RaiLink, Ltd. The defined benefit portion of the plan is a mirror plan of CPR's defined benefit plan. The employees that transferred and joined the mirror plan were entitled to transfer or buy back prior years of service. As part of the arrangement, CPR transferred to the Company the appropriate value of each employee's pension entitlement. The following chart summarizes the benefit obligations, assets, funded status and rate assumptions associated with the defined benefit plan (in thousands) for the year ended December 31, 2000 and the period from August 1, 1999 to December 31, 1999. [Download Table] 2000 1999 ------- ------- Change in benefit obligation Benefit obligation at beginning of period $ 2,853 $ 2,710 Service cost 47 26 Interest cost 150 79 Plan participants' contributions 67 38 Benefits paid (3) 0 ------- ------- Benefit obligation at end of period $ 3,114 $ 2,853 ======= ======= Change in plan assets Fair value of plan assets at beginning of period $ 2,655 $ 2,445 Actual return on plan assets 340 132 Employer contributions 93 37 Plan participants' contributions 116 41 Benefits paid (3) 0 ------- ------- Fair value of plan assets at end of period $ 3 ,201 $ 2,655 ======= ======= Funded status Prepaid (accrued) benefit cost $ 87 $ (198) ======= ======= Rate Assumptions Discount rate 7.00% 7.00% Expected return on plan assets 8.00% 8.00% Rate of compensation increase 4.50% 4.50% 2000 1999 ------- ------- Components of net periodic benefit cost: Service cost $ 47 $ 26 Interest cost 150 79 Expected return on plan assets (147) (83) Net obligation at date of adoption 16 17 ------- ------- Net periodic pension cost $ 66 $ 39 ======= ======= F-24
10-K40567th Page of 78TOC1stPreviousNextBottomJust 67th
Freight Australia's employees participate in the Victorian government's superannuation funds. The contributions made by Freight Australia are as follows (in thousands) for the year ended December 31, 2000 and the period from May 1, 1999 to December 31, 1999. 2000 1999 ------ ------ Victorian Superannuation Fund $ 140 $ 62 State Superannuation Fund 972 647 Transport Fund 263 194 Freight Victoria Fund 161 53 ------ ------ Total contributions $1,536 $ 956 ====== ====== Defined contribution - The defined contribution component applies to a majority of the Company's Canadian railroad employees that are not covered by the defined benefit component. The Company contributes 3% of a participating employee's salary to the plan. Pension expense for the year ended December 31, 2000 and for the period August 1, 1999 to December 31, 1999 for the defined contribution members was $0.2 million and $0.1 million, respectively. Profit Sharing Plan The Company maintains a contributory profit sharing plan as defined under Section 401(k) of the U.S. Internal Revenue Code. The Company made contributions to this plan at a rate of 50% of the employees' contribution up to a maximum annual contribution of $1,500 per eligible employee. An employee becomes 100% vested with respect to the employer contributions after completing six years of service. Employer contributions during the years ended December 31, 2000, 1999 and 1998 were approximately $286,000, $81,000 and $66,000, respectively. F-25
10-K40568th Page of 78TOC1stPreviousNextBottomJust 68th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. COMMITMENTS AND CONTINGENCIES In the second quarter of 2000, certain parties filed property damage claims totaling approximately $32.5 million against Mackenzie Northern Railway, a wholly-owned subsidiary of RailAmerica, and others in connection with fires that allegedly occurred in 1998. The Company intends to vigorously defend these claims, and has insurance coverage to approximately $13.0 million to cover these claims. The Company's insurer has reserved $9.8 million for these matters. A loss, if any, in