Genesee & Wyoming Inc.

Transcription

1 Genesee & Wyoming Inc. T. J. Gallagher, Chief Financial Officer Genesee & Wyoming Inc. 1

2 Forward Looking Statements This presentation contains forward-looking statements regarding future events and the future performance of Genesee & Wyoming Inc. that involve risks and uncertainties that could cause actual results to differ materially from those expressed or forecasted, including, but not limited to, risks related to the operation of our railroads, severe weather conditions and other natural occurrences, economic, political and market conditions (including employee strikes or work stoppages), the credit risk of customers and counterparties, customer demand, railroad network congestion, derailments, currency fluctuations, changes in commodity prices, increased competition in the relevant market, and others, many of which are beyond our control. The Company refers you to the documents that it files from time to time with the Securities and Exchange Commission, such as the Company s Forms 10-Q and 10-K, which contain additional important factors that could cause its actual results to differ from its current expectations and from the forward-looking statements discussed during this presentation. Forward looking statements speak only as of the date of this presentation or the date they were made. Genesee & Wyoming Inc. does not undertake, and expressly disclaims, any duty to update any forwardlooking statement contained in this presentation whether as a result of new information, future events or otherwise, except as required by law. Genesee & Wyoming Inc. 2

3 Agenda G&W History Overview of Unique Global Rail Platform Operations Free Cash Flow Genesee & Wyoming Inc. 3

4 Historical Context of the G&W Journey Founding Original RR Post Staggers Act to Initial Public Offering G&W expansion is 100% domestic IPO on June 24, 1996, with a market capitalization of $82MM 1997: First Investment in Canada RailAmerica Acquisition Creation of Commercial & Operations Support Freightliner Acquisition in U.K % JV with Macquarie in Australia Birth of a Holding Company Mortimer B. Fuller III purchases a controlling interest in GWRR Deregulation of U.S. Railroads The Staggers Act 1997: First Investment in Australia Today Unique Global Rail Platform Genesee & Wyoming Inc. 4

5 Overview NYSE: Listed as GWR with ~$4.3B market capitalization Railroads: 122 railroads with ~16,000 track miles People: 8,000 Customers: 3,000 Equipment: 1,350 locomotives Carloads: ~3.4 million annually Genesee & Wyoming Inc. 5

6 Platform Built on Recognizing, Executing and Integrating Acquisitions Rail Ferry Container Terminal Operator & Drayage Total Acquisition Spend ($MM) $103MM $420MM $842MM $2,042MM $2,077MM Genesee & Wyoming Inc. 6

7 Unique Global Rail Platform Stability With High Barriers To Entry Execution Growth Platform 1 Strong and Stable Free Cash Flow Generation 4 Best Practices Driving Operational Excellence 6 Organic Growth, Investments and M&A 2 Diversified Across Geographies, Customers and Commodities 5 Reputation is a Key Driver of Success 3 Irreplaceable Collection of Rail and Transportation Infrastructure Assets and Real Estate Genesee & Wyoming Inc. 7

8 1 Strong and Stable Free Cash Flow Generation G&W s ability to adjust costs and capital investment to match operating conditions allows the company to consistently generate and grow free cash flow $227 $296 $226 $266 $270 $68 $75 $103 $106 $ Adjusted Free Cash Flow Attributable to G&W Excl. New Bus. 1. Adjusted Free Cash Flow Attributable to G&W and Adjusted Free Cash Flow Attributable to G&W excluding New Business Investments are non-gaap financial measures. Reconciliations of non-gaap financial measures accompany this presentation Adjusted Free cash flow attributable to G&W excluding new business investments includes 51% of Genesee pro forma GWA & Wyoming JV Inc. 8 (1)

9 2 Diversified Across Geographies Customers Commodities % of G&W Total 2017 Revenue % of G&W Total 2017 Revenue % of G&W Total 2017 Freight Revenue $1.6bn Total Freight Revenue Genesee & Wyoming Inc. 9

10 3 Irreplaceable Collection of Rail Infrastructure, Terminals and Real Estate Largest Short Line Operator in North America, operating in 41 U.S. States and 4 Canadian Provinces Largest Rail Operator in U.K. Strong Position as Intermodal with key Real Estate #3 rail operator in Australia, at Ports and Inland Terminals; Offer with long-term track Trains, Trucks & Storage Services concession & contracts Genesee & Wyoming Inc. 10

