AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 7, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
GENESEE & WYOMING INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
4011 06-0984624
DELAWARE
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
71 LEWIS STREET
GREENWICH, CT 06830
(203) 629-3722
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(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MORTIMER B. FULLER, III
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
GENESEE & WYOMING INC.
71 LEWIS STREET
GREENWICH, CT 06830
(203) 629-3722
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
SUSAN MASCETTE BRANDT, ESQ. JOEL S. KLAPERMAN, ESQ.
HARTER, SECREST & EMERY SHEARMAN & STERLING
700 MIDTOWN TOWER 599 LEXINGTON AVENUE
ROCHESTER, NY 14604 NEW YORK, NY 10022
----------------
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a) MAY DETERMINE.
GENESEE & WYOMING INC.
CROSS-REFERENCE SHEET
PURSUANT TO RULE 404(a) AND ITEM 501(b) OF REGULATION S-K
ITEM NO. FORM S-1 CAPTION PROSPECTUS CAPTION
-------- ---------------- ------------------
1 Forepart of the
Registration Statement
and Outside Front Cover
Page of Prospectus..... Outside Front Cover Page
2 Inside Front and Outside
Back Cover Pages of Inside Front Cover Page; Outside Back Cover
Prospectus............. Page
3 Summary Information,
Risk Factors and Ratio Outside Front Cover Page; Prospectus
of Earnings to Fixed Summary; Selected Consolidated Financial
Charges................ and Operating Data; Risk Factors
4 Use of Proceeds......... Use of Proceeds
5 Determination of
Offering Price......... Outside Front Cover Page; Underwriting
6 Dilution................ Dilution
7 Selling Security
Holders................ Not Applicable
8 Plan of Distribution.... Outside Front Cover Page; Underwriting
9 Description of
Securities to be Outside Front Cover Page; Description of
Registered............. Capital Stock
10 Interests of Named
Experts and Counsel.... Legal Matters; Experts
11 Information With Respect
to the Registrant
(a)Description of
Business .......... Business; Recent Developments
(b)Description of
Property .......... Property
(c)Legal Proceedings ... Business
(d)Market Price of and
Dividends on the
Registrant's Common Outside Front Cover Page; Dividend Policy;
Equity and Related Principal Stockholders; Shares Eligible
Stockholder Matters for Future Sale
...................
(e)Financial Statements Financial Statements; Pro Forma Financial
................... Information
(f)Selected Financial Selected Consolidated Financial and
Data .............. Operating Data
(g)Supplementary
Financial
Information ....... Not Applicable
(h)Management's
Discussion and
Analysis of Management's Discussion and Analysis of
Financial Condition Financial Condition and Results of
and Results of Operations
Operations ........
(i)Changes in and
Disagreements with
Accountants on
Accounting and
Financial
Disclosure ........ Not Applicable
(j)Directors and
Executive Officers
................... Management
(k)Executive
Compensation ...... Management
(l)Security Ownership of
Certain Beneficial
Owners and
Management ........ Principal Stockholders
(m)Certain Relationships
and Related
Transactions....... Certain Transactions
12 Disclosure of Commission
Position on
Indemnification for
Securities Act
Liabilities............ Not Applicable
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + |
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 7, 1996
2,500,000 SHARES
GENESEE & WYOMING INC.
CLASS A COMMON STOCK
($.01 PAR VALUE)
All of the shares of Class A Common Stock offered hereby are being sold by the Company. Prior to this offering, there has been no public market for the Class A Common Stock of the Company. It is currently anticipated that the initial public offering price will be between $14.00 and $16.00 per share. See "Underwriting" for information relating to the method of determining the initial public offering price.
The Company's authorized capital stock consists of Class A Common Stock and Class B Common Stock. The Class A Common Stock is substantially identical to the Class B Common Stock, except with respect to voting rights, convertibility and dividends. The Class A Common Stock is entitled to one vote per share and the Class B Common Stock is entitled to ten votes per share. Each share of Class B Common Stock is freely convertible into one share of Class A Common Stock. Shares of Class A Common Stock are entitled to a 10% dividend preference over shares of Class B Common Stock when, as and if dividends are declared by the Board of Directors. See "Description of Capital Stock."
The Class A Common Stock has been approved for quotation, subject to official notice of issuance, on the Nasdaq Stock Market's National Market (the "Nasdaq National Market") under the symbol "GNWR."
FOR INFORMATION CONCERNING CERTAIN FACTORS RELATING TO THIS OFFERING, SEE
"RISK FACTORS" BEGINNING ON PAGE 7.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
Per Share.................................. $ $ $
- --------------------------------------------------------------------------------
Total(3)................................... $ $ $
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(2) Before deducting estimated expenses of $875,000 payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to an additional 375,000 shares of Class A Common Stock at the Price to Public, less Underwriting Discounts and Commissions shown above, solely to cover over-allotments, if any. If this option is exercised in full, the total Price to Public, Underwriting Discounts and Commissions and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting."
The shares of Class A Common Stock offered hereby are being offered by the several Underwriters named herein, subject to prior sale and acceptance by the Underwriters and subject to their right to reject any order in whole or in part. It is expected that the Class A Common Stock will be available for delivery on or about , 1996 at the offices of Schroder Wertheim & Co. Incorporated, New York, New York.
SCHRODER WERTHEIM & CO. FURMAN SELZ
, 1996
[ART TO COME]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and the
Consolidated Financial Statements, including the Notes thereto, appearing
elsewhere in this Prospectus. All references to "GWI" or the "Company" in this
Prospectus mean Genesee & Wyoming Inc., a Delaware corporation, and its
subsidiaries. Unless otherwise indicated, all information in this Prospectus
(i) assumes an initial public offering price of $15.00 per share of Class A
Common Stock,(ii) assumes that the Underwriters' over-allotment option is not
exercised, and (iii) gives effect to an 18.5:1 stock split and reclassification
of the Company's common stock into Class A Common Stock and Class B Common
Stock (collectively, the "Common Stock") which will become effective
immediately prior to the Offering.
THE COMPANY
GWI is a leading operator of short line and regional freight railroads, based on revenues and total track miles. In 1977, when Mortimer B. Fuller, III purchased a controlling interest in the Company and became its Chief Executive Officer, the Company operated a single 14-mile railroad that generated $3.9 million in operating revenues, substantially all of which were attributable to shipments of salt by Akzo Nobel Salt, Inc. ("Akzo"). As a result of the Company's acquisition and marketing strategies, the Company has grown to operate over approximately 1,500 miles of track and, in 1995, the Company generated $53.4 million in operating revenues. The Company now operates in four regions of the United States: Western New York and Pennsylvania; Illinois; Louisiana and Texas; and Oregon.
The Company's growth to date has been the result of its acquisition of rail properties and its marketing efforts. This growth has largely been "stair-step" in nature--large revenue increases resulting primarily from acquisitions, followed by more gradual, incremental revenue growth as the Company implements its marketing and operating strategies. The Company's growth has resulted in an expanded customer base, a more diversified commodity mix and decreased dependence on any one customer. The success of the Company's growth strategy is evidenced by the fact that it has continued to maintain a stable revenue base despite the collapse and subsequent closure of the salt mine operated by Akzo, the Company's largest freight customer until 1994. See "Management's Discussion and Analysis of Financial Condition and Results in Operations--Akzo Mine."
The Company's strategy is to become the dominant provider of rail freight transportation in the markets it serves by (i) growing its business through acquisitions to establish new regions or increase its presence in existing regions, (ii) expanding its revenue base within each region through marketing efforts, and (iii) improving its operating efficiency through rationalization and consolidation of overhead expenses.
The Company's fundamental acquisition strategy is to acquire properties that have large industrial customers which will provide the Company with a stable revenue base and the potential to generate incremental revenues and additional customers upon implementation of a focused marketing plan. In the first four months of 1996, the Company completed two acquisitions, one which established a new region and another which increased and diversified its customer base in the New York and Pennsylvania region. In both cases, the Company acquired rail properties that serve large industrial customers.
In February 1996, the Company formed Illinois & Midland Railroad, Inc. ("Illinois & Midland") which acquired certain railroad assets from Chicago & Illinois Midland Railway Company ("CIMR") (the "Illinois & Midland Acquisition"). In 1995, CIMR generated operating revenues of $13.7 million and transported 48,104 carloads, 91% of which consisted of coal shipments to two power plants operated by Commonwealth Edison Company ("ComEd"). In April 1996, the Company formed Pittsburg & Shawmut Railroad, Inc. ("Pittsburg & Shawmut"), which acquired certain railroad assets owned by three operating subsidiaries of the Arthur T. Walker Estate Corporation (the "ATWEC Railroads") (the "Pittsburg & Shawmut Acquisition"). Pittsburg & Shawmut
interchanges with one of the Company's other railroads in three locations. In 1995, the ATWEC Railroads generated operating revenues of $5.9 million and transported approximately 17,500 carloads, 93% of which were shipments of coal from four mines located along its lines. See "Recent Developments."
The Illinois & Midland Acquisition established the Company in a new region and broadened the Company's base of major industrial customers. This acquisition provides the Company with an immediate presence in the midwest and a strong base for additional growth in the region. The Pittsburg & Shawmut Acquisition expanded the Company's presence in its New York and Pennsylvania region and further broadened its customer base. The Company believes that the proximity of Pittsburg & Shawmut to one of the Company's other railroads offers an excellent opportunity for rationalization and consolidation of overhead expenses as well as market extension and diversification.
The Company's marketing strategy is to build each region on a base of major industrial customers, to grow that base business through marketing efforts directed at its major customers and to generate incremental revenues outside the base of major customers by attracting smaller customers and providing ancillary services which generate non-freight revenues. The Company believes that over the long term, its strategy of building its regions around a core of major industrial customers provides a stable revenue base and allows the Company to focus its efforts on additional growth opportunities within a region.
The Company's operating strategy is to empower local managers with the resources and authority to increase revenues, lower operating costs and rationalize track where appropriate to make operations more efficient. GWI has established incentive compensation programs that reward local managers for improving results. The Company also seeks to increase the profitability of its railroads by spreading regional and corporate overhead expenses over an expanding revenue base.
The Company's principal executive offices are located at 71 Lewis Street, Greenwich, Connecticut 06830. Its telephone number is (203) 629-3722.
THE OFFERING(1)
Class A Common Stock offered........................ 2,500,000 shares
Common Stock to be outstanding after the Offering:
Class A Common Stock(2)........................... 4,001,937 shares(3)
Class B Common Stock(2)........................... 846,556 shares
---------
Total........................................... 4,848,493 shares(3)
=========
To repay debt. See "Use of
Use of proceeds..................................... Proceeds."
Nasdaq National Market symbol....................... GNWR
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(1) The offering of shares of Class A Common Stock by the Company is referred to herein as the "Offering."
(2) The Class A Common Stock is entitled to one vote per share. The Class B Common Stock is entitled to ten votes per share. The Class B Common Stock is convertible into Class A Common Stock on a one-to-one basis at the option of the holder and, with certain exceptions, automatically converts upon transfer by the original holder thereof. The Class A Common Stock is entitled to a 10% dividend preference over the Class B Common Stock when, as and if dividends are declared by the Board of Directors. The Class A Common Stock and Class B Common Stock vote together as a single class except as required by law, and are substantially identical except with respect to voting rights, convertibility and dividends. See "Description of Capital Stock."
(3) Excludes (i) an aggregate of 500,000 shares of Class A Common Stock reserved for issuance under the Company's 1996 Stock Option Plan and Stock Option Plan for Outside Directors, of which options to purchase 350,500 shares of Class A Common Stock are currently outstanding, (ii) 450,000 shares of Class A Common Stock reserved for issuance under the Company's Employee Stock Purchase Plan, and (iii) 41,847 shares of Class A Common Stock reserved for issuance upon exercise of the Bank Warrant. See "Management--Stock Options," "Management--Employee Stock Purchase Plan" and "Description of Capital Stock--Bank Warrant."
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The summary consolidated financial and operating data below has been taken or derived from the audited consolidated financial statements and other records of the Company. The summary consolidated financial and operating data should be read in conjunction with the Consolidated Financial Statements and accompanying Notes contained in this Prospectus. The results of operations for the interim periods are not necessarily indicative of results of operations for the full year. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations." The pro forma financial and operating data is based upon certain pro forma adjustments to reflect (i) the sale of 2,500,000 shares of Class A Common Stock in the Offering and the application of the estimated net proceeds of the Offering as set forth under "Use of Proceeds," (ii) the amendment and restatement of the Credit Facilities and (iii) the closing of the Illinois & Midland and Pittsburg & Shawmut Acquisitions. The pro forma unaudited condensed consolidated balance sheet data assumes that the Pittsburg & Shawmut Acquisition occurred on March 31, 1996, and the pro forma unaudited condensed consolidated income statement and operating data assumes that the Illinois & Midland and Pittsburg & Shawmut Acquisitions and the amendment and restatement of the Credit Facilities occurred on January 1, 1995.
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31, PRO FORMA
------------------------------------------------ ---------------- -------------------------
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1991 1992 1993 1994 1995 1995 1996 1995 1996
-------- -------- -------- -------- -------- ------- ------- ------------ ------------
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT DATA:
Operating revenues...... $ 20,536 $ 32,940 $ 49,645 $ 55,419 $ 53,387 $13,391 $16,608 $ 73,042 $19,448
Operating income........ 275 2,748 6,144 8,038 6,572 1,526 2,814 12,416 3,558
Interest expense........ (1,583) (2,319) (2,864) (3,212) (3,405) (766) (1,274) (4,020) (948)
Net income (loss)....... (884) 637 1,624 3,011 1,657 502 965 6,104 1,620
Earnings per common
share:
Income before extraor-
dinary item and cumu-
lative effect of ac-
counting change....... $ (0.39) $ 0.28 $ 0.88 $ 1.31 $ 0.92 $ 0.21 $ 0.41 $ 1.36 $ 0.33
Net income (loss)...... $ (0.39) $ 0.28 $ 0.70 $ 1.31 $ 0.71 $ 0.21 $ 0.41 $ 1.26 $ 0.33
Weighted average number
of common shares
outstanding............ 2,258 2,258 2,304 2,304 2,348 2,348 2,348 4,848 4,848
OPERATING DATA:
Total track mile-
age(1)(2).............. 298 555 841 808 839 808 964 1,160 1,236
Total carloads.......... 43,077 73,429 115,301 119,051 118,673 30,966 39,345 184,277 49,674
Total employees(2)...... 176 266 357 380 397 399 462 485 489
Operating revenues per
carload................ $ 477 $ 449 $ 431 $ 466 $ 450 $ 432 $ 422 $ 396 $ 392
Operating revenues per
employee............... $116,682 $123,835 $139,062 $145,839 $134,476 $33,561 $35,948 $150,602 $39,771
Carloads per employee... 245 276 323 313 299 78 85 380 102
Operating ratio(3)...... 98.7% 91.7% 87.6% 85.5% 87.7% 88.6% 83.1% 83.0% 81.7%
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MARCH 31, 1996
-----------------------------------
AS FURTHER
ACTUAL AS ADJUSTED(4) ADJUSTED(5)
-------- -------------- -----------
(UNAUDITED)
BALANCE SHEET DATA:
Total assets................................ $115,859 $125,027 $125,027
Total debt.................................. 66,207 72,207 38,207
Stockholders' equity........................ 11,952 11,952 45,952
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(2) Based on monthly averages over the respective periods, except for pro forma
data which is as of December 31, 1995 and March 31, 1996.
(3) Operating expenses divided by operating revenues.
(4) As adjusted to give effect to the Pittsburg & Shawmut Acquisition. See
"Recent Developments."
(5) As further adjusted to give effect to the sale of 2,500,000 shares of Class
A Common Stock in the Offering and the application of the estimated net
proceeds of the Offering as described in "Use of Proceeds."
RISK FACTORS
Potential purchasers of the Class A Common Stock should carefully consider the following factors, as well as the other information contained in this Prospectus, before deciding to purchase shares of the Class A Common Stock offered hereby.
AVAILABILITY OF ACQUISITION OPPORTUNITIES
The Company's ability to continue to grow is dependent in part upon its ability to acquire additional rail properties. In making acquisitions the Company competes with other short line and regional rail operators, some of which are larger and have greater financial resources than the Company. There can be no assurance that acquisition opportunities will be available to the Company in the future or that the Company will be able to compete successfully for available properties. The Company's ability to acquire additional rail properties and related railroad assets may also be dependent upon its ability to obtain financing for such acquisitions. Financing may not be available or may be available only on terms and conditions unfavorable to the Company. In addition, the Company's Credit Facilities contain certain limitations on the Company's ability to make acquisitions. See "Business--Strategy--Acquisition of Rail Properties," "Business--Competition" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources."
FLUCTUATIONS IN REVENUES AND EXPENSES
The Company has historically experienced fluctuations in revenues and expenses due to unpredictable events such as one-time freight moves, customer plant expansions and shut-downs, railcar sales, accidents and derailments. The occurrence of such events in the future could cause further fluctuations in revenues and expenses and negatively affect the Company's financial performance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--General."
CUSTOMER CONCENTRATION
In 1995, the Company's ten largest customers accounted for approximately 50% of the Company's operating revenues. The Company's two largest customers in 1995 were Akzo and Georgia-Pacific Corporation ("Georgia Pacific"), which accounted for 9% and 8% of operating revenues, respectively. As a result of the Illinois & Midland Acquisition, the Company anticipates that ComEd will become its largest customer. On a pro forma basis after giving effect to both the Illinois & Midland Acquisition and the Pittsburg & Shawmut Acquisition, ComEd represented 16% of operating revenues in 1995. See "Pro Forma Financial Information." The Company's business could be adversely affected if its customers suffer significant reductions in their businesses or reduce shipments of commodities transported by the Company. See "Business--Railroad Operations--Customers."
RELIANCE ON KEY PERSONNEL
The Company's success to date has been largely dependent on the leadership of Mortimer B. Fuller, III, its Chairman, President and Chief Executive Officer. While the Company has a decentralized organizational structure and an experienced management team, the loss of Mr. Fuller's services could adversely affect the Company's operations. See "Business--Railroad Operations-- Management" and "Management."
RELATIONSHIPS WITH CLASS I RAILROADS
The railroad industry in the United States is dominated by a small number of large Class I carriers that have substantial market control and negotiating leverage. Almost all of the traffic on the Company's railroads is interchanged with Class I carriers. A decision by any of these Class I carriers to discontinue transporting certain commodities or to use alternate modes of transportation, such as motor carriers, could adversely affect the Company's business. See "Business--Industry Overview."
The Company's ability to provide rail service to its customers depends in large part upon its ability to maintain cooperative relationships with Class I connecting carriers with respect to, among other matters, freight rates, car supply, reciprocal switching, interchange and trackage rights. A deterioration in the operations of or
service provided by those connecting carriers, or in the Company's relationship with its connecting carriers, could adversely affect the Company's business. In addition, much of the freight transported by the Company's railroads moves on railcars supplied by Class I carriers. Were these carriers to reduce the number of railcars available for use by its railroads, the Company might not be able to obtain replacement railcars on favorable terms. See "Business--Railroad Operations" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations."
Portions of the Company's rail properties are operated under leases, operating agreements or trackage rights agreements with Class I carriers. Failure of the Company's railroads to comply with such leases and agreements in all material respects could result in the loss of operating rights with respect to such rail properties, which would adversely affect the Company's business. See "Property."
COMPETITION
Each of the Company's railroads is typically the only rail carrier directly serving its customers; however, the Company's railroads compete directly with other modes of transportation, including motor carriers and, to a lesser extent, ships and barges. Competition is based primarily upon the rate charged and the transit time required, as well as the quality and reliability of the service provided. Any improvement in the cost or quality of these alternate modes of transportation could increase competition from these other modes of transportation and adversely affect the Company's business. Approximately 12.8% of the Company's 1995 freight revenues was generated by overhead traffic (i.e. traffic neither originating nor terminating on one of its railroads). Overhead traffic is subject to diversion based on service and prices charged by other railroads. See "Business--Competition" and "Business--Railroad Operations--Rail Traffic."