excess of our insurance policy coverage may adversely affect the Company's cash flow and financial condition. In the ordinary course of conducting its business, the Company becomes involved in various legal actions and other claims which are pending or could be asserted against the Company. Litigation is subject to many uncertainties, the outcome of individual litigated matters is not predictable with assurance, and it is reasonably possible that some of these matters may be decided unfavorably to the Company. It is the opinion of management that the ultimate liability, if any, with respect to these matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows. The Company has a $4.7 million contingent obligation, under certain events of default or if line abandonment occurs, to the Canadian National Railroad in connection with its properties. The contingent obligation bears no interest and has no pre-defined terms of payment or maturity. The Company's operations are subject to extensive environmental regulation. The Company records liabilities for remediation and restoration costs related to past activities when the Company's obligation is probable and the costs can be reasonably estimated. Costs of ongoing compliance activities to current operations are expensed as incurred. The Company's recorded liabilities for these issues represent its best estimates (on an undiscounted basis) of remediation and restoration costs that may be required to comply with present laws and regulations. At December 31, 2000 these recorded liabilities were not material. Although these costs cannot be predicted with certainty, management believes that the ultimate outcome of identified matters will not have a material adverse effect on the Company's consolidated results of operations or financial condition. 18. SEGMENT INFORMATION The Company's continuing operations have been classified into three business segments: North American rail transportation, Australian rail transportation, and Chilean rail transportation. The North American rail transportation segment includes the operations of the Company's railroad subsidiaries in the United States and Canada. F-26
10-K40569th Page of 78TOC1stPreviousNextBottomJust 69th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. SEGMENT INFORMATION, continued Business and geographical segment information for the years ended December 31, 2000, 1999 and 1998 (dollar amounts in thousands) is as follows: YEAR ENDED DECEMBER 31, 2000: [Enlarge/Download Table] NORTH AMERICA ------------------------------ CONSOLIDATED UNITED STATES CANADA CHILE AUSTRALIA ------------ -------------- ------------- ------------ ------------ Revenue $ 357,936 $ 169,354 $ 63,505 $ 22,873 $ 102,204 Depreciation and amortization $ 26,021 $ 14,052 $ 4,253 $ 2,278 $ 5,438 Income (loss) before income taxes $ 12,558 $ (19,194) $ 13,752 $ 954 $ 17,046 Interest expense $ 51,096 $ 47,811 $ 431 $ 2,383 $ 471 Total assets $ 839,703 $ 635,746 $ 83,724 $ 57,629 $ 62,604 Capital expenditures $ 62,499 $ 24,566 $ 9,570 $ 10,018 $ 18,345 YEAR ENDED DECEMBER 31, 1999: [Enlarge/Download Table] NORTH AMERICA ------------------------------ CONSOLIDATED UNITED STATES CANADA CHILE AUSTRALIA ------------ -------------- ------------- ------------ ------------ Revenue $ 129,818 $ 27,166 $ 20,179 $ 19,115 $ 63,358 Depreciation and amortization $ 9,179 $ 2,428 $ 2,091 $ 1,231 $ 3,429 Income (loss) before income taxes $ 5,238 $ (2,979) $ 919 $ 1,473 $ 5,825* Interest expense $ 16,287 $ 3,926 $ 3,203 $ 1,595 $ 7,563 Total assets $ 428,932 $ 115,295 $ 99,038 $ 52,022 $ 162,577 Capital expenditures $ 51,391 $ 14,604 $ 11,841 $ 13,389 $ 11,557 YEAR ENDED DECEMBER 31, 1998: [Enlarge/Download Table] NORTH AMERICA ------------------------------ CONSOLIDATED UNITED STATES CANADA CHILE AUSTRALIA ------------ -------------- ------------- ------------ ------------ Revenue $ 39,136 $ 18,960 $ 4,252 $ 15,924 $ -- Depreciation and amortization $ 2,544 $ 1,838 $ -- $ 706 $ -- Income (loss) before income taxes $ (887) $ (2,327) $ (142) $ 1,580 $ 2 Interest expense $ 4,479 $ 3,104 $ 109 $ 1,266 $ -- Total assets $ 117,081 $ 74,628 $ 2,672 $ 37,786 $ 1,995 Capital expenditures $ 28,129 $ 15,109 $ 213 $ 12,807 $ -- * - Amount includes $4.1 million casualty gain. F-27
