RailAmerica, Inc. Reports Results for the Third Quarter of 2009

JACKSONVILLE, Fla., Nov. 11 /PRNewswire-FirstCall/ --

Third Quarter Highlights -- Operating income of $25.6 million and an operating ratio of 76.7% -- Adjusted EBITDA(1) of $37.6 million and net cash provided by operating activities of $48.5 million -- Completed initial public offering in October

RailAmerica, Inc. today reported third quarter 2009 earnings from continuing operations of $3.5 million or $0.08 per diluted share, compared to $2.0 million or $0.05 per diluted share, for the third quarter of 2008. Net income, which includes discontinued operations, for the third quarter of 2009 was $3.5 million, compared to $2.9 million for the third quarter of 2008. Net income for the third quarter of 2009 includes a tax benefit of $5.4 million.

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John Giles, RailAmerica's President and Chief Executive Officer, said, "In the third quarter, we posted solid financial results generating Adjusted EBITDA of $37.6 million, down 4% compared to the record third quarter of 2008 and up 7% compared to the second quarter of 2009. Also, for the third quarter our operating ratio improved to 76.7% compared to 81.5% in the third quarter of 2008 as we continued to strengthen operating efficiencies. With the completion of the initial public offering in October, we have a strong balance sheet with approximately $130 million of cash(2) and are well positioned to make strategic investments that will complement the opportunities we have to grow organically through freight and non-freight revenue growth and further productivity gains."

Third quarter 2009 revenue decreased $23.3 million, or 17%, to $110.1 million from $133.4 million in the third quarter of 2008. Freight revenue declined $27.9 million, or 24%, primarily due a 23% decline in carloads. Non-freight revenue increased $4.6 million, or 26%, to $22.1 million from $17.5 million in the third quarter of 2008.

Third quarter 2009 operating income increased 4% to $25.6 million from $24.7 million in the third quarter of 2008 as lower operating expenses more than offset lower revenue. Lower fuel expense, reduced maintenance expense as a result of a Track Maintenance Agreement executed in 2009, and productivity improvements drove the operating expense decrease. Third quarter 2008 results include a $1.7 million impairment charge, $0.4 million gain on sale and $2.9 million in expenses for headquarters relocation compared to third quarter 2009 results, which include $0.2 million gain on sale and $0.4 million in expenses for headquarters relocation.

Third quarter 2009 net cash provided by operating activities increased $10.5 million, or 28%, to $48.5 million from $38.0 million in the third quarter of 2008. Second quarter 2009 cash used by operating activities was $37.0 million, primarily due to a $55.8 million cash payment made for the termination of the interest rate swap in conjunction with the repayment of the bridge credit facility.

As previously announced, RailAmerica, Inc. will present its third quarter earnings on Thursday, November 12, 2009 at 8:30 a.m. Eastern Time via live teleconference and webcast. Those interested in participating via teleconference may dial [phone]. Callers outside the U.S. may dial [phone]. The conference ID number is 38929092. Participants should dial in no later than 10 minutes prior to the call. Presentation materials and access to the live webcast will be available in the Investors section of RailAmerica's website (http://www.railamerica.com/). Following the earnings call, a webcast replay will be archived on the Company's website. A telephone replay will be available through November 26, 2009 beginning approximately two hours after the call. The recording can be accessed by dialing [phone] or [phone]. The conference ID number is 38929092.

RailAmerica, Inc. is the largest owner and operator of short line and regional freight railroads in North America, measured in terms of total track-miles, operating a portfolio of 40 individual railroads with approximately 7,500 miles of track in 27 U.S. states and three Canadian provinces.