REGULATION
The Company's railroads are subject to regulation by the Surface Transportation Board ("STB"), the Federal Railroad Administration ("FRA"), state departments of transportation and some state and local regulatory agencies. See "Business--Regulation." Despite deregulation in recent years, federal and state regulation continues to affect profitability and competitiveness in the railroad industry. The federal and state regulatory schemes negatively affect the Company through, among other things, the delays and costs associated with protracted abandonment proceedings and the legal costs associated with acquisition proceedings. Although the recently enacted ICC Termination Act of 1995 (the "ICCTA") purports to aim at eliminating or reducing such costs, the ICCTA has not been in effect long enough to determine the extent to which it will be successful in this regard. In reducing regulation, an effect of the ICCTA may be diminished regulatory protection for small railroads, which negatively affects their competitive position with their Class I connections. See "Business--Railroad Operations" and "Business-- Regulation."
LIABILITY FOR CASUALTY LOSSES
The Company has obtained for each of its railroads insurance coverage for losses arising from personal injury and for property damage in the event of derailments or other accidents or occurrences. The Company believes that its insurance coverage is adequate based on its experience. However, under catastrophic circumstances such as accidents involving passenger trains or spillage of hazardous materials, the Company's liability could exceed its insurance limits. Insurance is available from only a very limited number of insurers and there can be no assurance that insurance protection at the Company's current levels will continue to be available or, if available, will be obtainable on terms acceptable to the Company. The occurrence of losses or other liabilities which are not covered by insurance or which exceed the Company's insurance limits could materially adversely affect the financial condition of the Company. See "Business--Insurance."
ENVIRONMENTAL MATTERS
The Company's railroad operations and real estate ownership are subject to extensive federal, state and local environmental laws and regulations concerning, among other things, emissions to the air, discharges to waters, and the handling, storage, transportation and disposal of waste and other materials. The Company's railroads regularly transport hazardous materials for shippers, and also periodically use hazardous materials in their own
operations. As a result, the Company's business involves the risk of substantial environmental liability as a result of current and past operations. See "Business--Environmental Matters."
LABOR MATTERS
Five of the Company's railroads have employees who are subject to collective bargaining agreements. Strikes and work stoppages, whether brought against the Company's railroads or against the Class I carriers with which they connect, could adversely affect the operations of the Company's railroads. See "Business--Railroad Operations--Employees."
DILUTION
Purchasers of Class A Common Stock in the Offering will experience an immediate and substantial dilution of $9.12 per share in the net tangible book value of their shares. See "Dilution."
CONCENTRATION OF VOTING POWER
Upon completion of the Offering, the directors and executive officers of the Company will beneficially own approximately 27.9% of the outstanding shares of Class A Common Stock and approximately 99.0% of the outstanding shares of Class B Common Stock, representing approximately 76.2% of the voting power of the Company (including approximately 57.5% of the voting power of the Company controlled by Mortimer B. Fuller, III, the Company's Chairman, President and Chief Executive Officer). As a result, Mr. Fuller and the other directors and executive officers of the Company will have the ability to affect the vote of the Company's stockholders on significant corporate actions requiring stockholder approval, including mergers, share exchanges or sales of all or substantially all of the Company's assets. With such voting power, Mr. Fuller and the other directors and executive officers of the Company may also have the ability to delay or prevent a change in control of the Company. See "Principal Stockholders," "Certain Transactions" and "Description of Capital Stock."
NO PRIOR PUBLIC MARKET FOR CLASS A COMMON STOCK
Prior to the Offering, there has been no public market for the Class A Common Stock. Although the Company has applied for quotation of the Class A Common Stock on the Nasdaq National Market, there can be no assurance that an active trading market for the Class A Common Stock will develop or, if it does develop, that such trading market will be sustained after the completion of the Offering. The initial public offering price will be determined through negotiations between GWI and representatives of the Underwriters and may not be indicative of the market price for the Class A Common Stock after the Offering. See "Underwriting" for information relating to the factors considered in determining the initial public offering price of the Class A Common Stock. The market price of the Class A Common Stock could be subject to significant fluctuations in response to variations in quarterly operating results and other factors. In addition, general market price declines or market volatility in the future could affect the market price of the Class A Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
All of the 1,501,937 shares of Class A Common Stock outstanding immediately prior to the Offering will be eligible for sale subject to the volume and other limitations of Rule 144 under the Securities Act of 1933, as amended (the "Act"). In addition, all of the 846,556 shares of Class B Common Stock outstanding immediately prior to the Offering are freely convertible into shares of Class A Common Stock and, if so converted, will be eligible for sale subject to the volume and other limitations of Rule 144. Holders of the Bank Warrant are also entitled under certain circumstances to demand and "piggy- back" registration rights with respect to the shares issuable upon exercise thereof. No prediction can be made as to the effect, if any, that future sales of shares of Class A Common Stock, or the availability of shares of Class A Common Stock for future sales, will have on the market price of the Class A Common Stock prevailing from time to time. Sales of substantial amounts of Class A Common Stock (including shares issued upon the exercise of options, warrants or the conversion of Class B Common Stock, or under the Company's Employee Stock Purchase Plan), or the perception that such sales could occur, could adversely affect prevailing market prices for the Class A Common Stock. See "Management--Stock Options," "Management--Employee Stock Purchase Plan" and "Description of Capital Stock--Bank Warrant."
The Company, its officers and directors and certain other stockholders have agreed not to sell or otherwise dispose of any shares of Common Stock, subject to certain exceptions, for a period of 180 days after the date of this Prospectus without the prior written consent of Schroder Wertheim & Co. Incorporated. Following the Offering, an aggregate of 1,952,783 shares, or 40.3% of the total shares outstanding, will be subject to these restrictions. See "Shares Eligible for Future Sale" and "Underwriting."
LIMITATIONS ON TAKEOVERS
Certain provisions of the Company's Certificate of Incorporation and By-laws may have the effect of discouraging a third party from making an acquisition proposal for the Company and may thereby inhibit a change in control of the Company under circumstances that could give the stockholders the opportunity to realize a premium over the then-prevailing market prices. Specifically, mergers and certain other corporate actions require the approval of two-thirds of the total votes represented by all Class A Common Stock and Class B Common Stock, the Board of Directors is divided into three classes, with the members of each class serving for staggered three-year terms, and the Board is expressly authorized to consider a variety of factors and constituencies in determining the Company's best interests. In addition, under certain circumstances Section 203 of the Delaware General Corporation Law makes it more difficult for an "interested stockholder" (generally a 15% stockholder) to effect certain business combinations with a corporation for a three-year period. See "Description of Capital Stock--Limitations on Takeovers."
RECENT DEVELOPMENTS
ILLINOIS & MIDLAND ACQUISITION
On February 8, 1996, the Company established its Illinois region when Illinois & Midland acquired certain railroad operating assets from CIMR. The purchase price was $27.5 million (including the assumption of certain liabilities and $159,000 of related costs) and was financed by the proceeds of the term loan described below.
The Illinois & Midland Acquisition is an example of the Company's strategy of acquiring rail properties that service major industrial customers. In 1995, CIMR generated operating revenues of $13.7 million and income from continuing operations of $2.5 million and transported 48,104 carloads, approximately 91% of which consisted of coal shipments to two power plants operated by ComEd. Illinois & Midland has the exclusive right to serve these power plants and the majority of the shipments are under long-term contracts extending until 2002. A second coal customer, Illinois Power Company, began to receive coal shipments at a power plant located in Havana, Illinois in 1996. Illinois Power Company has entered into a contract to receive an average of 7,000 carloads annually through 1999. The Company believes that these contracts will provide a stable revenue base from which to grow other freight revenues and non- freight revenues. In addition to coal, Illinois & Midland also transports flour, roofing granules, ethanol and lumber.
The assets acquired by Illinois & Midland consist primarily of a 126-mile line extending from Peoria, Illinois, through Springfield to Taylorville, Illinois, a small number of railcars which will be used for maintenance of way, and certain rights under real property leases. The rail line consists of 111 miles of FRA Class III track and 15 miles of FRA Class II track. The Company believes that the track is in excellent condition and that a relatively low level of capital expenditures will be required in the near future. Illinois & Midland interchanges with 11 railroads, including six Class I railroads, and also connects with the Illinois River through an unloading facility owned by ComEd and operated by Illinois & Midland. The Company believes there will be opportunities for additional expansion through acquisitions in the midwest.
In connection with the acquisition, Illinois & Midland hired 70 former CIMR employees, including 55 operating and hourly employees who had been represented by 12 different labor unions. Illinois & Midland, through negotiation with the United Transportation Union ("UTU"), has entered into an agreement whereby the UTU will represent all of these operating and hourly employees. The agreement simplifies operating rules contained in the prior agreements.
PITTSBURG & SHAWMUT ACQUISITION
On April 29, 1996, Pittsburg & Shawmut acquired substantially all of the operating assets of the ATWEC Railroads. These railroad assets were previously operated by ATWEC subsidiaries Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company and Red Bank Railroad Company. The purchase price was approximately $15.2 million (including the assumption of a grant from the Commonwealth of Pennsylvania and $250,000 of related costs). In addition, the purchase and sale agreement provides for additional contingency payments of up to $2.5 million in the event that coal revenues exceed certain agreed upon levels. The purchase price was financed by the proceeds of the term loan described below.
The 237-mile line acquired by Pittsburg & Shawmut consists of a main line that extends from Driftwood, Pennsylvania through DuBois to Freeport, Pennsylvania, and branch lines that extend to Reidsburg and Lawsonham, Pennsylvania. In 1995, the ATWEC Railroads generated operating revenues of $5.9 million and transported approximately 17,500 carloads, 93% of which were shipments of coal from four mines located along its lines. Pittsburg & Shawmut has entered into a seven-year agreement covering the shipments by its largest customer, which represented 60% of coal hauled by the ATWEC Railroads in 1995.
The Pittsburg & Shawmut Acquisition is an example of the Company's strategy of acquiring rail properties in its existing regions in order to capitalize on operating efficiencies. Pittsburg & Shawmut consists of three separate rail lines, which interchange with another of the Company's railroads in three locations. The Company believes that the proximity of these two railroads offers an excellent opportunity for rationalization as well as market extension and diversification. The assets acquired by Pittsburg & Shawmut consist of 237 miles of track, 859 railcars, 19 locomotives and various other related assets necessary to operate the rail lines. As a result of operating efficiencies obtained with the Company's existing railroads in the New York and Pennsylvania region, Pittsburg & Shawmut plans to liquidate 42 miles of track and sell a significant portion of the railcars and locomotives, thereby reducing the effective purchase price of the acquisition.
AMENDMENT AND RESTATEMENT OF CREDIT FACILITIES
On February 8, 1996, the Company and each of its subsidiaries entered into an Amended and Restated Revolving Credit and Term Loan Agreement (the "Credit Agreement") whereby the Company restructured its credit facilities (the "Credit Facilities") with The First National Bank of Boston, as agent for a syndicate of banks (the "Bank of Boston"). The Credit Agreement provides for a five-year $34 million revolving credit facility and a five-year $40 million loan. The term loan was made available to the Company in two tranches. The Company borrowed $26 million in February 1996 to consummate the Illinois & Midland Acquisition, and an additional $12 million was used in April 1996 to consummate the Pittsburg & Shawmut Acquisition. In connection with the Credit Agreement, the Company issued to the Bank of Boston a warrant to purchase 41,847 shares of Class A Common Stock at a price of $.0005 per share (the "Bank Warrant"). See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Description of Capital Stock--Bank Warrant."
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be $34.0 million ($39.2 million ifthe Underwriters' over-allotment option is exercised in full), after deducting underwriting discounts and commissions and estimated expenses of the Offering payable by the Company.
The Company intends to use all of the net proceeds of the Offering to repay borrowings under the Credit Facilities. Borrowings under the Credit Facilities were used as follows: (i) $26.1 million in connection with the Illinois & Midland Acquisition, (ii) $11.7 million in connection with the Pittsburg & Shawmut Acquisition, (iii) $14.3 million to repay outstanding debt, including $701,000 in debt held by or for the benefit of directors and officers of the Company and members of their respective families (see "Certain Transactions") and $2.7 million in prepayment and other financing costs, (iv) $8.3 million to purchase rolling stock and locomotives, and (v) $700,000 to construct a locomotive facility. As of May 31, 1996, the Company had $59.3 million outstanding under the Credit Facilities at an interest rate of 8.53% per annum. The interest rate fluctuates at increments over prime or London Inter- Bank Offered Rates ("LIBOR"), based on the Company's ratio of debt to EBITDA.
Following application of the net proceeds of the Offering, the Credit Facilities will be available to the Company to finance future acquisitions. See "Recent Developments" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has historically paid quarterly dividends in order to provide limited liquidity to its stockholders. In 1994, 1995 and the first quarter of 1996, the Company paid total cash dividends of $63,000, $191,000 and $32,000, respectively. Dividends in 1994 were reduced in anticipation of decreased net income as a result of the loss of production at the Akzo mine. Because the Company's net income increased in 1994 despite Akzo's decreased production, a larger than usual dividend was paid in the first quarter of 1995 to offset the lower dividends paid in 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Akzo Mine." Although the Company has paid dividends in the past, it currently intends to retain all earnings to support its operations and future growth and, therefore, does not anticipate the payment of cash dividends on the Common Stock in the foreseeable future. In addition, the Credit Facilities have certain covenant limitations on the payment of dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources."
CAPITALIZATION
The following table sets forth the capitalization of the Company at March 31, 1996 and as adjusted to give effect to (i) the Pittsburg & Shawmut Acquisition and (ii) the sale of 2,500,000 shares of Class A Common Stock in the Offering and the application of the estimated net proceeds of the Offering as described in "Use of Proceeds."
MARCH 31, 1996
----------------------------------
AS FURTHER
ACTUAL AS ADJUSTED(1) ADJUSTED(2)
------- -------------- -----------
(DOLLARS IN THOUSANDS)
Long-term debt:
Current portion of long-term debt......... $ 2,894 $ 4,690 $ 2,730
Long-term debt, excluding current portion. 63,313 67,517 35,477
------- ------- -------
Total long-term debt.................... 66,207 72,207 38,207
------- ------- -------
Stockholders' equity:
Class A Common Stock, $.01 par value,
12,000,000 shares authorized; 1,501,937
outstanding and outstanding as adjusted;
4,001,937 outstanding as further
adjusted(3)(4)........................... 15 15 40
Class B Common Stock, $.01 par value,
1,500,000 shares authorized; 846,556
outstanding(4)........................... 8 8 8
Additional paid-in capital................ 1,340 1,340 35,315
Warrants outstanding(5)................... 471 471 471
Retained earnings......................... 10,118 10,118 10,118
------- ------- -------
Total stockholders' equity.............. 11,952 11,952 45,952
------- ------- -------
Total capitalization.................. $78,159 $84,159 $84,159
======= ======= =======
|
(1) As adjusted to give effect to the Pittsburg & Shawmut Acquisition as if it
had occurred on March 31, 1996. See "Recent Developments."
(2) As further adjusted to give effect to the sale of 2,500,000 shares of
Class A Common Stock in the Offering and the application of the estimated
net proceeds of the Offering as described in "Use of Proceeds."
(3) Excludes (i) an aggregate of 500,000 shares of Class A Common Stock
reserved for issuance under the Company's 1996 Stock Option Plan and Stock
Option Plan for Outside Directors, of which options to purchase 350,500
shares of Class A Common Stock are currently outstanding and (ii) 450,000
shares of Class A Common Stock reserved for issuance under the Company's
Employee Stock Purchase Plan. See "Management--Stock Options" and
"Management--Employee Stock Purchase Plan."
(4) For a description of the Class A Common Stock and the Class B Common
Stock, see "Description of Capital Stock."
(5) For a description of the Bank Warrant, see "Description of Capital Stock--
Bank Warrant."
DILUTION
Pro forma net tangible book value per share before the Offering takes into consideration the Pittsburg & Shawmut Acquisition as if it had occurred on March 31, 1996. The Company's pro forma net tangible book value at March 31, 1996 was $(5.5) million, or $(2.33) per share of Common Stock. Pro forma net tangible book value per share is determined by dividing the pro forma tangible net worth of the Company (total tangible assets less total liabilities) by the total number of shares of Class A Common Stock and Class B Common Stock outstanding. After giving effect to the sale by the Company of 2,500,000 shares of Class A Common Stock in the Offering and the application of the net proceeds as described in "Use of Proceeds," the Company's pro forma net tangible book value at March 31, 1996 would have been $28.5 million, or $5.88 per share. This represents an immediate increase in net tangible book value of $8.21 per share to existing stockholders and an immediate dilution in net tangible book value of $9.12 per share to new investors purchasing shares of Class A Common Stock in the Offering. The following table illustrates the pro forma per share dilution at March 31, 1996:
Assumed initial public offering price per share.................. $15.00
Pro forma net tangible book value per share before the Offer-
ing(1)........................................................ $(2.33)
Increase per share attributable to new investors............... 8.21
------
Pro forma net tangible book value per share after giving effect
to the Offering(1).............................................. 5.88
------
Dilution per share to new investors.............................. $ 9.12
======
|
(1) Tangible assets include leasehold interests. Intangible assets include unamortized service assurance agreement (see note 1 to audited condensed consolidated financial statements), organization costs and financing costs in the amount of $17.4 million.
The following table shows, on a pro forma basis at March 31, 1996, the difference between existing stockholders and new investors with respect to the number of shares purchased from the Company and the total consideration and average price per share paid to the Company:
SHARES PURCHASED(1) TOTAL CONSIDERATION AVERAGE
----------------------------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- --------------------- ------- ---------
Existing stockholders(2).... 2,348,493 48.4% $ 1,362,995 3.5% $ 0.58
New investors............... 2,500,000 51.6 37,500,000 96.5 15.00
----------- ------- ----------- -----
Total..................... 4,848,493 100.0% $38,862,995 100.0%
=========== ======= =========== =====
|
(1) The Class A Common Stock is entitled to one vote per share and the Class B
Common Stock is entitled to ten votes per share. The Class A Common Stock
and the Class B Common Stock vote together as a single class, except as
required by law. After giving effect to the Offering, the outstanding
shares of Class A Common Stock held by new investors will represent
approximately 20.1% of the total combined voting power of both classes of
Common Stock outstanding, and the outstanding shares of Class A Common
Stock and Class B Common Stock held by existing stockholders will
represent approximately 79.9% of the total combined voting power of both
classes of Common Stock outstanding. See "Risk Factors--Concentration of
Voting Power" and "Description of Capital Stock."
(2) The information presented assumes no exercise of outstanding options or
warrants. See "Management--Stock Options" and "Description of Capital
Stock--Bank Warrant."
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The following selected consolidated income statement data and selected consolidated balance sheet data of the Company for the years ended December 31, 1991, 1992, 1993, 1994 and 1995, and the three months ended March 31, 1995 and 1996, have been derived from the Company's consolidated financial statements. The results of operations for the interim periods are not necessarily indicative of results of operations for the full year. The following selected consolidated operating data for the years ended December 31, 1991, 1992, 1993, 1994 and 1995, and the three months ended March 31, 1995 and 1996, have been derived from the records of the Company. All of the information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Prospectus. See also "Management's Discussion and Analysis of Financial Condition and Results of Operations."