10-K40570th Page of 78TOC1stPreviousNextBottomJust 70th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19. UNAUDITED QUARTERLY FINANCIAL DATA Quarterly financial data for 2000 is as follows (in thousands except per share amounts) [Download Table] FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- Operating revenue $ 81,000 $ 96,047 $ 90,970 $ 89,919 Operating income $ 13,966 $ 23,705 $ 16,837 $ 15,526 Income (loss) from continuing operations $ (889) $ 7,588 $ 1,844 $ 1,065 Net income (loss) $ (3,182) $ 7,553 $ 237 $ 7,053 Basic income (loss) from continuing operations per share $ (0.06) $ 0.40 $ 0.09 $ 0.05 Diluted income (loss) from continuing operations per share $ (0.06) $ 0.36 $ 0.09 $ 0.05 Quarterly financial data for 1999 is as follows (in thousands except per share amounts) [Download Table] FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- Operating revenue $ 11,062 $ 28,816 $ 39,678 $ 50,262 Operating income $ 1,628 $ 4,373 $ 6,602 $ 12,676 Income (loss) from continuing operations $ 39 $ 1,389 $ 2,278 $ 2,319 Net income $ 1,203 $ 2,748 $ 3,287 $ 2,683 Basic income (loss) from continuing operations per share $ (0.02) $ 0.10 $ 0.17 $ 0.18 Diluted income (loss) from continuing operations per share $ (0.02) $ 0.10 $ 0.16 $ 0.17 The above amounts differ from those included in the Form 10-Q's filed during 1999 due to the trailer manufacturing segment being included in discontinued operations for all periods reported in these consolidated financial statements. F-28
10-K40571st Page of 78TOC1stPreviousNextBottomJust 71st
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 20. GUARANTOR FINANCIAL STATEMENT INFORMATION In August 2000, RailAmerica Transportation Corp. ("Issuer"), a wholly-owned subsidiary of RailAmerica, Inc. ("Parent"), sold units including 12 7/8% senior subordinated notes, which are registered with the Securities and Exchange Commission. The notes are guaranteed by the Parent, the domestic subsidiaries of the Issuer and Palm Beach Rail Holding, Inc. RAILAMERICA, INC. Consolidating Balance Sheet At December 31, 2000 [Enlarge/Download Table] Non Company Guarantor Guarantor Issuer (Parent) Subsidiaries Subsidiaries Eliminations Consolidated --------- --------- ------------ ------------ ------------ ------------ ASSETS Current Assets: Cash $ -- $ 7 $ 2,943 $ 10,140 $ -- $ 13,090 Cash held in escrow -- -- 2,525 2,014 -- 4,539 Accounts and notes receivable 11 1,735 35,682 27,135 (1,699) 62,864 Other current assets 23 829 6,930 11,769 -- 19,551 --------- --------- --------- --------- --------- --------- Total current assets 34 2,571 48,080 51,058 (1,699) 100,044 Property, plant and equipment, net 48 638 415,961 298,373 -- 715,020 Other assets 15,018 1,899 3,617 4,105 -- 24,639 Investment in and advances to affiliates 450,563 164,772 32,037 (161,811) (485,561) -- --------- --------- --------- --------- --------- --------- Total assets $ 465,663 $ 169,880 $ 499,695 $ 191,725 $(487,260) $ 839,703 ========= ========= ========= ========= ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 13,557 $ -- $ 1,427 $ 7,273 $ (1,699) $ 20,558 Accounts payable 74 537 13,748 25,393 -- 39,752 Accrued expenses 9,888 1,280 19,902 16,235 -- 47,305 --------- --------- --------- --------- --------- --------- Total current liabilities 23,519 1,817 35,077 48,901 (1,699) 107,615 Long-term debt, less current maturities 423,818 -- (105,214) 