Cautionary Note Regarding Forward-Looking Statements

Certain items in this press release and other information we provide from time to time may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not necessarily limited to, statements relating to future events and financial performance. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "may," "will," "would," "could," "should," "seeks," "estimates" and variations on these words and similar expressions are intended to identify such forward-looking statements. These statements are based on management's current expectations and beliefs and are subject to a number of factors that could lead to actual results materially different from those described in the forward-looking statements. RailAmerica, Inc. can give no assurance that its expectations will be attained. Accordingly, you should not place undue reliance on any forward-looking statements contained in this press release. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from RailAmerica, Inc.'s expectations include, but are not limited to, prolonged capital markets disruption and volatility, general economic conditions and business conditions, our relationships with Class I railroads and other connecting carriers, our ability to obtain railcars and locomotives from other providers on which we are currently dependent, legislative and regulatory developments including rulings by the Surface Transportation Board or the Railroad Retirement Board, strikes or work stoppages by our employees, our transportation of hazardous materials by rail, rising fuel costs, acquisition risks, competitive pressures within the industry, risks related to the geographic markets in which we operate; and other risks detailed in RailAmerica, Inc.'s filings with the Securities and Exchange Commission, including our prospectus filed with the Commission on October 13, 2009. In addition, new risks and uncertainties emerge from time to time, and it is not possible for RailAmerica, Inc. to predict or assess the impact of every factor that may cause its actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this press release. RailAmerica, Inc. expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

(1) See schedule at the end of press release for a reconciliation of non-GAAP financial measures

(2) Pro forma to give effect to the initial public offering and repayment of 10% of senior notes

RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months For the Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2009 2008 2009 2008 ---- ---- ---- ---- (In thousands, except per share data) Operating revenue $110,137 $133,400 $316,620 $388,640 Operating expenses: Transportation 47,524 70,364 138,974 214,728 Selling, general and administrative 26,799 27,085 74,943 77,190 Net loss (gain) on sale of assets (159) (434) 855 (532) Impairment of assets -- 1,731 -- 1,731 Depreciation and amortization 10,365 9,959 30,931 29,558 ------- ------- ------- ------- Total operating expenses 84,529 108,705 245,703 322,675 ------- ------- ------- ------- Operating income 25,608 24,695 70,917 65,965 Interest expense, including amortization costs (including amortization of swap termination costs of $9,054, $0, $10,026 and $0, respectively) (27,507) (17,288) (62,770) (41,622) Other income (loss) 24 (2,170) (1,396) (3,510) ------- ------- ------- ------- Income (loss) from continuing operations before income taxes (1,875) 5,237 6,751 20,833 Provision for (benefit from) income taxes (5,378) 3,203 (3,028) 13,728 ------- ------- ------- ------- Income from continuing operations 3,503 2,034 9,779 7,105 Discontinued operations: Gain (loss) on disposal of discontinued business (net of income taxes (benefit) of $(11), $60, $311, and $213, respectively) (20) 842 12,931 545 ------- ------- ------- ------- Net income $3,483 $2,876 $22,710 $7,650 ======= ======= ======= ======= Dividends declared and paid per common share $- $- $0.46 $- Basic earnings (loss) per common share: Continuing operations $0.08 $0.05 $0.23 $0.16 Discontinued operations 0.00 0.02 0.30 0.02 ------- ------- ------- ------- Net Income $0.08 $0.07 $0.53 $0.18 Diluted earnings (loss) per common share: Continuing operations $0.08 $0.05 $0.23 $0.16 Discontinued operations 0.00 0.02 0.30 0.02 ------- ------- ------- ------- Net Income $0.08 $0.07 $0.53 $0.18 Weighted Average common shares outstanding: Basic 43,721 43,565 43,688 43,413 Diluted 43,721 43,565 43,688 43,413 RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) September 30, December 31, 2009 2008 ------------- ------------- (In thousands, except share data) ASSETS Current assets: Cash and cash equivalents $62,208 $26,951 Accounts and notes receivable, net of allowance of $4,301 and $3,338, respectively 75,473 76,384 Other current assets 17,713 18,480 Current deferred tax assets 5,854 5,854 ---------- ---------- Total current assets 161,248 127,669 Property, plant and equipment, net 956,554 953,604 Intangible assets 176,353 172,859 Goodwill 200,635 199,754 Other assets 22,105 16,561 ---------- ---------- Total assets $1,516,895 $1,470,447 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities of long-term debt $695 $899 Accounts payable 56,219 56,058 Accrued expenses 49,541 51,349 ---------- ---------- Total current liabilities 106,455 108,306 Long-term debt, less current maturities 3,208 628,681 Senior secured notes 710,550 - Deferred income taxes 157,993 144,748 Other liabilities 33,133 117,192 ---------- ---------- Total liabilities 1,011,339 998,927 ---------- ---------- Commitments and contingencies Stockholders' equity: Common stock, $0.01 par value, 46,800,000 shares authorized; 43,720,263 shares issued and outstanding at September 30, 2009; and 43,531,272 shares issued and outstanding at December 31, 2008 437 435 Additional paid in capital and other 470,510 470,578 Retained earnings 53,254 50,029 Accumulated other comprehensive loss (18,645) (49,522) ---------- ---------- Total stockholders' equity 505,556 471,520 ---------- ---------- Total liabilities and stockholders' equity $1,516,895 $1,470,447 ========== ========== RAILAMERICA, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Nine Months Ended September 30, ------------------- 2009 2008 ---- ---- (In thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $22,710 $7,650 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization, including amortization of debt issuance costs classified in interest expense 39,858 35,108 Amortization of swap termination costs 10,026 - Net (gain) loss on sale or disposal of properties (12,448) 868 Foreign exchange (gain) loss on debt (1,160) 2,762 Swap termination costs (55,750) - Write-off of deferred financing costs 2,593 - Equity compensation costs 3,146 2,418 Deferred income taxes (5,340) 13,515 Changes in operating assets and liabilities, net of acquisitions and dispositions: Accounts receivable 1,906 10,378 Other current assets 1,315 2,017 Accounts payable (544) (3,801) Accrued expenses (1,841) 4,904 Other assets and liabilities 657 898 ---------- ---------- Net cash provided by operating activities 5,128 76,717 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment (34,451) (47,546) Proceeds from sale of assets 20,071 14,427 Deferred acquisition/disposition costs and other (355) - ---------- ---------- Net cash used in investing activities (14,735) (33,119) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt 709,830 - Principal payments on long-term debt (625,677) (6,877) Dividends paid to common stockholders (19,485) - Sale of common stock - 635 Deferred financing costs paid (20,018) (16,657) ---------- ---------- Net cash provided by (used in) financing activities 44,650 (22,899) ---------- ---------- Effect of exchange rates on cash 214 (301) ---------- ---------- Net (decrease) increase in cash 35,257 20,398 Cash, beginning of period 26,951 15,387 ---------- ---------- Cash, end of period $62,208 $35,785 ========== ========== RAILAMERICA, INC. AND SUBSIDIARIES SELECTED FINANCIAL INFORMATION (amounts in thousands) (unaudited) Three Months Ended September 30, ------------------------------------ 2009 2008 ----------------- ----------------- Operating revenue $110,137 100.0% $133,400 100.0% Operating expenses: Labor and benefits 35,755 32.4% 37,114 27.8% Equipment rents 8,900 8.1% 10,423 7.8% Purchased services 7,534 6.8% 10,751 8.1% Diesel fuel 8,373 7.6% 18,692 14.0% Casualties and insurance 4,593 4.2% 5,262 3.9% Materials 2,977 2.7% 2,727 2.0% Joint facilities 2,497 2.3% 3,291 2.5% Other expenses 3,694 3.3% 9,189 6.9% Net gain on sale of assets (159) (0.1)% (434) (0.3)% Impairment of assets -- 0.0% 1,731 1.3% Depreciation and amortization 10,365 9.4% 9,959 7.5% ------- ------ ------- ------ Total operating expenses 84,529 76.7% 108,705 81.5% ------- ------ ------- ------ Operating income $25,608 23.3% $24,695 18.5% ======= ====== ======= ====== Nine Months Ended September 30, ------------------------------------- 2009 2008 ----------------- ----------------- Operating revenue $316,620 100.0% $388,640 100.0% Operating expenses: Labor and benefits 101,216 32.0% 110,720 28.5% Equipment rents 27,327 8.6% 34,011 8.7% Purchased services 23,417 7.4% 28,914 7.4% Diesel fuel 23,285 7.3% 58,274 15.0% Casualties and insurance 13,965 4.4% 15,099 3.9% Materials 8,138 2.6% 7,683 2.0% Joint facilities 4,822 1.5% 9,963 2.6% Other expenses 11,747 3.7% 27,254 7.0% Net loss (gain) on sale of assets 855 0.3% (532) (0.1)% Impairment of assets --- 0.0% 1,731 0.4% Depreciation and amortization 30,931 9.8% 29,558 7.6% ------- ------ ------- ------ Total operating expenses 245,703 77.6% 322,675 83.0% ------- ------ ------- ------ Operating income $70,917 22.4% $65,965 17.0% ======= ====== ======= ====== RAILAMERICA, INC. AND SUBSIDIARIES Railroad Freight Revenue, Carloads and Average Freight Revenue Per Carload Comparison by Commodity Group (unaudited) Three Months Ended Three Months Ended September 30, 2009 September 30, 2008 --------------------------- -------------------------- Average Average Freight Freight Revenue Revenue Freight per Freight per Revenue Carloads Carload Revenue Carloads Carload ------- -------- ------- ------- -------- ------- (Dollars in thousands, except carloads and average freight revenue per carload) Agricultural Products $15,370 31,405 $489 $17,378 37,081 $469 Chemicals 12,112 20,946 578 15,388 26,456 582 Coal 9,381 46,806 200 9,516 44,110 216 Non-Metallic Minerals and Products 8,562 20,081 426 10,020 24,339 412 Pulp, Paper and Allied Products 8,162 16,267 502 11,679 20,917 558 Forest Products 6,748 12,078 559 10,933 18,431 593 Food or Kindred Products 6,061 13,042 465 7,464 14,013 533 Metallic Ores and Metals 6,049 10,382 583 12,542 24,439 513 Waste and Scrap Materials 5,468 14,350 381 7,191 21,609 333 Petroleum 4,648 9,909 469 5,180 10,541 491 Other 3,957 8,958 442 7,373 24,648 299 Motor Vehicles 1,483 4,047 366 1,194 3,925 304 ------- ------- ------- -------- ------- ------- Total $88,001 208,271 $423 $115,858 270,509 $428 ======= ======= ======= ======== ======= ======= Nine Months Ended Nine Months Ended September 30, 2009 September 30, 2008 --------------------------- -------------------------- Average Average Freight Freight Revenue Revenue Freight per Freight per Revenue Carloads Carload Revenue Carloads Carload ------- -------- ------- ------- -------- ------- (Dollars in thousands, except carloads and average freight revenue per carload) Agricultural Products $39,916 88,484 $451 $46,337 109,069 $425 Chemicals 35,135 60,977 576 46,927 83,365 563 Coal 28,339 136,341 208 29,229 136,530 214 Non-Metallic Minerals and Products 24,620 58,870 418 29,987 74,151 404 Pulp, Paper and Allied Products 24,105 47,177 511 31,877 61,076 522 Forest Products 20,559 36,004 571 30,922 56,468 548 Food or Kindred Products 19,219 39,196 490 19,905 40,763 488 Metallic Ores and Metals 16,854 29,919 563 41,656 77,346 539 Other 15,527 43,179 360 22,188 75,672 293 Waste and Scrap Materials 14,791 39,762 372 22,245 63,281 352 Petroleum 14,388 31,260 460 15,305 33,372 459 Motor Vehicles 4,154 11,405 364 4,416 16,105 274 -------- ------- ------- -------- ------- ------- Total $257,607 622,574 $414 $340,994 827,198 $412 ======== ======= ======= ======== ======= ======= RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