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31, PRO FORMA(1)
------------------------------------------------ ----------------- ----------------------
THREE
YEAR MONTHS
ENDED ENDED
DECEMBER 31, MARCH 31,
1991 1992 1993 1994 1995 1995 1996 1995 1996
-------- -------- -------- -------- -------- ------- -------- ------------ ---------
(UNAUDITED) (UNAUDITED)
INCOME STATEMENT DATA:
Operating revenues...... $ 20,536 $ 32,940 $ 49,645 $ 55,419 $ 53,387 $13,391 $ 16,608 $ 73,042 $ 19,448
Operating expenses...... 20,261 30,192 43,501 47,381 46,815 11,865 13,794 60,626 15,890
-------- -------- -------- -------- -------- ------- -------- -------- --------
Operating income........ 275 2,748 6,144 8,038 6,572 1,526 2,814 12,416 3,558
Interest expense........ (1,583) (2,319) (2,864) (3,212) (3,405) (766) (1,274) (4,020) (948)
Other income............ 105 643 165 192 456 105 81 2,711 113
-------- -------- -------- -------- -------- ------- -------- -------- --------
Income (loss) before
income taxes,
extraordinary item and
cumulative effect of
accounting change...... (1,203) 1,072 3,445 5,018 3,623 865 1,621 11,107 2,723
Income taxes............ 319 (435) (1,428) (2,007) (1,472) 363 656 4,509 1,103
-------- -------- -------- -------- -------- ------- -------- -------- --------
Income (loss) before
extraordinary item and
cumulative effect of
accounting change...... (884) 637 2,017 3,011 2,151 502 965 6,598 1,620
Extraordinary item...... -- -- -- -- (494) -- -- (494) --
Cumulative effect of ac-
counting change(2)..... -- -- (393) -- -- -- -- -- --
-------- -------- -------- -------- -------- ------- -------- -------- --------
Net income (loss)....... $ (884) $ 637 $ 1,624 $ 3,011 $ 1,657 $ 502 $ 965 $ 6,104 $ 1,620
======== ======== ======== ======== ======== ======= ======== ======== ========
Earnings per common
share:
Income (loss) before
extraordinary item and
cumulative effect of
accounting change..... $ (0.39) $ 0.28 $ 0.88 $ 1.31 $ 0.92 $ 0.21 $ 0.41 $ 1.36 $ 0.33
Extraordinary item..... -- -- -- -- (0.21) -- -- (0.10) --
Cumulative effect of
accounting change(2).. -- -- (0.18) -- -- -- -- -- --
-------- -------- -------- -------- -------- ------- -------- -------- --------
Net income (loss)...... $ (0.39) $ 0.28 $ 0.70 $ 1.31 $ 0.71 $ 0.21 $ 0.41 $ 1.26 $ 0.33
======== ======== ======== ======== ======== ======= ======== ======== ========
Dividends per common
share.................. $ 0.05 $ 0.05 $ 0.05 $ 0.03 $ 0.08 $ 0.04 $ 0.01
Weighted average number
of common shares
outstanding............ 2,258 2,258 2,304 2,304 2,348 2,348 2,348 4,848 4,848
OPERATING DATA:
Total track mile-
age(3)(4).............. 298 555 841 808 839 808 964 1,160 1,236
Total carloads.......... 43,077 73,429 115,301 119,051 118,673 30,966 39,345 184,277 49,674
Total employees(4)...... 176 266 357 380 397 399 462 485 489
Operating revenues per
carload................ $ 477 $ 449 $ 431 $ 466 $ 450 $ 432 $ 422 $ 396 $ 392
Operating revenues per
employee............... $116,682 $123,835 $139,062 $145,839 $134,476 $33,561 $ 35,948 $150,602 $ 39,771
Carloads per employee... 245 276 323 313 299 78 85 380 102
Operating ratio(5)...... 98.7% 91.7% 87.6% 85.5% 87.7% 88.6% 83.1% 83.0% 81.7%
BALANCE SHEET DATA AS OF
PERIOD END:
Total assets............ $ 44,404 $ 56,965 $ 63,653 $ 69,888 $ 78,429 $67,334 $115,859 $125,027
Total debt.............. 26,592 32,109 35,095 32,640 39,941 31,415 66,207 38,207
Stockholders' equity.... 4,030 4,575 6,074 9,082 10,548 9,488 11,952 45,952
|
(1) The pro forma financial information presented is based upon certain pro
forma adjustments to reflect (i) the sale of 2,500,000 shares of Class A
Common Stock in the Offering and the application of the estimated net
proceeds of the Offering as set forth under "Use of Proceeds," (ii) the
amendment and restatement of the Credit Facilities, and (iii) the closing
of the Illinois & Midland and Pittsburg & Shawmut Acquisitions. The pro
forma unaudited condensed consolidated balance sheet data assumes that the
Pittsburg & Shawmut Acquisition occurred on March 31, 1996, and the pro
forma unaudited condensed consolidated income statement and operating data
assumes that the Illinois & Midland and Pittsburg & Shawmut Acquisitions
and the amendment and restatement of the Credit Facilities occurred on
January 1, 1995.
(2) Represents the adoption, as of January 1, 1993, of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions."
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Accounting Matters."
(3) Excludes track miles operated under trackage rights and operating
contracts. See "Property."
(4) Based on monthly averages over the respective periods, except for pro
forma data which is as of December 31, 1995 and March 31, 1996.
(5) Operating expenses divided by operating revenues.
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Unaudited Condensed Consolidated Statements assume
(i) the sale of 2,500,000 shares of Class A Common Stock in the Offering and
the application of the estimated net proceeds of the Offering as set forth
under "Use of Proceeds," (ii) the amendment and restatement of the Credit
Facilities and (iii) the closing of the Illinois & Midland and Pittsburg &
Shawmut Acquisitions. The Pro Forma Unaudited Condensed Consolidated Balance
Sheet assumes that the Pittsburg & Shawmut Acquisition occurred on March 31,
1996, and the Pro Forma Unaudited Condensed Consolidated Statement of Income
assumes that the Illinois & Midland and Pittsburg & Shawmut Acquisitions and
the amendment and restatement of the Credit Facilities occurred on January 1,
1995.
The Pro Forma Unaudited Condensed Consolidated Income Statement for the year ended December 31, 1995 reflects the audited income statement of the Company for the year ended December 31, 1995 and the audited income statements of CIMR and the ATWEC Railroads for the year ended December 31, 1995 on a historical basis.
The Pro Forma Unaudited Condensed Consolidated Income Statement for the period ended March 31, 1996 reflects the unaudited income statement of the Company for the period ended March 31, 1996 and the unaudited income statements of CIMR and the ATWEC Railroads for the period ended February 8, 1996 and March 31, 1996, respectively, on a historical basis.
The pro forma financial information is a presentation of historical results with accounting and other adjustments. The pro forma financial information does not reflect the effects of any of the anticipated changes to be made by the Company in the Illinois & Midland and Pittsburg & Shawmut operations from the historical operations of CIMR and the ATWEC Railroads.
THE PRO FORMA STATEMENTS ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE COMPANY'S FINANCIAL POSITION OR RESULTS OF OPERATIONS HAD THE TRANSACTIONS BEEN CONSUMMATED ON THE DATES ASSUMED AND DO NOT PROJECT THE COMPANY'S RESULTS OF OPERATIONS FOR ANY FUTURE PERIOD. SEE "RECENT DEVELOPMENTS."
The following Pro Forma Unaudited Condensed Consolidated Statements and accompanying notes should be read in conjunction with the financial statements and the financial information pertaining to the Company, CIMR and the ATWEC Railroads included elsewhere in this Prospectus.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT
OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CHICAGO & THE
GENESEE & ILLINOIS MIDLAND ATWEC PRO
WYOMING INC. RAILWAY COMPANY RAILROADS COMBINED ADJUSTMENTS FORMA
------------ ---------------- --------- -------- ----------- -------
Operating Revenues...... $53,387 $13,733 $ 5,922 $ 73,042 $ -- $73,042
------- ------- ------- -------- ------- -------
Operating Expenses:
Transportation......... 14,262 2,593 1,027 17,882 -- 17,882
Maintenance of ways and
structures............ 6,127 1,814 806 8,747 -- 8,747
Maintenance of equip-
ment.................. 12,230 1,659 846 14,735 -- 14,735
General and administra-
tive.................. 10,309 2,203 1,918 14,430 (631)(1) 13,799
Depreciation and amor-
tization.............. 3,887 1,437 1,808 7,132 (1,669)(2,3) 5,463
------- ------- ------- -------- ------- -------
Total operating
expenses............. 46,815 9,706 6,405 62,926 (2,300) 60,626
Operating Income........ 6,572 4,027 (483) 10,116 2,300 12,416
Interest Expense........ (3,405) (1,461) (481) (5,347) 1,327 (4) (4,020)
Other Income............ 456 1,525 730 2,711 -- 2,711
Loss on Sale of Assets . -- (16,082) (10,288) (26,370) 26,370 (5) --
------- ------- ------- -------- ------- -------
Income Before Income
Taxes.................. 3,623 (11,991) (10,522) (18,890) 29,997 11,107
Income Taxes............ 1,472 (4,545) (4,214) (7,287) 11,796 (6) 4,509
------- ------- ------- -------- ------- -------
Income From Continuing
Operations............. $ 2,151 $(7,446) $(6,308) $(11,603) $18,201 $ 6,598
======= ======= ======= ======== ======= =======
Income From Continuing
Operations Per Common
Share.................. $ 0.92 $ 1.36
Weighted Average Number
of Common Shares
Outstanding............ 2,348 4,848
|
See accompanying notes to pro forma unaudited condensed consolidated financial statements.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CHICAGO &
ILLINOIS MIDLAND
RAILWAY COMPANY THE
GENESEE & (THROUGH ATWEC PRO
WYOMING INC. FEBRUARY 8, 1996) RAILROADS COMBINED ADJUSTMENTS FORMA
------------ ----------------- --------- -------- ----------- -------
Operating Revenues...... $16,608 $1,420 $1,420 $19,448 $ -- $19,448
Operating Expenses:
Transportation......... 4,480 532 261 5,273 -- 5,273
Maintenance of ways and
structures............ 2,186 411 210 2,807 -- 2,807
Maintenance of equip-
ment.................. 2,994 390 215 3,599 -- 3,599
General and administra-
tive.................. 2,809 757 400 3,966 (1,291)(1) 2,675
Depreciation and
amortization.......... 1,325 184 442 1,951 (415)(2,3) 1,536
------- ------ ------ ------- ------ -------
Total operating
expenses............. 13,794 2,274 1,528 17,596 (1,706) 15,890
Operating Income........ 2,814 (854) (108) 1,852 1,706 3,558
Interest Expense........ (1,274) (107) (78) (1,459) 511 (4) (948)
Other Income............ 81 17 15 113 -- 113
------- ------ ------ ------- ------ -------
Income Before Income
Taxes.................. 1,621 (944) (171) 506 2,217 2,723
Income Taxes............ 656 (360) (70) 226 877 (6) 1,103
------- ------ ------ ------- ------ -------
Income From Continuing
Operations............. $ 965 $ (584) $ (101) $ 280 $1,340 $ 1,620
======= ====== ====== ======= ====== =======
Income From Continuing
Operations Per Common
Share.................. $ 0.41 $ 0.33
Weighted Average Number
of Common Shares
Outstanding............ 2,348 4,848
|
See accompanying notes to pro forma unaudited condensed consolidated financial statements.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(IN THOUSANDS)
THE
GENESEE & ATWEC PRO
WYOMING INC. RAILROADS COMBINED ADJUSTMENTS FORMA
------------ --------- -------- ----------- --------
ASSETS
Current Assets:
Cash and cash equiva-
lents................. $ 6,588 $ 2,697 $ 9,285 $ (2,697)(7) $ 6,588
Accounts receivable,
net................... 14,764 710 15,474 (710)(7) 14,764
Materials and supplies. 2,295 183 2,478 (183)(7) 2,295
Prepaid expenses....... 1,747 298 2,045 (298)(7) 1,747
Deferred income tax as-
sets, net............. 1,364 -- 1,364 -- 1,364
-------- ------- -------- -------- --------
Total current assets.. 26,758 3,888 30,646 (3,888) 26,758
Note Receivable......... -- 1,249 1,249 (1,249)(7) --
Property and Equipment,
net.................... 70,609 14,480 85,089 (5,312)(8) 79,777
Service Assurance Agree-
ment, net.............. 14,851 -- 14,851 -- 14,851
Other Assets, net....... 3,641 84 3,725 (84)(7) 3,641
-------- ------- -------- -------- --------
Total assets.......... $115,859 $19,701 $135,560 $(10,533) $125,027
======== ======= ======== ======== ========
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Current Liabilities:
Current portion of
long-term debt........ $ 2,894 $ 125 $ 3,019 $ (289)(7,9) $ 2,730
Accounts payable....... 17,103 784 17,887 (784)(7) 17,103
Accrued expenses....... 4,431 433 4,864 (433)(7) 4,431
-------- ------- -------- -------- --------
Total current liabili-
ties................. 24,428 1,342 25,770 (1,506) 24,264
Long-Term Debt.......... 63,313 3,900 67,213 (31,736)(7,9) 35,477
Other Liabilities....... 2,055 333 2,388 (333)(7) 2,055
Deferred Income Taxes,
net.................... 4,489 1,921 6,410 (1,921)(7) 4,489
Deferred Items--grants.. 9,622 3,168 12,790 -- 12,790
Stockholders' Equity:
Class A common stock... 15 194 209 (169)(7,10) 40
Class B common stock... 8 150 158 (150)(7) 8
Treasury stock......... -- (33) (33) 33 (7) --
Additional paid-in cap-
ital.................. 1,340 7,653 8,993 26,322 (7,10) 35,315
Warrants outstanding... 471 -- 471 -- 471
Retained earnings...... 10,118 1,157 11,275 (1,157)(7) 10,118
Pension liability ad-
justment.............. -- (84) (84) 84 (7) --
-------- ------- -------- -------- --------
Total stockholders'
equity............... 11,952 9,037 20,989 24,963 45,952
-------- ------- -------- -------- --------
Total liabilities and
stockholders' equity. $115,859 $19,701 $135,560 $(10,533) $125,027
======== ======= ======== ======== ========
|
See accompanying notes to pro forma unaudited condensed consolidated financial statements.
NOTES TO PRO FORMA UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following notes identify the pro forma adjustments made to the historical amounts in the pro forma unaudited condensed consolidated financial statements.
1. For the fiscal year ended December 31, 1995, represents the elimination of compensation of executive officers of acquired railroads not retained or replaced by the Company ($406,000), occupancy and other costs of the offices of the parent company of the ATWEC Railroads which were not acquired ($168,000) and retiree benefits retained by the selling railroads ($57,000). For the three months ended March 31, 1996, represents the elimination of transaction bonuses ($286,000), severance payments ($920,000), occupancy and other costs of the offices of the parent company of the ATWEC Railroads which were not acquired ($77,000) and retiree benefits retained by the selling railroads ($8,000).
2. Represents the decrease in depreciation expense resulting from a decrease in the depreciable basis and a change in the depreciable lives of certain assets. Depreciation expense of CIMR and the ATWEC Railroads for the year ended December 31, 1995 and the three months ended March 31, 1996 was approximately $2,740,000 and $573,000, respectively. Pro forma depreciation expense of CIMR and the ATWEC Railroads, calculated on a straight-line basis, was approximately $1,200,000 and $173,000, respectively, or a difference of approximately $1,530,000 and $400,000, respectively. Pro forma depreciation expense was calculated using the composite depreciable lives utilized by the Company and the asset basis of the Illinois & Midland and Pittsburg & Shawmut Acquisitions.
3. Represents the increase in amortization expense for the year ended December 31, 1995 and the three months ended March 31, 1996 of approximately $179,000 and $20,000, respectively, resulting from a reduction in the amortization period for intangible assets, including the service assurance agreement from the acquisition of CIMR.
4. Represents a decrease in interest expense associated with the reduction of debt as a result of the Offering, plus the effect of the reduced interest expense associated with the replacement of CIMR's and the ATWEC Railroads' credit facilities with the Company's Credit Facilities. Included in the pro forma interest expense is approximately $94,000 of amortization of the debt discount associated with the Bank Warrant for the year ended December 31, 1995 and $10,000 for the three months ended March 31, 1996. The debt bears interest at an assumed rate of approximately 8.5%. Also included is the amortization of approximately $1,640,000 of debt financing fees over five years. An increase in the assumed interest rate of 1/8% would decrease net income by approximately $31,000 and $17,000 for the year ended December 31, 1995 and the three months ended March 31, 1996, respectively.
5. Represents the elimination of the write down of assets of CIMR and the ATWEC Railroads to the purchase price paid by the Company.
6. Represents the income tax effects of the pro forma adjustments. The Company's pro forma income tax rate is 40.6% for the year ended December 31, 1995 and 40.5% for the three months ended March 31, 1996.
7. Represents the elimination of assets (other than operating rail assets) and liabilities the ATWEC Railroads which the Company did not acquire or assume in connection with the Pittsburg & Shawmut Acquisition.
8. The total purchase price for the ATWEC Railroads of approximately $15,194,000 includes approximately $250,000 of costs related to the Pittsburg & Shawmut Acquisition. The purchase price was allocated to property and equipment, less the anticipated sale of assets of approximately $6,000,000.
9. Represents reduction of debt through the application of the estimated net proceeds of the Offering, after giving effect to the additional debt incurred by the Company in connection with the Pittsburg & Shawmut Acquisition.
10. Represents estimated net proceeds to the Company in the Offering of $34 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in connection with the Company's consolidated financial statements, related notes and other financial information included elsewhere in this Prospectus.
GENERAL
GWI is a holding company whose subsidiaries own and operate short line and regional freight railroads and provide related rail services. The Company generates revenues primarily from the movement of freight over track owned or operated by its railroads. The Company also generates non-freight revenues primarily by providing related rail services such as railcar leasing, railcar repair, switching and storage to shippers along its lines and to the Class I railroads that connect with its lines.
The Company's operating expenses include wages and benefits, equipment rents (including car hire), purchased services, depreciation and amortization, diesel fuel, casualties and insurance, materials and other expenses. Car hire is a charge paid by a railroad to the owners of railcars used by that railroad in moving freight. Other expenses generally include property and other non- income taxes, professional services, communication and data processing costs and general overhead expense.
When comparing the Company's results of operations from one reporting period to another, the following factors should be taken into consideration. First, in 1994 and 1995, the Company experienced a substantial decrease in revenues and operating income as a result of the collapse of Akzo's salt mine and subsequent loss of salt production. See "--Akzo Mine." Second, the Company has historically experienced fluctuations in revenues and expenses due to unpredictable events such as one-time freight moves, customer plant expansions and shut-downs, railcar sales, accidents and derailments. In periods when these events occur, results of operations are not easily comparable to other periods. Finally, much of the Company's growth to date has resulted from acquisitions and this growth has been "stair-step" in nature--periods with large revenue increases primarily as a result of these acquisitions, followed by periods of more gradual, incremental growth as the Company implements its marketing and operating strategies. The Company acquired two rail properties in 1993, one in 1994 and one in 1995. In addition, the Company completed the Illinois & Midland and Pittsburg & Shawmut Acquisitions during the first four months of 1996. See "Recent Developments." Because of variations in the structure, timing and size of these acquisitions and differences in economics among the Company's railroads resulting from differences in the rates and other material terms established through negotiation, the Company's results of operations in any reporting period may not be directly comparable to its results of operations in other reporting periods.
AKZO MINE
The major customer of one of the Company's railroads is Akzo, which operated a rock salt mine in Retsof, New York. In 1993, the last year the salt mine was fully operational, Akzo accounted for $9.7 million or 19.5% of the Company's operating revenues, $5.9 million or 15.2% of its freight revenues and $3.8 million or 37.0% of its non-freight revenues. In March 1994, a section of the mine's roof collapsed, causing flooding from an underground aquifer. The mine closed in September 1995. Akzo had previously announced its intention to construct a new mine. In anticipation of the construction of a new mine, the Company incurred approximately $600,000 of costs in connection with construction of a rail spur. Akzo announced in April 1996 that a new mine will not be constructed and that the Retsof location will be converted to a rock salt distribution center. While the Company anticipates that it will be reimbursed for these costs, there can be no assurance that such reimbursement will occur.