19,694 -- 338,298 Subordinated debt -- 20,609 117,660 3,142 -- 141,411 Deferred income taxes (11,664) (6,842) 92,590 13,204 -- 87,288 Minority interest and other liabilities -- -- 11,500 18,129 5,415 35,044 Redeemable convertible preferred stock -- 6,613 -- -- -- 6,613 Stockholders' equity: Common stock -- 19 972 27,772 (28,744) 19 Additional paid-in capital -- 118,502 310,880 47,314 (358,194) 118,502 Retained earnings 29,990 29,162 36,230 37,818 (104,038) 29,162 Accumulated other comprehensive income -- -- -- (24,249) -- (24,249) --------- --------- --------- --------- --------- --------- Total stockholders' equity 29,990 147,683 348,082 (88,655) (490,976) 123,434 --------- --------- --------- --------- --------- --------- Total liabilities, redeemable preferred stock and stockholders' equity $ 465,663 $ 169,880 $ 499,695 $ 191,725 $(487,260) $ 839,703 ========= ========= ========= ========= ========= ========= F-29
10-K40572nd Page of 78TOC1stPreviousNextBottomJust 72nd
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 20. GUARANTOR FINANCIAL STATEMENT INFORMATION, CONTINUED RAILAMERICA, INC. Consolidating Statement of Income For the Year Ended December 31, 2000 [Enlarge/Download Table] Non Company Guarantor Guarantor Issuer (Parent) Subsidiaries Subsidiaries Eliminations Consolidated --------- --------- ------------ ------------ ------------ ------------ Operating revenue $ -- $ 594 $ 169,353 $ 188,582 $ (593) $ 357,936 --------- --------- --------- --------- --------- --------- Operating expenses: Transportation -- -- 87,897 123,075 -- 210,972 Selling, general and administrative 530 11,730 34,090 16,336 (593) 62,093 Gain on sale and impairment of assets (net) (762) -- (10,753) 331 -- (11,184) Depreciation and amortization 944 121 12,987 11,969 -- 26,021 --------- --------- --------- --------- --------- --------- Total operating expenses 712 11,851 124,221 151,711 (593) 287,902 --------- --------- --------- --------- --------- --------- Operating income (712) (11,257) 45,132 36,871 -- 70,034 Interest expense (48,428) (1,910) (2,247) (3,365) -- (55,950) Interest in equity of subsidiaries 55,891 25,301 -- -- (81,192) -- Minority interest and other income (expense) -- 7 223 (1,756) -- (1,526) --------- --------- --------- --------- --------- --------- Income from continuing operations before income taxes 6,751 12,141 43,108 31,750 (81,192) 12,558 Provision for income taxes (11,548) (3,093) 10,130 7,461 -- 2,950 --------- --------- --------- --------- --------- --------- Income from continuing operations 18,299 15,234 32,978 24,289 (81,192) 9,608 Discontinued operations: Gain on disposal of discontinued segment -- -- 13,527 (2,000) -- 11,527 Loss from operations of discontinued segment -- -- (5,077) 1,851 -- (3,226) --------- --------- --------- --------- --------- --------- Income (loss) before extraordinary item 18,299 15,234 41,428 24,140 (81,192) 17,909 Extraordinary loss from early extinguishment of debt (net of tax) (1,299) (1,321) (1,376) -- -- (3,996) Cumulative effect of accounting change -- (2,252) -- -- -- (2,252) --------- --------- --------- --------- --------- --------- Net income $ 17,000 $ 11,661 $ 40,052 $ 24,140 $ (81,192) $ 11,661 ========= ========= ========= ========= ========= ========= F-30
10-K40573rd Page of 78TOC1stPreviousNextBottomJust 73rd