11 4 Best Practices Drive Operational Excellence Industry-leading safety Cross regional benchmarking Industry-Leading Safety Performance Injury Frequency Rate per 200,000 Hours reflects acquisition of RailAmerica in 2012 and Freightliner Group in 2015 and managing to G&W safety standards Senior corporate railroad experts Fit-for-purpose cost & capital philosophy Short Lines Class I (2) 1. G&W results excluding March 2015 Freightliner acquisition 2. G&W results include April 2015 acquisition of Freightliner Group Genesee & Wyoming Inc. 11

12 6 Reputation is a Key Driver of Success Outstanding Reputation Among Stakeholders Customers Employees Government and Regulators Potential Sellers Class I Railroads G&W s core purpose is to be the safest and most respected rail service provider in the world Committed to Core Values of Focus, Integrity, Respect and Excellence Unmatched safety record which reflects corporate culture G&W seeks to be transparent, rational and reliable Regional organization creates close proximity with customers and stakeholders Long-term ownership perspective Genesee & Wyoming Inc. 12

13 6 Growth Platform Organic Growth, Investments and M&A Organic Growth with New and Existing Customers Low Risk, High IRR New Business Investments Available Across Geographies in Numerous Projects (Track, Equipment, Property) Acquisitions of Railroads Within Existing Footprint Global Expansion Opportunities in Rail and Related Transport Assets Genesee & Wyoming Inc. 13

14 G&W Segment 1: North American Operations Rail Ferry Service Genesee & Wyoming Inc. 14

15 G&W Segment 2: Australia Operations Genesee & Wyoming Inc. 15

16 G&W Segment 3: UK/Europe Operations Genesee & Wyoming Inc. 16

17 Superior Free Cash Flow Generation Superior Adjusted Free Cash Flow Conversion of 130% + Two Drivers of Strong FCF Conversion Annual Core Capex is Less than D&A Favorable Tax Attributes (Cash Taxes less than Book Taxes) Sustaining Capital: $200 million - $210 million North America: ~$160 million - $165 million Australia: ~$20 million UK/Europe: ~$20 million - $25 million D&A ~$275 million Depreciation ~$225 million Amortization ~$50 million Genesee & Wyoming Inc. 17

18 Free Cash Flow Conversion Comparison (Free Cash Flow Before Dividends)/Net Income E CNI 75% 74% CP 53% 60% CSX 72% 107% NSC 90% 89% UNP 90% 96% KSU 82% 94% Class I Average 80% 89% Source: Wolfe Research G&W (1) 131% 130% (1) Reflects Adjusted Free Cash Flow Attributable to G&W/Adjusted Net Income 1. Adjusted Free Cash Flow Attributable to G&W and Adjusted Free Cash Flow Attributable to G&W excluding New Business Investments are non-gaap financial measures. Reconciliations of non-gaap financial measures accompany this presentation. Genesee & Wyoming Inc. 18

19 Core Purpose

20 Reconciliation of Non-GAAP Financial Measures Genesee & Wyoming Inc. 1

21 Non-GAAP Financial Measures This presentation contains references to Adjusted Free Cash Flow Attributable to G&W, Adjusted Free Cash Flow Attributable to G&W Excluding New Business Investments, Adjusted Net Income Attributable to G&W and Adjusted Free Cash Flow Conversion, which are non-gaap financial measures as this term is defined in Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of In accordance with these rules, G&W has reconciled these non-gaap financial measures to their most directly comparable U.S. GAAP measures. Management views these non-gaap financial measures as important measures of G&W s operating performance or, in the case of the Adjusted Free Cash Flow measures, important financial measure of how well G&W is managing its assets and a useful indicator of cash flow that may be available for discretionary use by G&W. Management also views these non-gaap financial measures as a way to assess comparability between periods. Key limitations of the Adjusted Free Cash Flow measures include the assumptions that G&W will be able to refinance its existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt. These non-gaap financial measures are not intended to represent, and should not be considered more meaningful than, or as an alternative to, their most directly comparable GAAP measures. These non-gaap financial measures may be different from similarly-titled non-gaap financial measures used by other companies. The following tables set forth reconciliations of each of these non-gaap financial measures to their most directly comparable GAAP measure (in millions). Genesee & Wyoming Inc. 2