The Akzo mine flooding negatively affected the Company's freight revenues in 1994 and 1995. Freight revenues attributable to Akzo totaled $2.8 million in 1994 and $1.9 million in 1995. The Company anticipates that freight revenues attributable to Akzo will be minimal in 1996 and thereafter. The flooding has not affected non-freight revenues from Akzo, which consist primarily of income from railcar leases under long-term contracts. Non-freight revenues from Akzo totaled $2.9 million in 1995 compared to $3.6 million in 1994.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31,
1995
Operating Revenues
Operating revenues were $16.6 million in the first three months of 1996 compared to $13.4 million in the first three months of 1995, an increase of $3.2 million or 24.0%. The increase was attributable to a $2.4 million increase in freight revenues and an $834,000 increase in non-freight revenues.
Freight revenues were $13.0 million in the first three months of 1996 compared to $10.6 million in the first three months of 1995, an increase of $2.4 million or 22.6%. The following table compares freight revenues, carloads and average freight revenues per carload for the first three months of 1995 and 1996:
FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
AVERAGE
FREIGHT
REVENUES
FREIGHT REVENUES CARLOADS PER CARLOAD
---------------------------- -------------------------- -----------
% OF % OF % OF % OF
COMMODITY GROUP 1995 TOTAL 1996 TOTAL 1995 TOTAL 1996 TOTAL 1995 1996
- --------------- ------- ----- ------- ----- ------ ----- ------ ----- ----- -----
(DOLLARS IN THOUSANDS)
Coal, Coke & Ores....... $ 694 6.6% $ 3,007 23.2% 3,324 10.7% 11,941 30.3% $209 $252
Petroleum Products...... 2,125 20.1 2,270 17.5 4,383 14.2 4,542 11.6 485 500
Pulp & Paper............ 1,691 16.0 1,793 13.8 4,610 14.9 4,772 12.1 367 376
Lumber & Forest Prod-
ucts................... 1,051 9.9 1,269 9.8 3,102 10.0 4,123 10.5 339 308
Metals.................. 1,065 10.1 1,220 9.4 4,098 13.2 4,715 12.0 260 259
Chemicals & Plastics.... 1,008 9.5 967 7.5 2,078 6.7 1,841 4.7 485 525
Farm & Food Products.... 508 4.8 787 6.1 1,468 4.7 2,282 5.8 346 345
Autos & Auto Parts...... 582 5.5 764 5.9 1,085 3.5 1,463 3.7 536 522
Minerals & Stone........ 394 3.7 277 2.1 1,007 3.3 915 2.3 391 303
Salt.................... 1,125 10.7 72 0.6 4,057 13.1 388 1.0 277 186
Other................... 327 3.1 528 4.1 1,754 5.7 2,363 6.0 186 223
------- ----- ------- ----- ------ ----- ------ ----- ----- -----
Total.................. $10,570 100.0% $12,954 100.0% 30,966 100.0% 39,345 100.0% $341 $329
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|
The increase in freight revenues was largely attributable to the commencement of operations on Illinois & Midland, which generated freight revenues of $2.5 million, $2.3 million of which were revenues from the shipment of coal. A new line acquired in August 1995 in the Oregon region generated an additional $591,000 in revenues in the first three months of 1996, primarily from shipments of grain and lumber. Excluding freight revenues from the Akzo mine, freight revenues from all other operations increased $389,000. These increases offset the continuing effect of the loss of production at the Akzo mine. See "--Akzo Mine."
Total carloads were 39,345 in the first three months of 1996 compared to 30,966 in the first three months of 1995, an increase of 8,379 or 27.1%. The increase was attributable to 9,720 carloads transported by Illinois & Midland, which consisted primarily of coal and 2,682 carloads from a new Oregon line. These increases were offset by a decrease of 4,023 carloads from other operations, most of which were related to the closure of the Akzo mine.
Non-freight revenues were $3.7 million in the first three months of 1996 compared to $2.8 million in the first three months of 1995, an increase of $834,000 or 29.6%. Revenues from car hire and car rentals were $1.3 million in the first three months of 1996 compared to $818,000 in the first three months of 1995, an increase of $491,000 or 60.1%. This increase includes a gain on the sale of railcars of $593,000. Revenues from switching and storage activities were $1.1 million in the first three months of 1996 compared to $821,000 in the first three months of 1995, an increase of $307,000 or 37.4%. The increase reflects the effect of increased capacity at the Company's railcar storage facility in 1996 compared to 1995, and switching revenues generated by Illinois & Midland.
Operating revenues per carload were $422 in the first three months of 1996 compared to $432 in the first three months of 1995, a decrease of $10 or 2.3%. The decrease is primarily due to the decline in average freight revenues per carload associated with increased coal shipments.
Operating Expenses
Operating expenses were $13.8 million in the first three months of 1996 compared to $11.9 million in the first three months of 1995, an increase of $1.9 million or 16.3%. Expenses associated with the Illinois & Midland Acquisition represented $1.4 million of the increase. The Company's operating ratio improved to 83.1% in the first three months of 1996 from 88.6% in the first three months of 1995.
The following table sets forth a comparison of the Company's operating expenses for the first three months of 1995 and 1996:
OPERATING EXPENSE COMPARISON
THREE MONTHS ENDED MARCH 31, 1995 AND 1996
1995 1996
----------------- -----------------
% OF % OF
OPERATING OPERATING
$ REVENUES $ REVENUES
------- --------- ------- ---------
(DOLLARS IN THOUSANDS)
Labor and benefits.......................... $ 4,764 35.6% $ 5,452 32.8%
Equipment rents............................. 1,884 14.1 1,880 11.3
Purchased services.......................... 779 5.8 780 4.7
Depreciation and amortization............... 926 6.9 1,340 8.1
Diesel fuel................................. 892 6.7 1,065 6.4
Casualties and insurance.................... 635 4.7 1,157 7.0
Materials................................... 881 6.6 706 4.3
Other....................................... 1,104 8.2 1,414 8.5
------- ---- ------- ----
Total..................................... $11,865 88.6% $13,794 83.1%
======= ==== ======= ====
|
Labor and benefits expense was $5.5 million in the first three months of 1996 compared to $4.8 million in the first three months of 1995, an increase of $688,000 or 14.4%, primarily due to the commencement of operations on Illinois & Midland. Labor costs decreased as a percentage of revenues, however, to 32.8% in the first three months of 1996 from 35.6% in the first three months of 1995. The decrease reflects the efficiency of the unit coal train operations on Illinois & Midland.
Depreciation and amortization expense was $1.3 million in the first three months of 1996 compared to $926,000 in the first three months of 1995, an increase of $414,000 or 44.7%. The increase reflects depreciation and amortization related to the Illinois & Midland Acquisition and the depreciation of rolling stock purchased during the second and third quarters of 1995. Casualties and insurance expense was $1.2 million in the first three months of 1996 compared to $635,000 in the first three months of 1995, an increase of $522,000 or 82.2%. The majority of this increase reflects increased derailment expenses.
Interest Expense and Income Taxes
Interest expense in the first three months of 1996 was $1.3 million compared to $766,000 in the first three months of 1995, an increase of $507,000 or 66.2%. The increase reflects the higher overall debt outstanding due to the financing of the Illinois & Midland Acquisition and the financing of rolling stock. The Company's effective income tax rate was 40.5% in the first three months of 1996 compared to 42.0% in the first three months of 1995.
Net Income
The Company's net income in the first three months of 1996 was $965,000 compared to $502,000 in the first three months of 1995, an increase of $463,000 or 92.0%.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Operating Revenues
Operating revenues were $53.4 million in 1995 compared to $55.4 million in 1994, a decrease of $2.0 million or 3.7%. This decrease was attributable to a $1.4 million decrease in non-freight revenues coupled with a $633,000 decrease in freight revenues.
Freight revenues were $42.4 million in 1995 compared to $43.0 million in 1994, a decrease of $633,000 or 1.5%. The following table compares freight revenues, carloads and average freight revenues per carload for 1994 and 1995:
FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
YEARS ENDED DECEMBER 31, 1994 AND 1995
AVERAGE
FREIGHT
REVENUES
FREIGHT REVENUES CARLOADS PER CARLOAD
---------------------------- ---------------------------- -----------
% OF % OF % OF % OF
COMMODITY GROUP 1994 TOTAL 1995 TOTAL 1994 TOTAL 1995 TOTAL 1994 1995
- --------------- ------- ----- ------- ----- ------- ----- ------- ----- ----- -----
(DOLLARS IN THOUSANDS)
Coal, Coke & Ores....... $ 2,828 6.6% $ 2,656 6.3% 12,867 10.8% 12,398 10.5% $ 220 $ 214
Petroleum Products...... 8,341 19.4 8,487 20.0 17,186 14.4 17,559 14.8 485 483
Pulp & Paper............ 6,354 14.8 6,797 16.1 17,070 14.3 18,667 15.7 372 364
Lumber & Forest Prod-
ucts................... 4,610 10.7 4,496 10.6 13,711 11.5 14,022 11.8 336 321
Metals.................. 4,862 11.3 4,459 10.5 16,606 14.0 17,014 14.3 293 262
Chemicals & Plastics.... 3,673 8.6 3,321 7.9 5,942 5.0 6,641 5.6 618 500
Farm & Food Products.... 2,112 4.9 2,756 6.5 6,525 5.5 5,778 4.9 324 477
Autos & Auto Parts...... 3,960 9.2 3,490 8.2 6,624 5.6 6,381 5.4 598 547
Minerals & Stone........ 1,860 4.3 1,407 3.3 5,037 4.2 4,189 3.5 369 336
Salt.................... 2,835 6.6 2,215 5.2 10,621 8.9 7,865 6.6 267 282
Other................... 1,550 3.6 2,268 5.4 6,862 5.8 8,159 6.9 226 278
------- ----- ------- ----- ------- ----- ------- ----- ----- -----
Total.................. $42,985 100.0% $42,352 100.0% 119,051 100.0% 118,673 100.0% $ 361 $ 357
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The decrease in freight revenues was largely attributable to the continuing effect of the loss of production at the Akzo mine. See "--Akzo Mine." Freight revenues from Akzo totaled $1.9 million in 1995 on 6,934 carloads compared to $2.8 million on 10,423 carloads in 1994. Excluding Akzo, total carloads increased by 3,111 or 2.9% in 1995 compared to 1994, while total freight revenues increased $233,000 or 0.6% in 1995 compared to 1994. In 1995, the Company realized $673,000 in additional freight revenues attributable to the acquisition of a new rail line in the Oregon region. This increase was partially offset by a $470,000 decrease in freight revenues from autos and auto parts to $3.5 million in 1995 from $4.0 million in 1994. Freight revenues from autos and auto parts in 1994 included a large one-time move of finished vehicles diverted to the Company by another carrier, which was not repeated in 1995.
Non-freight revenues were $11.0 million in 1995 compared to $12.4 million in 1994, a decrease of $1.4 million or 11.2%. Revenues from car hire and car rentals were $3.2 million in 1995 compared to $5.2 million in 1994, a decrease of $2.0 million or 38.7%. Revenues from car hire and rentals were unusually high in 1994 due to a gain on the sale of railcars. The Company also had a reduced operating fleet in 1995 as a result of a sale of railcars in 1994, which reduced rental revenue. Revenues from switching and storage activities were $3.6 million in 1995 compared to $2.7 million in 1994, an increase of $934,000 or 34.5%. The increase reflects the operation of the Company's railcar storage facility for a full year. Car repair revenues were $1.6 million in 1995 compared to $1.9 million in 1994, a decrease of $349,000 or 18.3%. The decrease was attributable to a lower number of cars required to haul salt and the improvement in the quality of cars received in interchange.
Operating revenues per carload were $450 in 1995 compared to $466 in 1994, a decrease of $16 or 3.4%. The $1.4 million decrease in non-freight revenues accounts for $12 of the per carload decline. The remainder is attributable to a $4 decrease in average freight revenues per carload.
Operating Expenses
Operating expenses were $46.8 million in 1995 compared to $47.4 million in 1994, a decrease of $565,000 or 1.2%. The Company's operating ratio increased to 87.7% in 1995 from 85.5% in 1994.
The following table sets forth a comparison of the Company's operating expenses in 1994 and 1995:
OPERATING EXPENSE COMPARISON
YEARS ENDED DECEMBER 31, 1994 AND 1995
1994 1995
----------------- -----------------
% OF % OF
OPERATING OPERATING
$ REVENUES $ REVENUES
------- --------- ------- ---------
(DOLLARS IN THOUSANDS)
Labor and benefits....................... $18,092 32.6% $18,683 35.0%
Equipment rents.......................... 8,634 15.6 7,434 13.9
Purchased services....................... 2,737 4.9 2,530 4.7
Depreciation and amortization............ 3,577 6.5 3,887 7.3
Diesel fuel.............................. 3,410 6.2 3,249 6.1
Casualties and insurance................. 2,742 5.0 3,673 6.9
Materials................................ 3,401 6.1 2,531 4.7
Other.................................... 4,788 8.6 4,828 9.1
------- ---- ------- ----
Total.................................. $47,381 85.5% $46,815 87.7%
======= ==== ======= ====
|
Labor and benefits expense was $18.7 million in 1995 compared to $18.1 million in 1994, an increase of $591,000 or 3.3%. Labor costs increased as a percentage of revenues to 35.0% in 1995 compared to 32.6% in 1994. The increase was attributable to the start-up costs in connection with additional lines in Oregon and expansion of operations in Texas.
Equipment rents were $7.4 million in 1995 compared to $8.6 million in 1994, a decrease of $1.2 million or 13.9%. The decrease reflects a reduction in the number of operating leases and lower car hire expense. In 1995, the Company purchased railcars and locomotives subject to an operating lease, which reduced equipment rent expense under this operating lease to $606,000 in 1995 compared to $1.7 million in 1994. Car hire expense decreased to $4.2 million in 1995 compared to $5.4 million in 1994, reflecting a concerted management effort to reduce this expense. Depreciation expense was $3.9 million in 1995 compared to $3.6 million in 1994, an increase of $310,000 or 8.7%. The majority of this increase reflects depreciation expense associated with railcars and locomotives purchased in 1995.
Casualties and insurance expense, including claims brought under the Federal Employers' Liability Act, was $3.7 million in 1995 compared to $2.7 million in 1994, an increase of $931,000 or 34.0%. Additions to reserves for third party liability were $1.4 million in 1995 compared to $669,000 in 1994, an increase of $736,000. The majority of the increase in 1995 related to incidents occurring prior to 1995. While the Company establishes reserves for incidents as they occur, an unexpected legal action brought in 1995, together with changes in circumstances relating to prior incidents, necessitated this increase. In August 1994, the Company reduced its self-insured retention. If this level of coverage had been in place when these incidents occurred, necessary additions to reserves in 1995 would have been reduced by $400,000. The remainder of the increase in casualties and insurance expense reflects an increase in derailment expense.
Materials expense was $2.5 million in 1995 compared to $3.4 million in 1994, a decrease of $870,000 or 25.6%. The decrease was largely attributable to a reduction in car repairs.
Interest Expense and Income Taxes
Interest expense was $3.4 million in 1995 compared to $3.2 million in 1994, an increase of $193,000 or 6.0%. The increase reflects higher overall debt outstanding related to the financing of rolling stock. During 1995, the Company refinanced the majority of its outstanding debt into the Credit Facilities, resulting in an effective
rate of interest that was lower than in 1994. See "--Liquidity and Capital Resources." Penalties and fees paid to lenders related to the repayment of debt resulted in an extraordinary charge of $494,000, net of related income taxes of $357,000. The Company's effective income tax rate was 40.6% in 1995 compared to 40.0% in 1994.
Net Income
The Company's net income in 1995 was $1.7 million (or $2.2 million before an extraordinary expense of $494,000 in connection with the early extinguishment of debt) compared to net income in 1994 of $3.0 million. Excluding the effect of this extraordinary expense, net income in 1995 decreased $860,000 or 28.6% compared to 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Operating Revenues
Operating revenues were $55.4 million in 1994 compared to $49.6 million in 1993, an increase of $5.8 million or 11.6%. Of this increase, $4.0 million was attributable to increases in freight revenues and $1.7 million was attributable to increases in non-freight revenues.
Freight revenues were $43.0 million in 1994 compared to $39.0 million in 1993, an increase of $4.0 million or 10.3%. The following table compares freight revenues, carloads and average freight revenues per carload for 1993 and 1994:
FREIGHT REVENUES AND CARLOADS COMPARISON BY COMMODITY GROUP
YEARS ENDED DECEMBER 31, 1993 AND 1994
AVERAGE
FREIGHT
REVENUES
FREIGHT REVENUES CARLOADS PER CARLOAD
---------------------------- ---------------------------- -----------
% OF % OF % OF % OF
COMMODITY GROUP 1993 TOTAL 1994 TOTAL 1993 TOTAL 1994 TOTAL 1993 1994
- --------------- ------- ----- ------- ----- ------- ----- ------- ----- ----- -----
(DOLLARS IN THOUSANDS)
Coal, Coke & Ores....... $ 3,514 9.0% $ 2,828 6.6% 15,915 13.8% 12,867 10.8% $ 221 $ 220
Petroleum Products...... 8,202 21.1 8,341 19.4 16,946 14.7 17,186 14.4 484 485
Pulp & Paper............ 4,360 11.2 6,354 14.8 11,789 10.2 17,070 14.3 370 372
Lumber & Forest Prod-
ucts................... 3,208 8.2 4,610 10.7 10,020 8.7 13,711 11.5 320 336
Metals.................. 3,137 8.1 4,862 11.3 13,626 11.8 16,606 14.0 230 293
Chemicals & Plastics.... 2,766 7.1 3,673 8.6 4,446 3.9 5,942 5.0 622 618
Farm & Food Products.... 1,259 3.2 2,112 4.9 3,960 3.4 6,525 5.5 318 324
Autos & Auto Parts...... 1,152 3.0 3,960 9.2 2,206 1.9 6,624 5.6 522 598
Minerals & Stone........ 1,664 4.3 1,860 4.3 5,558 4.8 5,637 4.2 300 369
Salt.................... 5,980 15.3 2,835 6.6 24,525 21.3 10,621 8.9 244 267
Other................... 3,711 9.5 1,550 3.6 6,310 5.5 6,862 5.8 588 226
------- ----- ------- ----- ------- ----- ------- ----- ----- -----
Total.................. $38,953 100.0% $42,985 100.0% 115,301 100.0% 119,051 100.0% $ 338 $ 361
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The increase in freight revenues was attributable to a 3.3% increase in carloads, to 119,051 in 1994 from 115,301 in 1993, combined with a 6.8% increase in average freight revenues per carload, to $361 in 1994 from $338 in 1993. The increase in carloads occurred despite the collapse of Akzo's salt mine which significantly decreased production from the mine. The loss of production was primarily responsible for a 52.6% decrease in the Company's freight revenues attributable to shipments of salt, to $2.8 million in 1994 from $6.0 million in 1993. See "--Akzo Mine."
Total carloads of commodities other than salt were 108,430 in 1994 compared to 90,776 in 1993, an increase of 17,654 or 19.4%. Autos and auto parts shipments increased by 4,418 carloads due to new contracts with Canadian auto plants and a large short-term movement of finished vehicles diverted to the Company by another carrier. Pulp and paper shipments increased by 5,281 carloads due to plant expansion and increased production from plants located on the Company's lines. Shipments of lumber and forest products increased by 3,691
carloads primarily due to a new contract with a paper mill. These increases were offset by a 3,048 carload decrease in shipments of coal, coke and ores in 1994 compared to 1993 primarily due to lower shipments to a Canadian utility.