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 20. GUARANTOR FINANCIAL STATEMENT INFORMATION, CONTINUED RAILAMERICA, INC. Consolidating Statement of Cash Flow For the Year Ended December 31, 2000 [Enlarge/Download Table] Non Company Guarantor Guarantor Issuer (Parent) Subsidiaries Subsidiaries Eliminations Consolidated --------- --------- ------------ ------------ ------------ ------------ Cash flows from operating activities: Net income (loss) $ (38,891) $ (13,640) $ 40,052 $ 24,140 $ -- 11,661 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,594 1,236 15,751 12,985 -- 34,566 Write-off of deferred loan costs 1,615 1,353 735 1,154 -- 4,857 Interest paid in kind -- -- 5,806 -- -- 5,806 Minority interest in income of subsidiary -- -- -- 995 -- 995 Equity interest in earnings of affiliate -- -- -- (554) -- (554) (Gain) loss on sale or disposal of properties (762) -- (31,857) 3,065 -- (29,554) Cumulative effect of accounting change -- 2,252 -- -- -- 2,252 Deferred income taxes (13,984) (4,431) 20,549 (4,931) -- (2,797) Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable (356) 745 (2,676) 5,941 -- 3,654 Other current assets (23) (388) (1,802) 4,668 -- 2,455 Accounts payable 74 (240) (2,977) 5,382 -- 2,239 Accrued expenses 9,889 295 (2,562) (1,863) -- 5,759 Other liabilities -- -- 4,671 (600) -- 4,071 Deposits and other 263 (1,552) (392) 704 -- (977) --------- --------- --------- ---------- --------- --------- Net cash provided by operating activities (37,581) (14,370) 45,297 51,088 -- 44,433 --------- --------- --------- ---------- --------- --------- Cash flows from investing activities: Purchase of property, plant and equipment (52) (26) (24,034) (38,387) -- (62,499) Proceeds from sale of properties -- -- 80,976 15,678 -- 96,654 Acquisitions, net of cash acquired -- -- (148,922) -- -- (148,922) Change in cash in escrow -- -- (2,507) (2,032) -- (4,539) Deferred acquisition costs and other -- (2,711) -- -- -- (2,711) --------- --------- --------- ---------- --------- --------- Net cash used in investing activities (52) (2,737) (94,486) (24,742) -- (122,017) --------- --------- --------- ---------- --------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt 539,150 986 6,040 3,059 -- 549,235 Principal payments on long-term debt (97,186) (11,699) (156,010) (183,212) -- (448,107) Disbursements/receipts on intercompany debt (385,991) 29,805 201,256 154,930 -- -- Proceeds from exercise of stock options -- 234 -- -- -- 234 Preferred stock dividends paid -- (289) -- -- -- (289) Purchase of treasury stock -- (1,992) -- -- -- (1,992) Deferred financing costs paid (18,340) (23) (617) -- -- (18,980) --------- --------- --------- ---------- --------- --------- Net cash provided by financing activities 37,633 17,022 50,669 (25,223) -- 80,101 --------- --------- --------- ---------- --------- --------- Net (decrease) increase in cash -- (85) 1,480 1,123 -- 2,517 Effect of exchange rates on cash -- -- -- (1,025) -- (1,025) Cash, beginning of period -- 92 1,464 10,042 -- 11,598 --------- --------- --------- ---------- --------- --------- Cash, end of period $ -- $ 7 $ 2,943 $ 10,140 $ -- $ 13,090 ========= ========= ========= ========== ========= ========= F-31
10-K40574th Page of 78TOC1stPreviousNextBottomJust 74th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 20. GUARANTOR FINANCIAL STATEMENT INFORMATION, CONTINUED RAILAMERICA, INC. Consolidating Balance Sheet At December 31, 1999 [Enlarge/Download Table] Non Company Guarantor Guarantor (Parent) Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ ASSETS Current Assets: Cash $ 3,588 $ 274 $ 7,736 $ -- $ 11,598 Accounts and notes receivable 2,480 7,682 32,401 (1,705) 40,857 Other current assets 441 971 12,017 -- 13,429 Net assets of discontinued operation -- -- 14,996 -- 14,996 --------- --------- --------- --------- --------- Total current assets 6,509 8,926 67,150 (1,705) 80,880 Property, plant and equipment, net 733 88,922 257,963 -- 347,617 Other assets 4,866 1,671 8,895 -- 15,432 Investment in and advances to affiliates 92,953 (15,833) (3,925) (73,196) -- --------- --------- --------- --------- --------- Total assets $ 105,061 $ 83,686 $ 330,083 $ (74,901) $ 443,929 ========= ========= ========= ========= ========= LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY Current Liabilities: Current maturities of