Adjusted EBITDA, is a supplemental measure of liquidity that is not calculated or presented in accordance with U.S. generally accepted accounting principles ("GAAP"). We use non-GAAP financial measures as a supplement to our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business. However, Adjusted EBITDA has limitations as an analytical tool. It is not a measurement of our cash flows from operating activities under GAAP and should not be considered as an alternative to cash flow from operating activities as a measure of liquidity.

Adjusted EBITDA assists us in monitoring our ability to undertake key investing and financing functions such as making investments, transferring property, paying dividends, and incurring additional indebtedness, which are generally prohibited by the covenants under our senior secured notes unless we met certain financial ratios and tests. Adjusted EBITDA represents EBITDA before impairment of assets, equity compensation costs, gain (loss) on foreign currency exchange and non-recurring headquarter relocation costs. EBITDA, also a non-GAAP financial measure, is defined as net income (loss) before interest expense, provision for (benefit from) income taxes and depreciation and amortization.

The following tables set forth the reconciliation of Adjusted EBITDA from our cash flow from operating activities (in thousands):

Nine months ended Sept. 30, Q1 2009 Q2 2009 Q3 2009 2009 ------- ------- ------- ----------- Cash flows from operating activities to Adjusted EBITDA Reconciliation: Net cash provided by (used in) operating activities $(6,335) $(37,023) $48,486 $5,128 Changes in working capital accounts 25,308 2,430 (29,231) (1,493) Depreciation and amortization, including amortization of debt issuance costs classified in interest expense (15,432) (12,718) (11,708) (39,858) Amortization of swap termination costs -- (972) (9,054) (10,026) Net gain (loss) on sale or disposal of properties 728 11,530 190 12,448 Foreign exchange gain (loss) on debt (1,164) 2,324 -- 1,160 Swap termination costs -- 55,750 -- 55,750 Write-off of deferred financing costs -- (2,593) -- (2,593) Equity compensation costs (790) (1,152) (1,204) (3,146) Deferred income taxes (1,322) 658 6,004 5,340 ------- ------- ------- -------- Net income 993 18,234 3,483 22,710 ------- ------- ------- -------- Add: Discontinued operations (gain) loss (184) (12,767) 20 (12,931) ------- ------- ------- -------- Income from continuing operations 809 5,467 3,503 9,779 Add: Provision for (benefit from) income taxes 1,232 1,118 (5,378) (3,028) Interest expense, including amortization costs 18,590 16,673 27,507 62,770 Depreciation and amortization 10,319 10,247 10,365 30,931 ------- ------- ------- -------- EBITDA 30,950 33,505 35,997 100,452 Add: Equity compensation costs 790 1,152 1,204 3,146 Foreign exchange (gain) loss on debt 1,164 (2,324) -- (1,160) Write-off of deferred financing costs -- 2,593 -- 2,593 Non-recurring headquarter relocation costs 509 127 408 1,044 ------- ------- ------- -------- Adjusted EBITDA $33,413 $35,053 $37,609 $106,075 ======= ======= ======= ======== Nine months ended Sept. 30, Q1 2008 Q2 2008 Q3 2008 2008 ------- ------- ------- ----------- Cash flows from operating activities to Adjusted EBITDA Reconciliation: Net cash provided by operating activities $8,186 $30,568 $37,963 $76,717 Changes in working capital accounts 8,602 (7,134) (15,864) (14,396) Depreciation and amortization, including amortization of debt issuance costs classified in interest expense (10,506) (11,182) (13,420) (35,108) Net gain (loss) on sale or disposal of properties (209) (144) (515) (868) Foreign exchange gain (loss) on debt (1,735) 395 (1,422) (2,762) Equity compensation costs (1,043) (652) (723) (2,418) Deferred income taxes (5,113) (5,259) (3,143) (13,515) ------- ------- ------- -------- Net income (1,818) 6,592 2,876 7,650 ------- ------- ------- -------- Add: Discontinued operations gain 149 148 (842) (545) ------- ------- ------- -------- Income from continuing operations (1,669) 6,740 2,034 7,105 Add: Provision for (benefit from) income taxes 5,189 5,336 3,203 13,728 Interest expense, including amortization costs 12,143 12,191 17,288 41,622 Depreciation and amortization 9,786 9,813 9,959 29,558 ------- ------- ------- -------- EBITDA 25,449 34,080 32,484 92,013 Add: Impairment of assets -- -- 1,731 1,731 Equity compensation costs 1,043 652 723 2,418 Foreign exchange (gain) loss on debt 1,735 (395) 1,422 2,762 Non-recurring headquarter relocation costs 222 1,152 2,864 4,238 ------- ------- ------- -------- Adjusted EBITDA $28,449 $35,489 $39,224 $103,162

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RailAmerica, Inc.

CONTACT: INVESTORS: Ira Berger, [phone], or MEDIA: Karen
Burdette, [phone], or cell: [phone]

Web Site: http://www.railamerica.com/