Non-freight revenues were $12.4 million in 1994 compared to $10.7 million in 1993, an increase of $1.7 million or 16.3%. Revenues from car hire and car rentals were $5.2 million in 1994 compared to $4.4 million in 1993, an increase of $792,000 or 17.8%. The increase was primarily attributable to a gain on the sale of railcars. Railcar repair revenue was $1.9 million in 1994 compared to $1.5 million in 1993, an increase of $373,000 or 24.3%. This increase was primarily attributable to the increased volume of freight traffic in 1994. Other non-freight revenues were $5.3 million in 1994 compared to $4.7 million in 1993, an increase of $579,000 or 12.3%. The increase was primarily due to higher demurrage and storage charges and easement sales.
Operating revenues per carload were $466 in 1994 compared to $431 in 1993, an increase of $35 or 8.1%. The increase reflects a $23 increase in average freight revenues per carload combined with the $1.7 million increase in non- freight revenues.
Operating Expenses
Operating expenses were $47.4 million in 1994 compared to $43.5 million in 1993, an increase of $3.9 million or 8.9%. The Company's operating ratio improved to 85.5% in 1994 from 87.6% in 1993.
The following table sets forth a comparison of the Company's operating expenses in 1993 and 1994:
OPERATING EXPENSE COMPARISON
YEARS ENDED DECEMBER 31, 1993 AND 1994
1993 1994
----------------- -----------------
% OF % OF
OPERATING OPERATING
$ REVENUES $ REVENUES
------- --------- ------- ---------
(DOLLARS IN THOUSANDS)
Labor and benefits....................... $16,499 33.2% $18,092 32.6%
Equipment rents.......................... 6,726 13.5 8,634 15.6
Purchased services....................... 3,407 6.9 2,737 4.9
Depreciation and amortization............ 3,115 6.3 3,577 6.5
Diesel fuel.............................. 2,788 5.6 3,410 6.2
Casualties and insurance................. 2,446 4.9 2,742 5.0
Materials................................ 3,680 7.4 3,401 6.1
Other.................................... 4,840 9.8 4,788 8.6
------- ---- ------- ----
Total.................................. $43,501 87.6% $47,381 85.5%
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Labor and benefits expense was $18.1 million in 1994 compared to $16.5 million in 1993, an increase of $1.6 million or 9.7%. However, labor and benefits expense decreased as a percentage of operating revenues to 32.6% in 1994 from 33.2% in 1993.
Equipment rents were $8.6 million in 1994 compared to $6.7 million in 1993, an increase of $1.9 million or 28.3%. Equipment rents increased as a percentage of operating revenues to 15.6% in 1994 from 13.5% in 1993. The increase was primarily due to higher car hire costs resulting from the change in mix of commodities hauled. The Company's railroads pay minimal car hire on shipments of minerals, which declined from 1993 to 1994, but pay relatively high car hire fees on shipments of autos and auto parts, which increased from 1993 to 1994.
Purchased services expense was $2.7 million in 1994 compared to $3.4 million in 1993, a decrease of $670,000 or 19.7%. Purchased services expense decreased as a percentage of operating revenues to 4.9% in 1994
from 6.9% in 1993. The decrease was attributable to a reduction in contracted maintenance of way expense and a reduction in repairs performed by third parties on railcars owned or leased by GWI railroads.
Diesel fuel expense was $3.4 million in 1994 compared to $2.8 million in 1993, an increase of $622,000 or 22.3%. Diesel fuel expense increased as a percentage of operating revenues to 6.2% in 1994 from 5.6% in 1993. The increase was caused by an increase in fuel prices and severe winter weather conditions in 1994.
Other expense was $4.8 million in both 1994 and 1993, but decreased as a percentage of operating revenues to 8.6% in 1994 from 9.8% in 1993 as a result of the relatively fixed nature of these expenses. Other expense included write-offs of other assets of $675,000 and $180,000 in 1994 and 1993, respectively, both as a result of rail line abandonments.
Interest Expense and Income Taxes
Interest expense was $3.2 million in 1994 compared to $2.9 million in 1993, an increase of $348,000 or 12.2%. The increase reflects generally higher interest rates on the Company's debt in 1994. The Company's effective income tax rate decreased to 40.0% in 1994 from 41.5% in 1993 due to lower state and other income taxes.
Net Income
The Company's net income in 1994 was $3.0 million compared to net income in 1993 of $1.6 million (or $2.0 million before a cumulative change of accounting for postretirement benefits of $393,000). Excluding the effect of the accounting change, net income in 1994 increased $994,000 or 49.3% compared to 1993.
LIQUIDITY AND CAPITAL RESOURCES
During the first three months of 1996, the Company generated cash from operations of $6.0 million, which includes the effect of a $3.5 million increase in net trade payables associated with the commencement of operations of Illinois & Midland. In addition, the Company received $1.6 million in proceeds from the sale of equipment and invested $970,000 in track and other fixed assets (apart from its investment in the Illinois & Midland Acquisition).
During 1995, the Company generated cash from operations of $2.6 million, generated cash from asset sales of $318,000, received $3.5 million in state grant funds for track rehabilitation, and had net new borrowings of $6.7 million. During the year the Company invested $8.6 million in equipment and rolling stock and $8.0 million in track maintenance and buildings.
During 1994, the Company generated cash from operations of $7.3 million and cash from asset sales of $824,000, and received $1.8 million in state grants for rehabilitation of track. The cash generated was used to fund $6.2 million in capital expenditures and to repay a net $2.5 million in long-term debt and capital leases. Track and track structures accounted for $5.3 million of these capital expenditures, while the balance was invested in equipment.
The Company has budgeted $7.3 million in capital expenditures in 1996, primarily for track rehabilitation, of which $970,000 was expended during the first three months of 1996. In connection with its lease of a rail line, one of the Company's railroads has committed to install a minimum of five miles of 100 lb. rail or better in each of the next five years. The annual cost of this obligation is included in the 1996 capital budget.
In June 1995, the Company borrowed under the Credit Facilities to restructure a majority of its long-term debt and finance the purchase of rail equipment. The Company repaid $14.3 million in debt maturing at various dates between 1996 and 2001 and bearing interest rates ranging from 6.75% to 15.0% per annum, including the repayment of $701,000 in debt held by or for the benefit of directors and officers of the Company and members of their respective families. See "Certain Transactions." The Company borrowed $6.0 million under the Credit Facilities to purchase rolling stock which had been under an operating lease.
At March 31, 1996, the Company had long term debt (including current portion) totaling $66.2 million, which comprised 84.7% of its total capitalization. This compares to long term debt of $39.9 million, comprising
79.1% of total capitalization at December 31, 1995, and long term debt of $32.6 million, comprising 78.2% of total capitalization, at December 31, 1994.
In February 1996, the Company amended and restated its Credit Facilities to provide funding for the Illinois & Midland and Pittsburg & Shawmut Acquisitions. As amended, the Credit Facilities include a $40.0 million term loan and a $34.0 million revolving credit facility. The term loan requires varying quarterly principal payments beginning September 30, 1996, with the remaining balance payable in February 2001. The revolving credit facility provides for a mandatory commitment reduction of $2.0 million on December 31, 1997 with the remaining balance payable in February 2001. The interest rate on the facilities is a varying increment over the Bank of Boston's prime rate or LIBOR, based on the Company's ratio of debt to EBITDA. The Credit Facilities are secured by a blanket first-priority lien on all of the Company's railroad assets except real estate, and a pledge of all capital stock of the Company's subsidiaries. In conjunction with the financing, the Company paid a fee to the Bank of Boston of $1.5 million and issued the Bank Warrant. See "Description of Capital Stock--Bank Warrant."
The Company's railroads have entered into a number of rehabilitation grants with state and federal agencies. The grant funds are used as a supplement to the Company's normal capital programs. In return for the grants, the railroads pledge to maintain various levels of service and maintenance on the rail lines that have been rehabilitated. The Company believes that the levels of service and maintenance required under the grants are not materially different from those that would be required without the grant obligation. While the Company has benefited in recent years from these grant funds, there can be no assurance that the funds will continue to be available.
The Company has historically relied primarily on cash generated from operations to fund working capital and capital expenditures relating to ongoing operations, while relying on borrowed funds to finance acquisitions and equipment needs (primarily rolling stock) related to acquisitions. The Company believes that its cash flow from operations together with available amounts under the Credit Facilities will enable the Company to meet its liquidity and capital expenditure requirements relating to ongoing operations for at least the next four years.
INFLATION
In recent years, inflation has not had a significant impact on the Company's operations. The Company's contracts with connecting carriers typically include clauses that adjust the rates based on specific inflation factors.
SEASONALITY
Historically, the Company's operating revenues from existing operations have not been subject to significant seasonal changes.
ACCOUNTING MATTERS
Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The cumulative effect of the accounting change resulted in an after-tax charge to 1993 earnings of $393,000. The Company does not provide postemployment benefits to its employees. Accordingly, the adoption of Statement of Financial Accounting Standards No. 112 "Employers' Accounting for Postemployment Benefits" will have no effect on the Company.
The Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" (effective for fiscal years beginning after December 15, 1995), in the first quarter of 1996. The adoption did not have a material impact on the Company.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock- based Compensation" (effective for fiscal years beginning after December 15, 1995) encourages, but does not require, employers to adopt a fair value method of accounting for employee stock-based compensation, and requires increased stock-based compensation disclosures if the fair value method is not adopted. The Company does not intend to elect the fair value method for stock options. Accordingly, implementation of this Statement will have no effect on the Company's operating results or financial condition.
BUSINESS
The Genesee and Wyoming Railroad Company, the Company's predecessor, was founded in 1899 by E.L. Fuller and his partners. From its founding through 1977, the Company was dependent on a single commodity, salt, produced by a single customer. In 1977, when Mortimer B. Fuller, III purchased a controlling interest in the Company and became its Chief Executive Officer, the Company generated $3.9 million in operating revenues over its 14 miles of track. In 1978, under the leadership of Mr. Fuller, the Company began a strategy of diversifying its sources of revenues, initially in the railcar leasing business and then through rail line acquisitions. As a result of the Company's acquisition and marketing strategies, the Company has become a diversified rail operation extending over approximately 1,500 miles of track and serving over 280 customers in six states. In 1995, the Company generated $53.4 million in operating revenues.
INDUSTRY OVERVIEW
The railroad industry in the United States has undergone significant change since the passage of the Staggers Rail Act of 1980 (the "Staggers Rail Act"), which deregulated the pricing and types of services provided by railroads. Since 1980, Class I railroads in the United States and Canada have taken aggressive steps to improve profitability and recapture market share. In furtherance of that goal, these Class I railroads have focused their management and capital resources on their long-haul core systems, and certain of them have sold branch lines to smaller and more cost-efficient rail operators that are willing to commit the resources necessary to meet the needs of the shippers located on these lines. Divestment of branch lines enables Class I carriers to minimize incremental capital expenditures, concentrate traffic density, improve operating efficiency and avoid traffic losses associated with rail line abandonment.
The commitment of Class I carriers to increase efficiency and profitability has also led to an increase in merger activity among long haul railroads, such as the mergers between Union Pacific Corporation and Chicago and North Western Holdings Corp. and between Burlington Northern Inc. and Santa Fe Pacific Corporation, and the pending merger between Union Pacific Corporation and Southern Pacific Rail Corporation. Such merger activity is expected to lead to additional short line divestments, as overlapping routes are sold and the merged railroads seek to achieve operational synergies.
The Company believes that there will continue to be opportunities to acquire lines from Class I railroads in the United States and that there may be opportunities to make acquisitions among the over 500 existing short line and regional railroads. The Company believes there may be acquisition opportunities in Canada and Mexico as well, although governmental regulations may limit acquisition opportunities in these countries. Both Canadian National Railway Company and Canadian Pacific Limited have divestment programs, and Mexico has announced a privatization program of the National Railroad of Mexico which could include the disposition of rail lines.
Since 1980, more than 300 short line and regional railroads, operating approximately 36,500 miles of track, have been created, largely through divestments and other dispositions of track by Class I railroads. Reflecting the downsizing and operations rationalization that has been occurring among the Class I railroads, the proportion of total track miles operated by short line and regional railroads in the United States has increased from approximately 15% of total track miles in 1980 to approximately 27% in 1994 (the latest year for which information is available).
STRATEGY
The Company's strategy is to become the dominant provider of rail freight transportation in the markets it serves by (i) growing its business through acquisitions to establish new regions or increase its presence in existing regions, (ii) expanding its revenue base within each region through marketing efforts, and (iii) improving its operating efficiency through rationalization and consolidation of overhead expenses. The Company's growth to date has been the result of the acquisition of rail properties, which has expanded the Company's customer base and diversified its commodity mix, and its marketing efforts. The Company intends to continue to grow its business in each of its four regions and to acquire rail properties in new regions to build on its experience and further diversify its geographic and customer base.
Acquisition of Rail Properties
The Company seeks to expand its business through the selective acquisition of rail properties, both in new regions and in regions in which it currently operates. The Company's fundamental acquisition strategy is to identify properties that have large industrial customers which will provide the Company with a stable revenue base and the potential to generate incremental revenues and additional customers upon implementation of a focused marketing plan. In new regions, the Company targets rail properties that have adequate size to establish a presence in the region, provide a basis for growth in the region and attract qualified management. When acquiring rail properties in its existing regions, in addition to seeking properties with large industrial customers, the Company targets rail properties where it believes the successful implementation of its operating strategy is likely to generate significant operating efficiencies.
In evaluating acquisition opportunities, the Company considers, among other matters, the size of the rail operations, opportunities for expansion, commodity and customer diversification, revenue stability, connecting carriers, track condition and maintenance requirements, and expected financial returns. The Company also considers acquisition opportunities that have the potential to enable its railroads to provide better or more cost-effective service to major shippers or to increase and diversify the overall customer base of its railroads. The Company develops acquisition prospects through its relationships with Class I carriers and its reputation in the industry. In addition, the Company currently has four consultants on retainer to assist in the identification and development of acquisition opportunities. The Company has successfully integrated eleven acquisitions of varying sizes and operating characteristics, of which four were existing short lines and seven were Class I divestitures.
The Company acquires rail properties by purchase of assets, lease or operating contract. Typically, the Company bids against other short line and regional operators for available properties. The structure of each transaction is determined by the seller based upon economic and strategic considerations. In addition to the financial terms of the transaction, sellers consider more subjective criteria such as a prospective acquiror's operating experience, its reputation among shippers, and its ability to close a transaction and commence operations smoothly. The Company believes it has established an excellent record in each of these areas. In addition, by growing revenues on its acquired lines and providing improved service to shippers, the Company is able to provide increased revenue to the Class I carriers that connect with its lines. The Company sees this ability to provide increased revenue to Class I carriers as an advantage in bidding for properties.
Marketing
The Company's marketing strategy is to build each region on a base of major industrial customers, to grow that base business through marketing efforts directed at its major customers and to generate incremental revenues outside the base of major customers by attracting smaller customers and providing ancillary services which generate non-freight revenues. The Company believes that over the long term, its strategy of building its regions around a core of major industrial customers provides a stable revenue base and allows the Company to focus its efforts on additional growth opportunities within a region. Of the 13 customers that generated freight revenues in excess of $1 million in 1995, all but two depend exclusively on the Company for rail service to support their facilities, and the Company believes that each of these facilities is strategically important to the respective customers. While the other two customers are not dependent on the Company, the Company's railroads provide the best route for them to move their products by rail. Through implementation of its marketing strategy, the Company intends to increase further the number of major customers so that, over time, the Company's reliance on any one customer will be reduced.
Consistent with its decentralized management structure, the Company's sales and marketing activity is coordinated in each region by a marketing manager. The marketing manager works closely with personnel of each of the Company's railroads and with other department heads to develop marketing plans to increase shipments from existing customers and develop new business. The Company focuses on providing rail service to its customers that is easily accessible, reliable and cost-effective. The Company considers all of its employees to be customer service representatives and encourages them to initiate and maintain regular contact with shippers.
Because most of the traffic transported by the Company's railroads is interchanged with Class I carriers, the Company's marketing efforts are often aimed at enhancing its railroads' relationships with Class I carriers as well as shippers. The Company provides related rail services such as railcar leasing, railcar repair, switching, storage, weighing and blocking and bulk transfer, which enable Class I carriers and customers to move freight more easily and cost-effectively. For example, the Company supplies cars to its customers or its railroads when, among other things, a customer has a need which cannot be filled by cars supplied by Class I railroads or the Company has an opportunity to provide cars on a cost basis that both meets customer needs and improves the economics of a freight move to the Company. The Company actively manages its railcar portfolio, buying and selling equipment to take advantage of changes in market value in conjunction with changes in its customers needs.
Operations
The Company's operating strategy is to increase efficiency and profitability in each region in which it operates. When acquiring new rail properties within an existing region, the Company capitalizes on operating efficiencies created by the presence of its other railroads within that region. For example, in connection with the Pittsburg & Shawmut Acquisition, the Company will be able to liquidate 42 miles of track and sell a number of locomotives and railcars. In addition, consolidation of revenue and accounting functions often allows the Company to operate new railroads with fewer employees, as was the case with both the Illinois & Midland and Pittsburg & Shawmut Acquisitions. The Company rationalizes its track, where appropriate, to make its operations more efficient. Abandonments are planned on Buffalo & Pittsburgh, Louisiana & Delta and Pittsburg & Shawmut in 1996 and 1997. The Company also seeks and grants trackage rights to improve regional rail infrastructure efficiency.
The Company intends to continue to improve the operating efficiency of its railroads by track rehabilitation, especially where maintenance has been deferred by the prior owner. Because of the importance of certain of the Company's shippers to the economic stability and or development of the regions where they are located, and because of the importance of certain of the Company's railroads to the economic infrastructure of those regions, approximately $17.5 million in state and federal grants for track rehabilitation and service improvements has been invested in the Company's rail properties since 1987.
RAILROAD OPERATIONS
Management
The Company's decentralized management structure is an important element of its railroad operations. The Company's Chief Executive Officer and Chief Financial Officer have responsibility for overall strategic and financial planning. Significant operational discretion is given to local management of the Company's railroads, with each regional Senior Vice President responsible for implementing a strategic plan for the region based on annual budgets, quarterly reviews and incentive compensation tied to results. Regional Senior Vice Presidents and local managers also have specific operational objectives for continuous improvement such as reducing car hire expense or on-the-job lost time injuries. The plan for each region is updated annually and constitutes a basis for incentive compensation. Each railroad is given significant freedom in pricing, staffing, purchasing, marketing and operations, enabling the railroad's management to be more responsive to customer needs and emerging business opportunities. Managers from all regions meet periodically to discuss operational matters such as marketing, safety and locomotive acquisition and maintenance. Senior management of the Company also meets monthly to review each railroad's operations.
The Company believes that through its decentralized management structure it has developed a culture that encourages employees to take initiative and responsibility which is rewarded through performance-based profit sharing and bonus programs.
Customers
The Company's railroads serve over 280 customers in its four operating regions. Through 1995, the Company's largest customer was Akzo, which accounted for approximately 20% of operating revenues in 1993,
12% in 1994 and 9% in 1995. Since 1994, revenues from Akzo have been negatively affected by the flooding of the Akzo mine. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Akzo Mine." As a result of the Illinois & Midland Acquisition, the Company anticipates that its largest customer in 1996 will be ComEd. The Company's ten largest customers accounted for 50% of operating revenues in 1995. These same ten customers accounted for 51.6% of operating revenues in 1994. Assuming continuation of the Company's acquisition strategy, management expects the Company's reliance on any one customer to diminish over time. The Company typically ships freight pursuant to transportation contracts among the Company, its connecting carriers and the shipper. These contracts are in accordance with industry norms and vary in duration from one to seven years.
In recent years, the Company has benefited from the expansion of customers' facilities on its railroads. For example, Willamette Industries recently completed a $600 million expansion of its paper mill in Johnsonburg, Pennsylvania, which contributed to a $1.6 million increase in freight revenues from 1993 to 1995. A $98 million expansion at Armco Advanced Materials Company's Butler, Pennsylvania plant contributed to an increase in freight revenues from Armco of $478,000 from 1993 to 1995.