long-term debt $ 5 $ 8,805 $ 9,001 $ -- $ 17,811 Accounts payable 777 3,936 19,024 (6) 23,732 Accrued expenses 842 2,662 11,875 -- 15,379 --------- --------- --------- --------- --------- Total current liabilities 1,624 15,403 39,901 (6) 56,922 --------- --------- --------- --------- --------- Long-term debt, less current maturities 10,708 42,019 93,989 (1,699) 145,016 Subordinated debt 20,481 -- 101,968 -- 122,449 Deferred income taxes (2,411) 18,649 (856) -- 15,382 Minority interest and other liabilities -- 441 20,007 5,415 25,863 Redeemable convertible preferred stock 8,830 -- -- -- 8,830 Stockholders' equity: Common stock 12 119 28,259 (28,378) 13 Additional paid-in capital 47,645 3,514 20,557 (23,918) 47,797 Retained earnings 18,171 3,542 22,773 (26,315) 18,171 Accumulated other comprehensive income -- -- 3,486 -- 3,486 --------- --------- --------- --------- --------- Total stockholders' equity 65,828 7,174 75,075 (78,611) 69,467 --------- --------- --------- --------- --------- Total liabilities, redeemable preferred stock and stockholders' equity $ 105,061 $ 83,686 $ 330,083 $ (74,901) $ 443,929 ========= ========= ========= ========= ========= F-32
10-K40575th Page of 78TOC1stPreviousNextBottomJust 75th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 20. GUARANTOR FINANCIAL STATEMENT INFORMATION, CONTINUED RAILAMERICA, INC. Consolidating Statement of Income For the Year Ended December 31, 1999 [Enlarge/Download Table] Non Company Guarantor Guarantor (Parent) Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ Operating revenue $ -- $ 27,166 $ 102,652 $ -- $ 129,818 --------- --------- --------- --------- --------- Operating expenses: Transportation -- 13,490 65,949 -- 79,439 Selling, general and administrative 4,825 4,374 10,351 -- 19,550 Net gain on sale of assets -- -- (3,629) -- (3,629) Depreciation and amortization 108 2,320 6,751 -- 9,179 --------- --------- --------- --------- --------- Total operating expenses 4,933 20,184 79,422 -- 104,539 --------- --------- --------- --------- --------- Operating income (4,933) 6,982 23,231 -- 25,279 Interest expense (1,584) (3,221) (15,685) -- (20,490) Interest in earnings of subsidiaries 13,934 -- -- (13,934) -- Minority interest and other income (expense) 45 (267) 671 -- 449 --------- --------- --------- --------- --------- Income from continuing operations before income taxes 7,462 3,494 8,217 (13,934) 5,238 Provision for income taxes (2,459) 1,328 345 -- (787) --------- --------- --------- --------- --------- Income from continuing operations 9,921 2,166 7,872 (13,934) 6,025 Discontinued operations: Income from operations of discontinued segments -- -- 3,896 -- 3,896 --------- --------- --------- --------- --------- Net income $ 9,921 $ 2,166 $ 11,768 $ (13,934) $ 9,921 ========= ========= ========= ========= ========= F-33
10-K40576th Page of 78TOC1stPreviousNextBottomJust 76th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 20. GUARANTOR FINANCIAL STATEMENT INFORMATION RAILAMERICA, INC. Consolidating Statement of Cash Flows For the Year Ended December 31, 1999 [Enlarge/Download Table] Non Company Guarantor Guarantor (Parent) Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ Cash flows from operating activities: Net income (loss) $ (4,013) $ 2,166 $ 11,768 $ -- $ 9,921 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 855 2,494 10,785 -- 14,134 Minority interest in income of subsidiary -- -- 1,551 -- 1,551 Equity interest in earnings of affiliate -- -- (230) -- (230) Gain on insurance settlement -- -- (4,069) -- (4,069) Loss (gain) on sale or disposal of properties 56 407 (345) -- 118 Deferred income taxes 1,918 (9,181) 10,665 -- 3,402 Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable 802 5,533 (8,581) -- (2,246) Other current assets 175 1,003 (5,280) -- (4,102) Accounts payable (359) (3,965) 