22 Adjusted Free Cash Flow Attributable to G&W Net cash provided by operating activities $ 129 $ 127 $ 172 $ 174 $ 171 Net cash used in investing activities (414) (54) (389) (235) (2,102) Net cash paid for acquisitions/divestitures ,925 Adjusted free cash flow $ 68 $ 75 $ 103 $ 28 $ (6) New business investments Adjusted free cash flow before new business investments $ 68 $ 75 $ 103 $ 106 $ Net cash provided by operating activities $ 414 $ 492 $ 475 $ 407 $ 479 Net cash used in investing activities (209) (510) (1,074) (1,135) (307) Net cash paid for acquisitions/divestitures Adjusted free cash flow $ 205 $ 203 $ 160 $ 241 $ 278 New business investments Adjusted free cash flow before new business investments $ 239 $ 296 $ 226 $ 266 $ 298 Allocation of adjusted cash flow to noncontrolling interest (a) - (28) Adjusted free cash flow attributable to G&W before new business investements $ 266 $ 270 (a) See Note (a) on Slide 5. Genesee & Wyoming Inc. 3

23 Adjusted Net Income Attributable to G&W Twelve Months Ended December 31, 2017 Income Before Income Taxes (Pre-Tax Income) Benefit from/ (Provision for) Income Taxes Net Income Attributable to G&W As reported $ $ $ Adjusted for: Buyout of Freightliner deferred consideration agreements (8.9) - (8.9) Australia impairment and related costs 4.9 (1.5) 1.8 Corporate development and related costs 11.9 (4.3) 8.1 Restructuring costs 10.2 (1.0) 9.0 Gain on sale of investment (1.6) 0.7 (1.0) U.K. coal restructuring and related charges (1.1) 0.2 (0.9) Recongnition of unrecognized tax benefits (3.3) (3.3) Impact of United States Tax Cuts & Jobs Act - (371.9) (371.9) As adjusted $ $ (119.9) $ Genesee & Wyoming Inc. 4

24 Adjusted Free Cash Flow Conversion Twelve Months Ended December 31, 2017 Net cash provided by operating activities $ 479 Allocation of adjusted cash flow to noncontrolling interest (a) (28) Adjusted net cash provided by operating activities attributable to G&W 452 Net cash used in investing activities (307) Net cash paid for acquisitions/divestitures 105 Adjusted free cash flow attributable to G&W $ 250 Adjusted net income attributable to G&W $ 182 Adjusted Free Cash Flow Conversion (b) 137% (a) Allocation of adjusted cash flow to noncontrolling interest (MIRA's 48.9% equity ownership of GWA since December 1, 2016) is calculated as 48.9% of cash flow provided by operating activities of G&W s Australian Operations, less net purchases of property and equipment of G&W s Australian Operations. The timing and amount of actual distributions, if any, from GWA to G&W and MIRA made in any given period will vary and could differ materially from the amounts presented. There were no such distributions made for both the twelve months ended December 31, 2017 and G&W expressly disclaims any direct correlation between the allocation of adjusted cash flow to noncontrolling interest and actual distributions made in any given period. (b) Adjusted free cash flow conversion is calculated as adjusted free cash flow attributable to G&W divided by adjusted net income attributable to G&W. Genesee & Wyoming Inc. 5

25 Adjusted Free Cash Flow Attributable to G&W and Adjusted Free Cash Flow Conversion Twelve Months Ended December 31, 2018 Guidance Net cash provided by operating activities $ 590 Allocation of adjusted cash flow to noncontrolling interest (a) (20) Adjusted net cash provided by operating activities attributable to G&W 570 Purchase of property and equipment, net Adjusted free cash flow attributable to G&W before new business investments and grant funded (200) projects 370 Net cash paid for new business investments Net cash received for grant funded projects Adjusted free cash flow attributable to G&W $ (40) (15) 315 Net income attributable to G&W $ 240 Adjusted free cash flow conversion (b) 131% (a) Allocation of adjusted cash flow to noncontrolling interest (MIRA's 48.9% equity ownership of GWA since December 1, 2016) is calculated as 48.9% of cash flow provided by operating activities of G&W s Australian Operations, less net purchases of property and equipment of G&W s Australian Operations. The timing and amount of actual distributions, if any, from GWA to G&W and MIRA made in any given period will vary and could differ materially from the amounts presented. There were no such distributions made for both the twelve months ended December 31, 2017 and G&W expressly disclaims any direct correlation between the allocation of adjusted cash flow to noncontrolling interest and actual distributions made in any given period. (b) Adjusted free cash flow conversion is calculated as adjusted free cash flow attributable to G&W divided by net income attributable to G&W. Genesee & Wyoming Inc. 6

26 Genesee & Wyoming Inc. 7