Certain other customers have recently made or announced capital expansions at facilities served by the Company's railroads. Georgia Pacific's pulp and paper mill in Toledo, Oregon is undergoing a $100 million expansion that will increase capacity by 300 tons per day and also increase the input of raw materials. In 1995, Cascade Rolling Mills in McMinnville, Oregon began a two- phased investment of $42 million to construct and install a new wire rod and bar mill designed to roll an additional 500,000 tons per year. The Company believes it is well-positioned to realize an increase in freight revenues from these plant expansions. There can be no assurance, however, that these plant expansions, or the Company's marketing efforts, will lead to increased freight revenues.
Commodities
The Company's railroads transport a wide variety of commodities for their customers. Some of the Company's railroads have a well-diversified commodity mix while others transport one or two principal commodities. In 1995, pulp and paper and petroleum products were the two largest commodity groups transported by the Company's railroads, constituting 15.7% and 14.8%, respectively, of total carloads. On a pro forma basis after giving effect to both the Illinois & Midland Acquisition and the Pittsburg & Shawmut Acquisition, coal accounted for approximately 39.5% of total carloads in 1995. In 1996, the Company expects that coal will be the largest commodity transported by the Company's railroads as a result of the Illinois & Midland and Pittsburg & Shawmut Acquisitions. The following table summarizes the aggregate traffic volume of the Company's railroads by commodity group:
CARLOADS CARRIED BY COMMODITY GROUP
YEAR ENDED YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995 MARCH 31, 1996
------------------- ------------------- -------------------
COMMODITY CARLOADS % OF TOTAL CARLOADS % OF TOTAL CARLOADS % OF TOTAL
- --------- -------- ---------- -------- ---------- -------- ----------
Coal, Coke & Ores....... 12,867 10.8% 12,398 10.5% 11,941 30.3%
Pulp & Paper............ 17,070 14.3 18,667 15.7 4,772 12.1
Metals.................. 16,606 14.0 17,014 14.3 4,715 12.0
Petroleum Products...... 17,186 14.4 17,559 14.8 4,542 11.6
Lumber & Forest Prod-
ucts................... 13,711 11.5 14,022 11.8 4,123 10.5
Farm & Food Products.... 6,525 5.5 5,778 4.9 2,282 5.8
Chemicals & Plastics.... 5,942 5.0 6,641 5.6 1,841 4.7
Autos & Auto Parts...... 6,624 5.6 6,381 5.4 1,463 3.7
Minerals & Stone........ 5,037 4.2 4,189 3.5 915 2.3
Salt.................... 10,621 8.9 7,865 6.6 388 1.0
Other................... 6,862 5.8 8,159 6.9 2,363 6.0
------- ----- ------- ----- ------ -----
Total................. 119,051 100.0% 118,673 100.0% 39,345 100.0%
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Coal, coke and ores consist primarily of shipments of coal to utilities and industrial customers.
Pulp and paper consist primarily of inbound shipments of pulp and outbound shipments of kraft and fine papers.
Metals consist primarily of scrap metal and finished steel products shipped to and from two steel mills, and coated pipe.
Petroleum products consist primarily of fuel oil and crude oil.
Lumber and forest products consist primarily of finished lumber used in construction, particleboard used in furniture manufacturing, and wood chips and pulpwood used in paper manufacturing.
Farm and food products consist primarily of sugar, molasses, rice and other grains and fertilizer.
Chemicals and plastics consist primarily of various chemicals used in manufacturing.
Autos and auto parts consist primarily of finished automobiles.
Minerals and stone consist primarily of gravel and stone used in construction.
Salt consists of mined rock salt used for roadway ice control.
Rail Traffic
Rail traffic is classified as on-line or overhead traffic. On-line traffic is traffic that either originates or terminates with shippers located on a railroad and is interchanged with another rail carrier. On-line traffic that both originates and terminates on a railroad is referred to as local traffic. Overhead traffic neither originates nor terminates on a railroad, but rather passes over a railroad from one connecting carrier to another.
The Company believes that on-line shipments provide it with a stability of revenues because such traffic represents shipments to or from shippers located along its lines which cannot easily be diverted to other rail carriers. While overhead traffic is more easily diverted, it is less costly to handle. To offset the potential for diversion of overhead traffic, the Company has sought long-term contracts, based on a percentage of the shipper's annual rail volume, on its significant overhead traffic. In 1995, approximately two-thirds of GWI's overhead traffic was transported under such multi-year contracts. In 1995, 12.8% of freight revenues was generated by overhead traffic. On a pro forma basis after giving effect to both the Illinois & Midland Acquisition and the Pittsburg & Shawmut Acquisition, approximately 9.0% of freight revenues was generated by overhead traffic in 1995.
The following table summarizes freight revenues by type of traffic carried by the Company's railroads.
FREIGHT REVENUES BY TRAFFIC TYPE
YEAR ENDED YEAR ENDED THREE MONTHS
DECEMBER 31, 1994 DECEMBER 31, 1995 ENDED MARCH 31, 1996
------------------ ------------------ ---------------------
% OF % OF % OF
TRAFFIC TYPE AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
------------ --------- -------- --------- -------- ----------- ---------
(DOLLARS IN THOUSANDS)
On-line
Originated............ $ 18,784 43.7% $ 16,770 39.6% $ 3,862 29.8%
Terminated............ 16,504 38.4 17,104 40.4 6,836 52.8
Local................. 1,964 4.6 3,068 7.2 1,035 8.0
--------- ------- --------- ------- ----------- ---------
Total On-line....... 37,252 86.7 36,942 87.2 11,733 90.6
Overhead................ 5,733 13.3 5,410 12.8 1,221 9.4
--------- ------- --------- ------- ----------- ---------
Total Traffic....... $ 42,985 100.0% $ 42,352 100.0% $ 12,954 100.0%
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Safety
GWI's safety program involves all employees and focuses on the prevention of accidents and injuries. The Senior Vice President of each region is accountable for the results of the program, and each has an officer responsible for day-to-day program administration. Line supervisors have direct responsibility for the safety and training of their personnel.
The Company maintains a corporate-wide safety policy facilitated by a full- time Safety Director. The Company's safety program also gives each railroad the flexibility to develop its own safety rules based on local requirements or practices. Each railroad complies fully with all federal, state and local government regulations. Operating personnel are trained and certified in train operations, hazardous materials handling, proper radio procedures and all other areas subject to governmental rules and regulations.
The Company also participates in governmental and industry sponsored safety programs. Members of the Company's management serve on the Board of Directors of Operation Lifesaver (the national grade crossing awareness program), the New Program Committee of Operation Lifesaver and the American Short Line Railroad Association Safety Committee. In addition, the Company has a "working team" consisting of the safety officers from each railroad. This team is charged with ongoing development and refinement of the Company's safety program and coordination with each railroad to insure compliance with and implementation of all safety rules and regulations.
Employees
As of May 31, 1996, the Company had 484 full-time employees, 88 of whom were hired in 1996 in connection with the Illinois & Midland and Pittsburg & Shawmut Acquisitions. Of this total, 146 are members of national labor organizations, including 52 employees hired in connection with the Illinois & Midland Acquisition. The Company has seven contracts with these national labor organizations which have expiration dates ranging from August 1997 to June 1999. The Company has also entered into collective bargaining agreements with an additional 61 employees who represent themselves, all of which expire in 1999.
In March 1994, approximately 40 employees of one of the Company's railroads began an illegal work stoppage to protest the use of management on train crews. A temporary restraining order was issued and the underlying dispute was subsequently resolved in arbitration. The work stoppage did not have a material effect on the Company's operations and the Company believes the work stoppage has not had an adverse effect on its overall employee relations. The Company has not experienced any other strikes or work stoppages for over 20 years. The Company believes that its railroads' relations with their employees are good.
INSURANCE
The Company has obtained for each of its railroads insurance coverage for losses arising from personal injury and for property damage in the event of derailments or other accidents or occurrences. The liability policies have self-insured retentions ranging from $25,000 to $250,000 per occurrence. In addition, the Company maintains an excess liability policy which provides supplemental coverage for losses in excess of primary policy limits. With respect to the transportation of hazardous commodities, the Company's liability policy covers sudden releases of hazardous materials, including expenses related to evacuation. Personal injuries associated with grade crossing accidents are also covered under the Company's liability policy. The Company also maintains all-risk property damage coverage, subject to a standard pollution exception and self-insured retentions ranging from $10,000 to $250,000.
Employees of the Company's railroads are covered by the Federal Employers' Liability Act ("FELA"), a fault-based system under which injuries and deaths of railroad employees are settled by negotiation or litigation based on the comparative negligence of the employee and the employer. FELA-related claims are covered under the Company's liability insurance policies.
The Company believes its insurance coverage is adequate in light of its experience and the experience of the rail industry. However, there can be no assurance as to the adequacy, availability or cost of insurance in the future. See "Risk Factors--Liability for Casualty Losses."
COMPETITION
In acquiring rail properties, the Company competes with other short line and regional railroad operators, some of which are larger and have greater financial resources than the Company. Competition for rail properties is based primarily upon price, operating history and financing capability. The Company believes its established reputation as a successful acquiror and operator of short line rail properties, in combination with its managerial and financial resources, effectively positions it to take advantage of future acquisition opportunities. See "--Strategy--Acquisition of Rail Properties."
Each of the Company's railroads is typically the only rail carrier directly serving its customers; however, the Company's 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 the Company's 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 transportation package. To the extent other carriers are involved in transporting a shipment, the Company cannot control the cost and quality of such 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.
REGULATION
The Company's railroads are subject to regulation by the STB, the FRA, state departments of transportation and some state and local regulatory agencies. The STB is the successor to certain regulatory functions previously administered by the Interstate Commerce Commission. Established by the ICCTA in 1995, the STB has jurisdiction over, among other things, service levels and compensation of carriers for use of their railcars by other carriers. It also must authorize extension or abandonment of rail lines, the acquisition of rail lines, and consolidation, merger or acquisition of control of rail common carriers; in limited circumstances, it may condition such authorization upon the payment of severance benefits to affected employees. The STB may review rail carrier pricing only in response to a complaint concerning rates charged for transportation where there is an absence of effective competition. The FRA has jurisdiction over safety and railroad equipment standards and also assists in coordinating projects for railroad route simplification.
In 1980, the Staggers Rail Act fundamentally changed federal regulatory policy by emphasizing the promotion of revenue adequacy (the opportunity to earn revenues sufficient to cover costs and attract capital) for the railroads and allowing competition to determine to a greater extent rail prices and route and service options. The ICCTA continues the trend towards limiting regulation of rail prices. As a result of these changes in legislative policy, the railroad industry's rate structure has evolved from a system of interrelated prices that applied over different routes between the same points to a combination of market based prices that are now subject to limited regulatory constraints. While federal regulation of rail prices has been significantly curtailed, federal regulation of services continues to affect profitability and competitiveness in the railroad industry.
To date, the most significant impact on the Company of the federal and state regulatory schemes has been the delays and costs associated with protracted abandonment proceedings and the legal costs associated with acquisition proceedings. Although the ICCTA purports to aim at eliminating or reducing such costs, the ICCTA has not been in effect long enough to determine if it will be successful in this regard. In reducing regulation an effect of the ICCTA may be diminished regulatory recourse for small railroads which negatively affects their competitive position with their Class I connections.
ENVIRONMENTAL MATTERS
The Company's operations are subject to various federal, state and local laws and regulations relating to the protection of the environment, which have become increasingly stringent. These environmental laws and
regulations, which are implemented principally by the Environmental Protection Agency and comparable state agencies, govern the management of hazardous wastes, the discharge of pollutants into the air and into surface and underground waters, and the manufacture and disposal of certain substances. There are no material environmental claims currently pending or, to the Company's knowledge, threatened against the Company or any of its railroads. In addition, the Company believes that the operations of its railroads are in material compliance with current laws and regulations. The Company estimates that any expenses incurred in maintaining compliance with current laws and regulations will not have a material effect on the Company's earnings or capital expenditures. However, there can be no assurance that the current regulatory requirements will not change, or that currently unforeseen environmental incidents will not occur, or that past non-compliance with environmental laws will not be discovered on the Company's properties.
LEGAL PROCEEDINGS
The Company currently has no claims or legal actions pending other than claims arising in the ordinary course of its business. The Company believes these claims, taking into account reserves and applicable insurance, will not have a material adverse effect on the Company.
PROPERTY
The Company currently operates twelve railroads in six states, of which nine are owned, two are leased and one is operated under an operating agreement. The Company's railroads own or lease 1,236 miles of track and operate over an additional 270 miles pursuant to trackage rights and haulage contracts. These rail properties typically consist of the track and the underlying land. Real estate adjacent to the railroad rights-of-way is generally retained by the seller, and the Company's holdings of such property are not material. Similarly, the seller typically retains mineral rights and rights to grant fiber optic and other easements in the properties acquired by the Company's railroads.
The following table sets forth certain information with respect to the Company's railroads:
TRACK CONNECTING
RAILROAD AND LOCATION MILES STRUCTURE CARRIERS(1)
- --------------------- ----- --------- -----------
Allegheny & Eastern Railroad, 153 (2) Owned BPRR, CR
Inc. ("ALY")................
Pennsylvania
Bradford Industrial Railroad, 4 (3) Owned BPRR, CR
Inc. ("BR").................
New York, Pennsylvania
Buffalo & Pittsburgh Rail- 279 (4) Owned/Leased ALY, BLE, BR, CN,
road, Inc. ("BPRR")......... CPRS, CR, CSX, NS,
New York, Pennsylvania PS, RSR, SB
The Dansville & Mount Morris 8 Owned GNWR
Railroad Company ("DMM")....
New York
Genesee and Wyoming Railroad 26 (5) Owned (5) CPRS, CR, DMM, RSR
Company ("GNWR")............
New York
Pittsburg & Shawmut Railroad, 224 (6) Owned BPRR, CR
Inc. ("PS").................
Pennsylvania
Rochester & Southern Rail- 66 (7) Owned BPRR, CPRS, CR,
road, Inc. ("RSR").......... GNWR, NS
New York
Illinois & Midland Railroad, 97 (8) Owned BNSF, CR, GWWR,
Inc. ("IMR")................ IAIS, IC, KJRY, NS,
Illinois PPU, SP, TPW, UP
Portland & Western Railroad, 107 (9) Leased BNSF, SP, WPRR,
Inc. ("PNWR")............... POTB
Oregon
Willamette & Pacific Rail- 185 (10) Leased SP, PNWR
road, Inc. ("WPRR").........
Oregon
Louisiana & Delta Railroad, 87 (11) Owned/Leased SP
Inc. ("LDRR")...............
Louisiana
GWI Switching Services, L.P. 0 (12) Operating Agreement SP
("GWSW")....................
Texas
|
LEGEND OF CONNECTING CARRIERS
BLE Bessemer and Lake Erie Railroad Company BNSF Burlington Northern Santa Fe Corp. CN Canadian National CPRS CP Rail Systems CR Consolidated Rail Corporation CSX CSX Transportation, Inc. GWWR Gateway Western Railway IAIS Iowa Interstate Railroad, Ltd. IC Illinois Central Railroad Company |
KJRY Keokuk Junction Railway NS Norfolk Southern Corp. POTB Port of Tillamook Bay Railroad PPU Peoria & Pekin Union Railway SB South Buffalo Railway Company SP Southern Pacific Transportation Company TPW Toledo, Peoria & Western Railway Corp. UP Union Pacific Railroad Company |
The following is a description of each of the twelve railroads operated by the Company:
Allegheny & Eastern Railroad, Inc.
In 1992, ALY acquired from International Paper 153 miles of track between Erie and Emporium, Pennsylvania. Connections are made with CR at Erie and Emporium, Pennsylvania and with BPRR at Johnsonburg, Pennsylvania. Traffic in 1995 totaled 5,769 carloads, which included petroleum products, pulpwood, wood pulp, chemicals and paper. In addition, a CR unit train operates over ALY between International Paper plants in Lock Haven and Erie, Pennsylvania.
Bradford Industrial Railroad, Inc.
In 1992 BR acquired 4 miles of track running from East Bradford to Bradford, Pennsylvania and 14 miles of trackage rights from Bradford to Salamanca, New York, where BR connects with CR and BPRR. Traffic in 1995 totaled 722 carloads which included paper products, petroleum products and plastics.
Buffalo & Pittsburgh Railroad, Inc.
BPRR purchased and leased 365 miles of track and obtained 27 miles of trackage rights from CSX in 1991. BPRR conveyed its interest in the 26-mile Clearfield Branch to CR in 1992. In 1993, BPRR discontinued service over the 60-mile Indiana Branch leased from CSX. BPRR connects with every Class I railroad in the eastern United States and Canada. In 1995, BPRR handled 49,057 carloads. Principal commodities included aggregates, automobiles, chemicals, coal, petroleum products, lumber, paper products and steel.
The Dansville & Mount Morris Railroad Company
DMM operates 8 miles of track from a connection with GNWR at Groveland, New York to Dansville, New York, where it serves the Foster Wheeler Energy Corporation. In 1995, DMM handled 21 carloads of steel and machinery. DMM was acquired in 1985. In 1988, its 60-90 lb. rail was replaced with 131 lb. continuous welded rail.
Genesee and Wyoming Railroad Company
GNWR commenced operations in 1899. The 26-mile GNWR mainline runs from Groveland, New York to P&L Junction in Caledonia, New York. In addition, GNWR operates via trackage rights over 49 miles of RSR to interchange with CR in Rochester, New York. GNWR also interchanges with CPRS at Silver Springs, New York. The principal commodity handled by GNWR is rock salt for snow and ice control. Traffic in 1995 totaled 7,741 carloads and was negatively affected by the collapse and closure of the Akzo mine. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Akzo Mine."
Pittsburg & Shawmut Railroad, Inc.
The assets of PS were acquired on April 29, 1996. See "Recent Developments." PS operates over 237 miles of track in western Pennsylvania, connecting with BPRR in three locations and CR. Coal is the primary commodity hauled by PS.
Rochester & Southern Railroad, Inc.
The 93-mile RSR mainline and 6 miles of branch lines between Ashford and Rochester, New York were acquired from CSX in 1986. RSR abandoned 33 miles between Silver Springs and Machias, New York in 1991, leaving 60 miles of mainline. RSR interchanges with CR at Rochester and Silver Springs, with CPRS at Silver Springs, with GNWR at P&L Junction and with BPRR in Buffalo, New York via a haulage contract with CPRS. Traffic in 1995 totaled 4,290 carloads which included fuel oil, chemicals, coal, lumber and auto parts.
Illinois & Midland Railroad, Inc.
The assets of IMR were acquired on February 8, 1996. See "Recent Developments." IMR is headquartered in Springfield, Illinois and operates between Taylorville and Peoria, Illinois over 97 miles of owned track, 15 miles of trackage rights over IC, 9 miles of trackage rights over PPU and 5 miles of trackage rights over UP. IMR handles principally coal to two ComEd power plants. IMR connects with BNSF, CR, GWWR, IAIS, IC, KJRY, NS, PPU, SP, TPW and UP and with the Illinois River through an unloading facility owned by ComEd and operated by IMR at Havana, Illinois. Coal is the primary commodity hauled by IMR.
Portland & Western Railroad, Inc.
PNWR acquired by lease 53 miles of SP's remaining Oregon branch lines on August 18, 1995. The lease runs for 20 years with a 10-year renewal unless terminated by either party. PNWR has trackage rights from Willsburg Junction, Oregon to interchange with SP at Brooklyn Yard in Portland. On October 1, 1995 PNWR leased 54 miles of BNSF's former Oregon Electric subdivision for three years with three-year renewals subject to termination by either party. PNWR also interchanges with BNSF at Brooklyn Yard. In the last five months of 1995, PNWR handled 3,753 carloads comprised principally of lumber and grain.
Willamette & Pacific Railroad, Inc.