7,568 -- 3,244 Accrued expenses (203) (1,963) 5,492 -- 3,326 Other liabilities -- -- (2,294) -- (2,294) Deposits and other (245) 4 (1,014) -- (1,255) --------- --------- --------- ---------- --------- Net cash provided by operating activities (1,014) (3,502) 26,016 -- 21,500 --------- --------- --------- ---------- --------- Cash flows from investing activities: Purchase of property, plant and equipment (457) (13,458) (37,476) -- (51,391) Proceeds from sale of properties -- 166 998 -- 1,163 Acquisitions, net of cash acquired -- (257) (8,196) -- (8,453) Cash held in discontinued operations -- -- (656) -- (656) Deferred acquisition costs and other 639 -- -- -- 639 --------- --------- --------- ---------- --------- Net cash used in investing activities 182 (13,549) (45,330) -- (58,698) --------- --------- --------- ---------- --------- Cash flows from financing activities: Proceeds from issuance of long-term debt 146,405 8,630 -- -- 182,085 Principal payments on long-term debt (126,473) (18,445) (5,265) -- (150,183) Disbursements/receipts on intercompany debt (35,636) 32,287 30,399 -- -- Sale of convertible preferred stock 4,095 -- -- -- 4,095 Sale of common stock 11,868 -- -- -- 11,868 Proceeds from exercise of stock options 581 -- -- -- 581 Preferred stock dividends paid (843) -- -- -- (843) Purchase of treasury stock (1,224) -- -- -- (1,224) Deferred loan costs paid (2,603) (152) -- -- (2,755) --------- --------- --------- ---------- --------- Net cash provided by financing activities (3,830) 22,320 25,134 -- 43,624 --------- --------- --------- ---------- --------- Effect of exchange rates on cash -- -- 87 -- 87 --------- --------- --------- ---------- --------- Net increase (decrease) in cash (4,662) 5,269 5,907 -- 6,513 Cash, beginning of period 4,754 230 101 -- 5,085 --------- --------- --------- ---------- --------- Cash, end of period $ 92 $ 5,499 $ 6,008 $ -- $ 11,598 ========= ========= ========= ========== ========= F-34
10-K40577th Page of 78TOC1stPreviousNextBottomJust 77th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 23. GUARANTOR FINANCIAL STATEMENT INFORMATION RAILAMERICA, INC. Consolidating Statement of Income For the Year Ended December 31, 1998 [Enlarge/Download Table] Non Company Guarantor Guarantor (Parent) Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ Operating revenue $ -- $ 18,795 $ 20,341 $ -- $ 39,136 -------- -------- -------- -------- -------- Operating expenses: Transportation -- 8,676 13,420 -- 22,096 Selling, general and administrative 3,978 3,373 1,724 -- 9,075 Net gain on sale of assets -- (360) -- -- (360) Depreciation and amortization 104 1,734 706 -- 2,544 -------- -------- -------- -------- -------- Total operating expenses 4,082 13,423 15,850 -- 33,355 -------- -------- -------- -------- -------- Operating income (4,082) 5,372 4,491 -- 5,781 Interest expense, net (344) (3,721) (879) -- (4,944) Interest in earnings of subsidiaries 7,241 -- -- (7,241) -- Minority interest in income of subsidiary (155) 147 (1,716) -- (1,724) -------- -------- -------- -------- -------- Income from continuing operations before income taxes 2,660 1,798 1,896 (7,241) (887) Provision for income taxes (1,741) 551 190 -- (1,000) -------- -------- -------- -------- -------- Income from continuing operations 4,401 1,247 1,706 (7,241) 113 Discontinued operations Loss from operations of discontinued Motor Carrier segment -- -- 4,288 -- 4,288 -------- -------- -------- -------- -------- Net Income $ 4,401 $ 1,247 $ 5,994 $ (7,241) $ 4,401 ======== ======== ======== ======== ======== F-35
10-K405Last Page of 78TOC1stPreviousNextBottomJust 78th
