In offering to sell $300 million in stock and become a public company again for the first time in over two years, short line holding company RailAmerica said it is making money despite a sharp drop in freight traffic.
The company bills itself as the largest North American short line operator based on its 8,000 track miles. It owns 40 railroads across the continent, running in 27 states and three provinces of Canada.
RailAmerica is a unit of Fortress Investment Group, which bought it in 2007 for about $1.1 billion. That was part of a Fortress buying spree in freight transportation that later saw it pick up Florida East Coast Railway and the Interpool equipment leasing firm.
It is not yet clear how many shares RailAmerica will sell in this initial public offering, or what percentage of the company that will represent. It plans to use the proceeds for working capital plus general corporate needs including debt payments or refinancing.
As of March 31, it had $629 million in long-term debt and $25 million in cash on hand. In June, the company completed a private offering of $740 million in eight-year senior secured notes at 9.25 percent interest.
But in a late-July filing with the Securities and Exchange Commission, the company gave its first detailed description of its business in years. RailAmerica said it generated operating revenue in 2008 of $508.5 million and net income of $16.5 million, up from $479.9 million in revenue a year earlier but down from $28.2 million in 2007 profit.
For first-quarter 2009, RailAmerica earned $993,000 on operating revenue of $103.2 million. That was a bottom-line improvement from a $1.8 million operating loss in the first three months of 2008, when it took in $125 million. It also held $95 million in federal short line track improvement tax credits.
“In 2008, our railroads transported over one million carloads of freight for approximately 1,800 customers, hauling a wide range of products such as farm and food products, lumber and forest products, paper and paper products, metals, chemicals and coal,” the company said.
None of its commodities makes up more than 14 percent of total business, which the rail firm touted as helping blunt the impact from falling volume for any single cargo type.
It also said that freight revenue from its 10 largest customers made up nearly 20 percent of all sales last year, so “substantial reduction in business with or loss of important customers could have a material adverse effect on our business and financial results.” Its largest customer, a steel producer, generated nearly 5 percent of its business and $21 million in 2008 freight revenue.
Most of its railroad business, RailAmerica said, is hauling loads from a shipper’s plant or loading docks to a connection with a Class I railroad for long-distance hauls. “Frequently our railroads are the only rail lines directly serving our customers,” it said.
The SEC filing http://www.sec.gov/Archives/edgar/data/887637/000095012309025918/y01981sv1.htm
has a breakdown of traffic and revenue by cargo type, and explanations behind some of the major volume changes this year. That filing also breaks down traffic by its individual railroads.
That shows its companies nudging average revenue per railcar load up to $399 in this year’s first quarter from $396 a year before, while freight revenue fell 22 percent to $86 million and total carloads also fell 22 percent to 214,325 shipments.
Contact John D. Boyd at email@example.com.