In 1993 WPRR acquired, under a 20-year lease with renewal options subject to both parties' consent, 185 miles of SP's Westside Branches between Portland and Eugene, Oregon. WPRR operates under a trackage rights agreement over 41 miles of SP from Albany, Oregon to interchange with SP at Eugene Yard. Traffic in 1995 totaled 35,281 carloads. Major commodities shipped on WPRR include paper, newsprint, wood chips, lumber, steel, grain, scrap steel, fertilizer and grass seed.
Louisiana & Delta Railroad, Inc.
In 1987 LDRR purchased and leased certain SP branch lines between Raceland and New Iberia, Louisiana. Seven separate branches total 92 miles and are connected by 93 miles of trackage rights over the SP mainline. Service to an eighth branch, acquired by a shipper, began in 1989. LDRR handled 12,039 carloads in 1995. Principal commodities carried by LDRR are carbon black, sugar and molasses, pipe, plastics, rice, salt and paper products.
GWI Switching Services, L.P.
GWSW began operation of a Dayton, Texas plastic pellet car storage yard in 1994 under a long-term contract. The yard was completed in December 1995 and has capacity to hold 3,000 cars. The yard is located on over 100 acres along SP's Baytown branch and contains over 50 miles of track. GWSW operates over 5 miles of SP under trackage rights to move the cars to and from the storage yard and SP's Dayton rail yard. The yard has capacity to be expanded, at SP's option, to hold approximately 4,500 cars.
TRACK CONDITION
The Company's railroads conduct freight operations on 1,506 miles of track. Of this total, 829 miles of track are owned by the Company's railroads, 407 miles of track are leased and the Company operates over 202 miles of track pursuant to trackage rights agreements. In addition, the Company has a haulage contract whereby it pays a connecting carrier to carry its customers' freight over 56 miles of the connecting carrier's line. The remaining 12 miles are operated by Pittsburg & Shawmut pursuant to an operating contract.
Of the 1,506 miles of track operated on or by the Company's railroads, 13% was in FRA Class IV condition, permitting speeds of up to 60 miles per hour for freight trains. An additional 45% was in FRA Class III condition, permitting speeds of up to 40 miles per hour, while 21% was in FRA Class II condition, permitting speeds of up to 25 miles per hour. The remaining 21% was in FRA Class I or FRA Excepted Class I condition, which permits maximum speeds of 10 miles per hour. The following table summarizes the track condition of the Company's railroads:
TRACK CONDITION
FRA CLASS
----------------------------
IV III II I EXCEPTED TOTAL %
--- --- --- --- -------- ----- ---
Owned.................................. - 528 170 95 36 829 55%
Leased................................. - 119 120 46 122 407 27
Trackage rights........................ 146 31 18 7 - 202 13
Contract............................... 50 2 3 13 - 68 5
--- --- --- --- --- ----- ---
Total miles............................ 196 680 311 161 158 1,506 100%
=== === === === === ===== ===
FRA Class as percentage of miles....... 13% 45% 21% 11% 10% 100%
=== === === === === =====
|
The Company's track maintenance policy is to maintain its railroads' track, ties and roadbed consistent with safe operations and with the volume of traffic transported over their lines. Safety-related maintenance receives the highest maintenance priority, followed by high-density track segments on which the highest volume of traffic is transported. Low-density segments, sidings and lines for which higher transit speeds are not essential to providing timely and effective service are maintained at lower FRA Class conditions.
In connection with its lease of the SP rail line, WPRR installed 30,600 railroad ties and has committed to upgrade approximately 25 miles of rail. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources."
EQUIPMENT
As of March 31, 1996, rolling stock of the Company's railroads consisted of 113 locomotives and 1,133 freight cars, some of which were owned and some of which were leased from others. The average age of the Company's locomotive fleet is approximately 28 years. The following tables summarize the aggregate fleet of the Company's railroads at March 31, 1996(1):
LOCOMOTIVES
HORSEPOWER PER UNIT OWNED LEASED TOTAL
------------------- ----- ------ -----
3000 to 3200.............................................. 18 7 25
2000 to 3000.............................................. 28 6 34
1800 and under............................................ 24 30 54
--- --- ---
Total................................................... 70 43 113
=== === ===
|
FREIGHT CARS
CAR TYPE OWNED LEASED MANAGED TOTAL
-------- ----- ------ ------- -----
Covered hopper.................................... 651 19 162 832
Plain box car..................................... 25 - 101 126
Equipped box car.................................. - 50 - 50
Gondola........................................... - 115 - 115
Wood chip gondola................................. - 10 - 10
--- --- --- -----
Total........................................... 676 194 263 1,133
=== === === =====
|
MANAGEMENT
The following table sets forth information regarding the executive officers and directors of the Company:
NAME AGE POSITION
---- --- --------
Mortimer B. Fuller, III. 54 Chairman of the Board of Directors, President and
Chief Executive Officer
Senior Vice President, Chief Financial Officer and
Mark W. Hastings........ 46 Treasurer
Forrest L. Becht........ 52 Senior Vice President-Louisiana and Texas
Charles W. Chabot....... 49 Senior Vice President-New York and Pennsylvania
Robert I. Melbo......... 53 Senior Vice President-Oregon
Spencer D. White........ 36 Senior Vice President-Illinois
Alan R. Harris.......... 48 Senior Vice President and Chief Accounting Officer
James M. Fuller(1)...... 55 Director
Louis S. Fuller(2)...... 55 Director
John M. Randolph(1)(2).. 70 Director
Philip J. Ringo(1)(2)... 54 Director
|
The Company's Board of Directors is divided into three classes and directors serve for staggered three-year terms. The current terms of office of James M. Fuller and John M. Randolph expire in 1997, the current terms of office of Louis S. Fuller and Philip J. Ringo expire in 1998, and the current term of office of Mortimer B. Fuller, III expires in 1999.
Mortimer B. Fuller, III has been President and Chief Executive Officer of the Company since 1977. He has been a director of the Company since 1973 and also serves as Chairman of the Board and of the Board's Executive Committee. He is a graduate of Princeton University, Boston University School of Law and Harvard Business School. Mr. Fuller is a director of the American Short Line Railroad Association. He is a founding member of the Regional Railroads of America, and serves on that Association's executive committee. He also serves on the Board of Directors of Detection Systems, Inc. Mr. Fuller is a first cousin of James M. Fuller and Louis S. Fuller.
Mark W. Hastings, Senior Vice President, Chief Financial Officer and Treasurer, has been the Company's chief financial officer since he joined the Company in 1978. Prior to joining GWI, Mr. Hastings was a credit analyst for Marine Midland Bank. He currently represents the short line industry on the Board of the Railroad Clearing House, which has been established to create the administrative systems and banking functions for the electronic settlement of all rail industry interline freight payments.
Forrest L. Becht, Senior Vice President-Louisiana and Texas, joined the Company in 1987 as General Manager of Louisiana & Delta Railroad, Inc., and now serves as its President and General Manager. His 25-year career in the railroad industry has included service with The Atchison, Topeka and Santa Fe Railway from 1968 to 1981 in a succession of staff and line positions in its mechanical and operating departments. Mr. Becht is a director of the American Short Line Railroad Association and is active in several other railroad operating associations.
Charles W. Chabot, Senior Vice President-New York and Pennsylvania, joined the Company as Senior Vice President--Marketing and Sales in 1991. He became President of Buffalo & Pittsburgh Railroad, Inc. in 1992. Prior to joining the Company, Mr. Chabot was employed for over ten years by the Chessie System Railroad (predecessor of CSX Transportation, Inc.), where he served in various capacities in marketing and freight equipment planning, including Director, Minerals Marketing, Assistant Vice President, Chemical Marketing, and Assistant Vice President, Planning and Equipment. He also served as a management consultant with Booz, Allen and Hamilton. Mr. Chabot represents the short line railroad industry on the Board of Directors of Operation Lifesaver, Inc.
Robert I. Melbo, Senior Vice President-Oregon, has served as General Manager of Willamette & Pacific Railroad, Inc. since 1993. He joined the Company in 1993 after over 25 years of service in operations with Southern Pacific Transportation Company in various capacities, including Manager-Field Operations, Northern Willamette Valley, and Superintendent of the Oregon Division.
Spencer D. White, Senior Vice President-Illinois, joined the Company in 1988 as Chief Engineer of Buffalo & Pittsburgh Railroad, Inc. after serving in progressive engineering positions with CSX Transportation since 1982. He has served the Company as Vice President-Operations of Buffalo & Pittsburgh Railroad, Inc. and Chief Engineer of the New York and Pennsylvania railroads. He assumed his current position in February 1996, following the Illinois & Midland Acquisition.
Alan R. Harris, Senior Vice President and Chief Accounting Officer, joined the Company in 1990 as its Chief Accounting Officer. Mr. Harris is a certified public accountant and from 1985 to 1990, he was Director of Accounting, and subsequently Secretary and Treasurer, of Preston Trucking Company, Inc., an interstate carrier.
James M. Fuller has been a director of the Company since 1974. In 1995 he became Regional Sales Manager of the Harvey Salt Co., a distributor of salt and water purification chemicals. From 1983 until 1993, Mr. Fuller was National Account Manager-Export for Akzo, where he served for over 25 years. Mr. Fuller is a first cousin of Mortimer B. Fuller, III and Louis S. Fuller.
Louis S. Fuller, has been a director of the Company since 1974. Since 1991, he has been a member of Courtright and Associates, an executive search firm. Mr. Fuller serves on the Advisory Board of Pioneer American Bank. He is a first cousin of Mortimer B. Fuller, III and James M. Fuller.
John M. Randolph, a financial consultant and private investor for more than the past five years, has been a director of the Company since 1986. In 1965 Mr. Randolph founded and was Chief Executive Officer of Randolph Computer Corporation, one of the first computer leasing companies. He subsequently served as Chairman and Chief Executive Officer of J.M. Randolph and Associates, a company created to manage certain computer leasing assets acquired by the Bank of Boston. Mr. Randolph currently serves as a director of Leasing Technologies International Inc. and as Vice Chairman and a director of Financing for Science International, Inc.
Philip J. Ringo has been a director of the Company since 1978. Since 1995, he has been President of Chemical Leaman Tank Lines Inc., a trucking firm. From 1992 to 1995, Mr. Ringo served as President and Chief Operating Officer of The Morgan Group, Inc. and Chairman and Chief Executive Officer of Morgan Drive Away, Inc., a common and contract carrier for the manufactured housing and recreational vehicle industries. From 1988 to 1992, he was Chief Executive Officer and President of Energy Innovations, Inc., a monitoring and communications equipment firm. Prior to that, he served as President of Ryder Public Transportation Services and its predecessor company, ATE Management and Service Co., Inc. (international transportation services). Mr. Ringo is a Trustee of the Bartlett Capital Trust and the Bartlett Management Trust, and a director of Chemical Leaman, Inc.
EXECUTIVE COMPENSATION
Shown on the table below is information on the annual and long-term compensation for services rendered to the Company in all capacities during 1995, paid by the Company to those persons who were, at the end of 1995, the Chief Executive Officer and each other executive officer of the Company whose salary and bonus in 1995 exceeded $100,000 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------- --------------------------
AWARDS PAYOUTS
------------------ -------
OTHER
ANNUAL RESTRICTED ALL OTHER
COMPEN- STOCK LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) SATION AWARDS OPTIONS PAYOUTS SATION(2)
- --------------------------- ---- -------- -------- ------- ---------- ------- ------- ---------
Mortimer B. Fuller, III, 1995 $286,456 $70,400 - - - - $8,933
.......................
Chairman of the Board,
President and Chief Ex-
ecutive Officer
Mark W. Hastings ....... 1995 $115,375 $22,700 - - - - $7,086
Senior Vice President,
Chief Financial Officer
and Treasurer
Charles W. Chabot ...... 1995 $138,116 $15,400 - - - - $9,557
Senior Vice President-
New York and Pennsylva-
nia
|
(2) The amounts shown include (i) Company contributions to the Company's
401(k) Savings Plan (see "--401(k) Savings Plan") on behalf of the Named
Executives as follows: Mr. Fuller-$1,613, Mr. Hastings-$1,459 and Mr.
Chabot-$1,613; (ii) the value of insurance premiums paid by the Company,
and the economic benefit (projected on an actuarial basis) to the Named
Executives, under split dollar life insurance arrangements as follows: Mr.
Fuller-$6,845, Mr. Hastings-$5,152 and Mr. Chabot-$7,469; and (iii) $475
in life insurance premiums paid by the Company for the benefit of each
Named Executive under a group life insurance program.
STOCK OPTIONS
No options were granted or exercised during 1995 and no options to purchase Common Stock were outstanding at the end of 1995.
1996 Stock Option Plan
The Company's 1996 Stock Option Plan (the "Stock Option Plan") provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and non-statutory options to executives and other employees of the Company to purchase up to an aggregate of 450,000 shares of Class A Common Stock. The Stock Option Plan is administered by a Stock Option Committee comprised of at least two disinterested directors within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. The Stock Option Committee is authorized to determine the recipients of options, the type of options granted, the number of shares subject to each option, the term of each option, exercise prices and other option features. The term of an option may not exceed ten years, except that if an incentive stock option is granted to an optionee who would thereafter own stock possessing more than 10% of the combined voting power of the Common Stock (a "10% Stockholder"), the term of the option may not exceed five years. The exercise price must at least equal the market value of the Class A Common Stock on the grant date of the option, except that if an incentive stock option is granted to a 10% Stockholder, the exercise price must at least equal 110% of such value. Options are not transferable except by will or intestacy, and lapse within stated periods following the death of the optionee or the termination of the optionee's employment with the Company. The Stock Option Plan contains customary anti- dilution provisions and provides for the acceleration of the vesting of options upon a change in control of the Company. The Stock Option Plan terminates in 2006. Options to purchase an aggregate of 350,500 shares of Class A Common Stock at the initial public offering price are currently outstanding.
Stock Option Plan for Outside Directors
The Company's Stock Option Plan for Outside Directors (the "Outside
Directors' Plan") provides for the grant to non-employee directors of the
Company of non-statutory options to purchase up to an aggregate of 50,000
shares of Class A Common Stock. The Outside Directors' Plan provides for three
categories of option grants: (i) options to purchase 8,000 shares of Class A
Common Stock at the initial public offering price, granted to each of the
Company's four current outside directors on the closing date of the Offering;
(ii) options to purchase 2,000 shares of Class A Common Stock at its market
value on the option grant date, granted to each new outside director of the
Company upon his or her election to the Board; and (iii) options to purchase
1,000 shares of Class A Common Stock at its market value on the option grant
date, granted to each such new outside director on fixed dates in 1997 and
1998 provided that the Company's net income after taxes for the most recently
completed year exceeds by at least 10% its net income after taxes for the
immediately preceding year. Options vest over a three-year period in
increments of one-third on each anniversary of the grant date, and expire on
the tenth anniversary. Options are not transferable except by will or
intestacy, and lapse within stated periods following the death of the optionee
or cessation of his service as a director. The Outside Directors' Plan
contains customary anti-dilution provisions and provides for the acceleration
of the vesting of options upon a change in control of the Company.
EMPLOYMENT AGREEMENTS
The Company is a party to employment agreements with each of its seven executive officers which provide that upon termination of the officer's employment with the Company within three years after a defined change in control of the Company, the officer will receive a cash amount equal to three times the average annual compensation payable to him by the Company during the immediately preceding five years. The agreements provide for reduction of the amounts paid pursuant thereto to the extent that such amounts would otherwise be non-deductible to the Company under Section 280G of the Code.
CASH BONUS PLAN
The Company awards annual bonuses to ten employees (including its seven executive officers) based on pre-tax earnings targets and individual performance objectives. Earnings targets, individual performance objectives and bonus percentages are established at the beginning of each year by the Compensation Committee of the Board. Maximum bonus percentages currently range from 15% to 50% of annual salary.
401(K) SAVINGS PLAN
The Company's 401(k) Savings Plan (the "401(k) Plan") provides retirement, death and disability benefits to certain employees with a cash or deferred arrangement intended to qualify under the Code. It became effective in 1994 and covers employees other than union employees covered by a collective bargaining agreement with a union local (which employees are covered by a separate 401(k) plan of the Company). Each participant may defer and have contributed to his account under the 401(k) Plan up to 15% of compensation each year, including any bonuses. The Company and its subsidiaries make matching contributions annually equal to 25% of each participant's contribution. The maximum matching contribution is 1 1/2% of the participant's annual compensation. Each employer may make an additional discretionary contribution for its employees which is allocated to participants' accounts in proportion to their total compensation for the plan year for which the contribution is made.
DIRECTORS' COMPENSATION
The Company currently pays its outside directors $2,100 per Board meeting attended, $500 per Board Committee meeting attended not in conjunction with a Board meeting, $250 per Committee meeting attended in conjunction with a Board meeting and $250 per meeting attended by telephone. All of the Company's directors other than Mortimer B. Fuller, III qualify for such payments. In addition, during 1995 the Company provided medical insurance on behalf of Louis S. Fuller and John M. Randolph at a cost of $5,448 and $5,818, respectively.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995 the Compensation Committee of the Board of Directors was composed of Louis S. Fuller, John M. Randolph and Philip J. Ringo. Mortimer B. Fuller, III participates in the deliberations of the Compensation Committee for the purpose of providing evaluations and recommendations with respect to the compensation paid to officers other than himself. However, Mr. Fuller neither participates nor is otherwise involved in the deliberations of the Compensation Committee with respect to his own compensation, and those deliberations are conducted by the Compensation Committee in executive session without Mr. Fuller present.
EMPLOYEE STOCK PURCHASE PLAN
Under the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan"), all full-time employees who have been employed by the Company for at least two years are eligible to purchase from the Company shares of Class A Common Stock by payroll deduction at market price. The Stock Purchase Plan is administered by a committee composed of at least two disinterested directors. An aggregate of 450,000 shares of Class A Common Stock (subject to customary anti-dilution provisions) may be purchased under the Stock Purchase Plan. During any year, a participating employee may purchase under the Stock Purchase Plan shares having an aggregate market value of up to $25,000, provided that after any such purchase, he or she would own no more than 5% of the total combined voting power of the Company. The Stock Purchase Plan will become effective upon the effectiveness of the Company's registration statement on Form S-8 under the Act covering the shares subject to the Stock Purchase Plan.
CERTAIN TRANSACTIONS
In 1983, the Company issued $598,365 in aggregate principal amount of subordinated debentures maturing in 1998, including (i) a debenture in $260,865 principal amount issued to Louis S. Fuller, a director of the Company, and his wife, and (ii) debentures in $337,500 aggregate principal amount issued to trusts for the benefit of James M. Fuller, a director of the Company, and others. The debentures bore interest at the rate of 10% per annum and contained customary loan covenants. Such transactions were at arm's length, on terms and conditions identical to those offered to non-affiliated third parties. In June 1995, the Company repaid all such debt with borrowings under the Credit Facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources."
In May 1994, a subsidiary of the Company issued $990,000 in aggregate principal amount of subordinated notes maturing in 2001, including (i) a note in $100,000 principal amount issued to Louis S. Fuller, (ii) a note in $100,000 principal amount issued to Frances A. Fuller, the mother of Mortimer B. Fuller, III, and (iii) notes in $50,000 aggregate principal amount issued to trusts for the benefit of John M. Randolph, a director of the Company, and his wife. The notes bore interest at the rate of 12% per annum and contained customary loan covenants. Such transactions were at arm's length, on terms and conditions identical to those offered to non-affiliated third parties. In June 1995, the Company repaid all of such debt with borrowings under the Credit Facilities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources."