RAILAMERICA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands) 23. GUARANTOR FINANCIAL STATEMENT INFORMATION RAILAMERICA, INC. Consolidating Statement of Cash Flows For the Year Ended December 31, 1998 [Enlarge/Download Table] Non Company Guarantor Guarantor (Parent) Subsidiaries Subsidiaries Eliminations Consolidated -------- ------------ ------------ ------------ ------------ Cash flows from operating activities: Net income (loss) $ (2,840) $ 1,246 $ 5,995 $ -- $ 4,401 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 388 1,904 1,865 -- 4,157 Minority interest in income of subsidiary -- -- 1,672 -- 1,672 Sale of properties -- (367) 7 -- (360) Deferred income taxes (2,102) 2,763 252 -- 913 Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable (254) 1,576 (2,208) -- (886) Other current assets (65) (110) (7,905) -- (8,080) Accounts payable 75 (1,033) 3,369 -- 2,411 Accrued expenses 340 303 77 -- 720 Deposits and other 82 59 371 -- 512 -------- -------- -------- -------- -------- Net cash provided by operating activities (4,376) 6,341 3,495 -- 5,460 -------- -------- -------- -------- -------- Cash flows from investing activities: Purchase of property, plant and equipment (132) (11,615) (16,382) -- (28,129) Proceeds from sale of properties -- 2,051 38 -- 2,089 Acquisitions, net of cash acquired -- -- (1,757) -- (1,757) Deposit on purchase agreement (1,962) -- -- -- (1,962) Cash held in discontinued operations -- -- (674) -- (674) Deferred acquisition costs and other (606) (7) -- -- (613) -------- -------- -------- -------- -------- Net cash used in investing activities (2,700) (9,571) (18,775) -- (31,046) -------- -------- -------- -------- -------- Cash flows from financing activities: Proceeds from issuance of long-term debt 32,021 8,571 15,415 -- 56,007 Principal payments on debt and capital leases (25,241) (2,961) (7,522) -- (35,724) Disbursements/receipts on intercompany debt (5,162) (2,226) 7,388 -- -- Sale convertible preferred stock 7,515 -- -- -- 7,515 Sale of common stock 1,032 -- -- -- 1,032 Proceeds from exercise of stock options 871 -- -- -- 871 Purchase of treasury stock (1,838) -- -- -- (1,838) Deferred loan costs paid (836) (100) (1) -- (937) -------- -------- -------- -------- -------- Net cash provided by financing activities 8,362 3,284 15,280 -- 26,926 -------- -------- -------- -------- -------- Net increase in cash 1,286 54 -- -- 1,340 Cash, beginning of period 3,469 175 101 -- 3,745 -------- -------- -------- -------- -------- Cash, end of period $ 4,755 $ 229 $ 101 $ -- $ 5,085 ======== ======== ======== ======== ======== F-36

Dates Referenced Herein   and   Documents Incorporated By Reference

Referenced-On Page
This 10-K405 Filing   Date First   Last      Other Filings
3/31/923
11/11/9437
9/30/9538
11/12/9538
12/31/9539
9/20/9637
9/30/963810-C, 10QSB, 8-K
10/11/96398-K, 8-K/A
10/17/963810-C, 8-K
10/25/96398-K
12/31/962410KSB, 10KSB/A
2/1/9724
3/31/973910-Q, 10-Q/A, 10KSB, NT 10-Q
12/31/972410-K
1/6/983639
3/31/983910-K, 10-Q
5/14/983910-Q
11/4/9837
12/17/9837
12/31/98247810-K
1/1/9927
2/22/9937
3/30/9939
3/31/99394010-K, 10-Q, 10-Q/A
4/30/999548-K, 8-K/A, DEF 14A
5/1/99967
5/17/993910-Q, 8-K
7/26/99548-K, 8-K/A
8/1/992467
8/3/9936
9/1/9924
9/3/9939548-K, 8-K/A
9/20/99398-K, S-3
9/30/993910-Q
10/14/9936398-K
10/19/99398-K
10/29/9937
11/8/9938398-K
11/10/9937
11/12/99398-K, 8-K/A
12/31/9977610-K, 10-K/A
1/1/00438
1/13/0036398-K
1/26/00398-A12G/A, 8-K
2/1/0024
2/4/0025533, 8-K, S-3/A
3/3/0061
3/30/004010-K
4/13/0036408-K
5/4/0058
6/30/003410-Q
8/9/0036
8/14/00363710-Q, 3
For The Period Ended12/31/00773
1/1/013452
1/31/01603
2/1/0113
3/15/0144
3/23/01133
Filed On / Filed As Of4/2/014142
4/30/01353, 4, DEF 14A
7/1/0113
7/31/01604
12/31/01323410-K405, 4
5/31/0421
7/31/0460
8/5/0460
12/31/05215710-K
12/31/063157
 
TopList All Filings

Top
Filing Submission 0000950144-01-004642   –   Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Copyright © 2014 Fran Finnegan & Company.  All Rights Reserved.
AboutPrivacyRedactionsHelp — Sat, 29 Nov 07:20:26.1 GMT