The Company, Mortimer B. Fuller, III, the other executive officers of the Company (the "Other Executives") and all of the holders of the Class B Common Stock are parties to a Class B Stockholders' Agreement dated as of May 20, 1996. Under that agreement, if a party proposes to transfer shares of Class B Common Stock in a transaction that will not result in the automatic conversion of those shares into shares of Class A Common Stock (see "Description of Capital Stock"), the Other Executives have the right to purchase up to an aggregate of 50% of those shares, and Mr. Fuller has the right to purchase the balance, all at the then-current market price of the Class A Common Stock. If Mr. Fuller does not purchase the entire balance of the shares, the Other Executives have the right to purchase whatever shares remain. Such purchase rights also apply if the employment of any of the Other Executives is terminated for any reason. The effect of this agreement will be to concentrate ownership of the Class B Common Stock, which enjoys ten times the voting power of the Class A Common Stock, in the hands of management of the Company, particularly Mr. Fuller. See "Principal Stockholders."
PRINCIPAL STOCKHOLDERS
The following table sets forth as of May 31, 1996 certain information concerning shares of both classes of the Company's Common Stock held by (i) each stockholder known by the Company to own beneficially more than 5% of either class, (ii) each director of the Company, (iii) each Named Executive (see "Management--Executive Compensation"), and (iv) all directors and executive officers of the Company as a group. The address for each of the directors and Named Executives is the address of the Company.
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING AFTER OFFERING
---------------------------- ----------------------------
CLASS A CLASS B CLASS A CLASS B
NAME AND ADDRESS OF COMMON COMMON COMMON COMMON
BENEFICIAL OWNER(1) STOCK STOCK PERCENT(2) STOCK STOCK PERCENT(2)
------------------- --------- ------- ---------- --------- ------- ----------
Mortimer B. Fuller, 651,347 651,347 55.5% 651,347 651,347 26.9%(4)
III(3).................
James M. Fuller(5)...... 283,901 11,100 12.6 283,901 11,100 6.1
Louis S. Fuller(6)...... 160,894 160,894 13.7 160,894 160,894 6.6
John M. Randolph(7)..... 7,400 7,400 0.6 7,400 7,400 0.3
Philip J. Ringo(8)...... 3,700 -- 0.2 3,700 -- 0.1
Mark W. Hastings(9)..... 7,400 7,400 0.6 7,400 7,400 0.3
Charles W. Chabot....... -- -- -- -- -- --
ATE Management and Serv- 148,000 -- 6.3 148,000 -- 3.1
ice Co., Inc...........
49 East Fourth Street
Suite 700
Cincinnati, OH 45202
Nancy E. Putney, Trustee 159,470 -- 6.8 159,470 -- 3.3
.......................
Putney Family Trust
4833 Leland Street
Chevy Chase, MD 20815
All Directors and Execu-
tive Officers as a
Group (11 persons)..... 1,114,642 838,141 83.2% 1,114,642 838,141 40.3%(4)
|
(3) The amounts shown include: (i) 351,592 shares of Class A Common Stock and
351,592 shares of Class B Common Stock owned by Mr. Fuller individually;
(ii) 188,607 shares of Class A Common Stock and 188,607 shares of Class B
Common Stock held by a family trust for the benefit of Mr. Fuller and
others, of which Mr. Fuller is a co-trustee; (iii) 83,583 shares of Class
A Common Stock and 83,583 shares of Class B Common Stock held by another
family trust for the benefit of Mr. Fuller and others, of which Mr. Fuller
is a co-trustee; (iv) 925 shares of Class A Common Stock and 925 shares of
Class B Common Stock owned by Mr. Fuller's wife, as to which shares Mr.
Fuller disclaims beneficial ownership; (v) 10,915 shares of Class A Common
Stock and 10,915 shares of Class B Common Stock owned by Mr. Fuller's
mother which, together with the shares held by the above-mentioned family
trusts, are subject to a Voting Agreement pursuant to which Mr. Fuller has
been granted irrevocable proxies to vote all such shares through March 20,
2008; and (vi) 15,725 shares of Class A Common Stock and 15,725 shares of
Class B Common Stock held by a family trust for the benefit of Mr. Fuller
and others, of which Mr. Fuller is the Trustee.
(4) Because the Class A Common Stock is entitled to one vote per share and the Class B Common Stock is entitled to ten votes per share, immediately after the Offering the stock ownership of Mortimer B. Fuller, III will represent 57.5% of the voting power of the Company and the stock ownership of all directors and executive officers as a group will represent 76.2% of the voting power of the Company.
(5) The amounts shown include 11,100 shares of Class A Common Stock and 11,100
shares of Class B Common Stock held by Mr. Fuller individually, and an
aggregate of 272,801 shares of Class A Common Stock held by family trusts
for the benefit of Mr. Fuller and others, of which Mr. Fuller is a co-
trustee.
(6) The amounts shown include 133,144 shares of Class A Common Stock and
133,144 shares of Class B Common Stock held by Mr. Fuller individually,
and an aggregate of 27,750 shares of Class A Common Stock and 27,750
shares of Class B Common Stock owned by Mr. Fuller's children (as to which
shares he disclaims beneficial ownership).
(7) Such shares are held by a trust for the benefit of Mr. Randolph, of which
he is a co-trustee.
(8) Such shares are owned by Mr. Ringo's wife, and he disclaims beneficial
ownership thereof.
(9) Such shares are owned by Mr. Hastings jointly with his wife.
DESCRIPTION OF CAPITAL STOCK
The following summary description of the capital stock of the Company is qualified in its entirety by reference to the Restated Certificate of Incorporation and By-laws of the Company.
IN GENERAL
The Company's authorized capital stock consists of 12,000,000 shares of Class A Common Stock, par value $.01 per share, and 1,500,000 shares of Class B Common Stock, par value $.01 per share. At the date of this Prospectus, 1,501,937 shares of Class A Common Stock and 846,556 shares of Class B Common Stock were issued and outstanding, and there were 31 holders of record of Class A Common Stock and 18 holders of record of Class B Common Stock.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Voting. Holders of Class A Common Stock are entitled to one vote per share. Holders of Class B Common Stock are entitled to ten votes per share. All actions submitted to a vote of stockholders are voted on by the holders of Class A Common Stock and Class B Common Stock voting together as a single class, except as otherwise required by law. Under current Delaware law, the holders of the outstanding shares of a class are entitled to vote as a class upon a proposed charter amendment that would change the aggregate number of authorized shares of such class, change the par value of the shares of such class or change the powers, preferences or special rights of the shares of such class so as to affect them adversely. Holders of the Company's Common Stock are not entitled to cumulate voting in the election of directors.
Conversion. Class A Common Stock has no conversion rights. Each share of Class B Common Stock is convertible into one share of Class A Common Stock (i) at any time at the option of the holder of the Class B Common Stock and (ii) automatically upon any transfer by the holder thereof other than (a) a transfer to a spouse, child or grandchild of the transferor by gift or upon the transferor's death, or (b) a transfer to an individual or entity that is, at the time of transfer, a holder of record of Class B Common Stock or an executive officer of the Company.
Dividends. Dividends are payable on the outstanding shares of (i) only Class A Common Stock or (ii) both Class A Common Stock and Class B Common Stock, in each case, when, as and if declared by the Board of Directors. If the Board determines to pay a dividend on the Class B Common Stock, each share of Class A Common Stock will receive a dividend in an amount 10% greater than the amount of the dividend per share paid on the Class B Common Stock. Subject to the foregoing, dividends in the form of stock can only be paid in shares of Class A Common Stock. Although the Company has paid dividends in the past, it currently intends to retain all earnings to support its operations and future growth and, therefore, does not anticipate the payment of cash dividends on the Common Stock in the foreseeable future. See "Dividend Policy."
Liquidation. In the event of liquidation, holders of Class A Common Stock and Class B Common Stock will share with each other on a ratable basis as a single class in the net assets of the Company available for distribution after payment or provision for the liabilities of the Company.
Other Terms. Neither the Class A Common Stock nor the Class B Common Stock may be subdivided, consolidated, reclassified or otherwise changed unless contemporaneously therewith the other class of shares is subdivided, consolidated, reclassified or otherwise changed in the same proportion and in the same manner. In any merger, consolidation, reorganization or other business combination, the consideration to be received per share by holders of either Class A Common Stock or Class B Common Stock must be identical to that received by holders of the other class. Neither the holders of Class A Common Stock nor the holders of Class B Common Stock are entitled to preemptive rights, and neither the Class A Common Stock nor the Class B Common Stock is subject to redemption.
Listing. The Class A Common Stock has been approved for quotation, subject to official notice of issuance, on the Nasdaq National Market under the symbol "GNWR."
BANK WARRANT
As part of the consideration for the availability of the Credit Facilities (see "Recent Developments"), in February 1996 the Company paid a fee of $1.5 million and issued to the Bank of Boston, for no additional consideration, a warrant to purchase 41,847 shares of Class A Common Stock at a price of approximately $.0005 per share (the "Bank Warrant"), subject to customary anti-dilution adjustments. The Bank Warrant is immediately exercisable, is transferable to members of the banking syndicate and their affiliates, and expires in 2006. Holders of the Bank Warrant are entitled under certain circumstances to demand and "piggy-back" registration rights, at the Company's expense (subject to certain limitations), with respect to the shares issuable upon exercise thereof.
LIMITATIONS ON TAKEOVERS
Super-Majority Voting Provision. The Company's Restated Certificate of Incorporation requires the affirmative vote of the holders of at least two- thirds of the combined voting power of the Class A Common Stock and Class B Common Stock, voting together as one class, for approval of the following actions: (i) any merger or consolidation unless the Company is the surviving corporation in such transaction and no change of control (defined as any person or group becoming the beneficial owner of shares of Class A Common Stock and Class B Common Stock representing 50% or more of the votes represented by all outstanding shares of Class A Common Stock and Class B Common Stock) has occurred, (ii) any sale, lease or other disposition of all or substantially all of the assets of the Company and (iii) any amendment of the super-majority voting provision. These voting requirements could have the effect of delaying, deferring or preventing such transactions.
Classified Board of Directors. The Company's Board of Directors is divided into three classes, with the members of each class serving for staggered three-year terms. The classification of the directors will have the effect of making it more difficult for stockholders to force an immediate change in the composition of the Board of Directors. The Board of Directors believes that the longer time required to elect a majority of a classified Board of Directors helps to ensure the continuity and stability of the Company's management and policies since a majority of the directors at any given time will have had prior experience as directors of the Company.
Consideration of Non-Price Issues. The Company's Restated Certificate of Incorporation permits the Board of Directors, in considering the best interests of the Company, to consider the effects of any action upon employees, general agents, customers, creditors, communities, the state and national economies and the long-term as well as short-term interests of the Company and its stockholders, including the possibility that these interests may be best served by the continued independence of the Company, and all other pertinent factors.
Delaware General Corporation Law Section 203. Section 203 of the Delaware General Corporation Law provides that, subject to certain exceptions specified therein, a corporation may not engage in any business combination (which includes a merger or a sale of more than 10% of the corporation's assets) with an "interested stockholder" for a three-year period following the time that such stockholder becomes an interested stockholder unless (i) prior to such time, the Board of Directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares), or (iii) at or subsequent to such time, the business combination is approved by the Board of Directors of the corporation and by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. Except as specified in Section 203, an interested stockholder is defined to include (a) any person that is the owner of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to the date of determination and (b) the affiliates and associates of any such person. Under certain circumstances, Section 203 makes it more difficult for an interested stockholder to effect various business combinations with a corporation for a three-year period.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Class A Common Stock is The First National Bank of Boston.
SHARES ELIGIBLE FOR FUTURE SALE
All of the 1,501,937 shares of Class A Common Stock outstanding immediately prior to the Offering will be eligible for sale subject to the volume and other limitations of Rule 144 under the Act. In addition, all of the 846,556 shares of Class B Common Stock outstanding immediately prior to the Offering are freely convertible into shares of Class A Common Stock and, if so converted, will be eligible for sale subject to the volume and other limitations of Rule 144 under the Act.
In general, under Rule 144 as currently in effect, a holder (or holders
whose shares are aggregated) of "restricted securities," including persons who
may be deemed affiliated with the Company, whose shares meet a two-year
holding period requirement are entitled to sell, within any three-month
period, a number of those shares that does not exceed the greater of 1% of the
then outstanding shares of Class A Common Stock (36,742 shares of Class A
Common Stock immediately after the Offering) or the average weekly reported
trading volume in the Class A Common Stock during the four calendar weeks
preceding the date on which notice of the sale is given, provided certain
manner of sale and notice requirements and requirements as to the availability
of current public information about the Company are satisfied. Under Rule
144(k), a holder of "restricted securities" who is deemed not to have been an
affiliate of the Company during the three months preceding a sale by him, and
whose shares meet a three-year holding period requirement, is entitled to sell
those shares without regard to these restrictions and requirements. However,
affiliates of the Company must comply with the restrictions and requirements
of Rule 144, other than the two-year holding period requirement, in order to
sell shares of Class A Common Stock which are not "restricted securities"
(such as shares acquired by affiliates in the Offering).
The Company, its officers and directors and certain other stockholders have agreed not to sell or otherwise dispose of any shares of Common Stock, subject to certain exceptions, for a period of 180 days after the date of this Prospectus without the prior written consent of Schroder Wertheim & Co. Incorporated. Following the Offering, an aggregate of 1,952,783 shares, or 40.3% of the total shares outstanding, will be subject to these restrictions.
An aggregate of 450,000 shares of Class A Common Stock is available for issuance under the Company's 1996 Stock Option Plan (including 350,500 shares subject to outstanding options, none of which are currently exercisable), and an aggregate of 450,000 shares of Class A Common Stock is available for issuance under the Company's Employee Stock Purchase Plan. The Company expects to file a registration statement on Form S-8 under the Act immediately after the closing of the Offering to register all of the shares issuable under both such Plans. In addition, an aggregate of 50,000 shares of Class A Common Stock is available for issuance under the Company's Stock Option Plan for Outside Directors, which shares, if issued, will be eligible for sale subject to the volume and other limitations of Rule 144 under the Act. See "Management--Stock Options" and "Management--Employee Stock Purchase Plan." The holders of the Bank Warrant are entitled under certain circumstances to demand and "piggy- back" registration rights with respect to the shares issuable upon exercise thereof. See "Description of Capital Stock--Bank Warrant."
Prior to the Offering, there has been no public market for the Class A Common Stock and no determination can be made as to the effect, if any, that sales of shares of Class A Common Stock or the availability of shares for sale will have on the market price of the Class A Common Stock prevailing from time to time. Nevertheless, sales of substantial amounts of the Class A Common Stock in the public market (including shares issued upon exercise of options or warrants, the conversion of Class B Common Stock, or under the Company's Employee Stock Purchase Plan) could adversely affect the market price of the Class A Common Stock and could impair the Company's future ability to raise capital through an offering of its equity securities.
UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters named below (the "Underwriters") have severally agreed to purchase and the Company has agreed to sell to them, severally, the aggregate number of shares of Class A Common Stock set forth opposite their respective names.
NUMBER OF
UNDERWRITER SHARES
----------- ---------
Schroder Wertheim & Co. Incorporated............................
Furman Selz LLC.................................................
---------
Total..................................................... 2,500,000
=========
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The Underwriting Agreement provides that the several Underwriters are obligated, subject to the approval of certain legal matters by their counsel and certain other conditions, to purchase all the shares of Class A Common Stock offered hereby (other than those covered by the Underwriters' over- allotment option described below), if any are purchased. Schroder Wertheim & Co. Incorporated and Furman Selz LLC, as representatives of the several Underwriters (the "Representatives"), have advised the Company that the Underwriters propose to offer the shares to the public at the public offering price set forth on the cover page of this Prospectus; that the Underwriters propose initially to allow a concession not in excess of $ per share to certain dealers, including the Underwriters; that the Underwriters and such dealers may initially allow a discount of not in excess of $ per share to other dealers; and that the initial public offering price and the concession and discount to dealers may be changed by the Representatives after the initial public offering.
The Company has granted to the Underwriters an option, expiring at the close of business on the 30th day after the date of the Underwriting Agreement, to purchase up to an additional 375,000 shares of Class A Common Stock, at the initial public offering price set forth on the cover page of this Prospectus, less underwriting discounts and commissions. The Underwriters may exercise the option only to cover over-allotments, if any, in the sale of shares of Class A Common Stock in the Offering. To the extent that the Underwriters exercise this option, each Underwriter will be committed, subject to certain conditions, to purchase a number of additional shares proportionate to such Underwriter's initial commitment.
The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Act.
The Company, certain management stockholders, directors and certain other stockholders have agreed not to offer to sell, sell, grant any option to purchase or otherwise dispose of any shares of Common Stock, subject to certain exceptions, for a period of 180 days after the date of this Prospectus without the prior written consent of Schroder Wertheim & Co. Incorporated.
Prior to the Offering, there has been no public market for the Class A Common Stock. Consequently, the initial public offering price of the Class A Common Stock will be determined by negotiations between the Company and the Representatives. Among the factors to be considered in such negotiations are the Company's
results of operations and financial condition, the prospects for the Company and for the industry in which the Company operates, the Company's capital structure and prevailing conditions in the securities market.
The Representatives have informed the Company that the Underwriters do not intend to confirm sales to accounts over which they exercise discretionary authority in excess of % of the total number of shares offered hereby.
NOTICE TO ONTARIO RESIDENTS
The distribution of the shares of Class A Common Stock in the Province of Ontario, Canada is being made only on a private placement basis and is exempt from the requirement that the Company prepare and file a prospectus with the relevant Canadian securities regulatory authorities. Accordingly, any resale of the shares of Class A Common Stock must be made in accordance with applicable securities laws, which may require resales to be made in accordance with exemptions from registration and prospectus requirements. Purchasers are advised to seek legal advice prior to any resale of the shares of Class A Common Stock.
Each Ontario purchaser who receives a purchase confirmation regarding the purchase of shares of Class A Common Stock will be deemed to represent to the Company and to the dealer from whom such confirmation is received that such purchaser is entitled under applicable Ontario securities laws to purchase such shares of Class A Common Stock without the benefit of a prospectus qualified under such securities laws.
Ontario purchasers of shares of Class A Common Stock should consult their own legal and tax advisors with respect to the tax consequences of an investment in the shares of Class A Common Stock in their particular circumstances and with respect to the eligibility of the shares of Class A Common Stock for investment by purchaser under relevant Canadian legislation.
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.
All of the Company's directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Ontario purchasers to effect service of process within Canada upon the Company or such persons. All or a substantial portion of the assets of the Company and such persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against the Company or such persons in Canada or to enforce a judgment obtained in Canadian courts against the Company or persons outside of Canada.
LEGAL MATTERS
The validity of the Class A Common Stock offered by this Prospectus is being passed on for the Company by Harter, Secrest & Emery, Rochester, New York. Certain legal matters will be passed upon for the Underwriters by Shearman & Sterling, New York, New York.
EXPERTS
The financial statements and schedules included in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company intends to furnish to its stockholders annual reports containing consolidated financial statements audited by its independent auditors and quarterly reports containing unaudited interim financial information for the first three quarters of each year.
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-l under the Act for registration of the
shares of Class A Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement and the
exhibits and schedules thereto, to which reference is hereby made. Statements
made in this Prospectus as to the contents of any contract, agreement or other
document referred to do not purport to be complete; with respect to each such
contract, agreement or other document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved and each statement shall be deemed qualified in its
entirety by this reference. The Registration Statement and the exhibits and
schedules thereto may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the public reference
facilities of the Commission's Regional Offices: New York Regional Office,
Seven World Trade Center, Suite 1300, New York, New York 10048; and Chicago
Regional Office, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material may also be obtained from the Public Reference
Section of the Securities and Exchange Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Genesee & Wyoming Inc. and Subsidiaries:
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and March
31, 1996 (Unaudited)................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1993,
1994 and 1995, and the Three Months Ended March 31, 1995 (Unaudited),
and March 31, 1996 (Unaudited)......................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1993, 1994 and 1995, and the Three Months Ended March 31,
1996 (Unaudited)....................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1993, 1994 and 1995, and the Three Months Ended March 31, 1995
(Unaudited), and March 31, 1996 (Unaudited)............................ F-6
Notes to Consolidated Financial Statements.............................. F-7
Chicago & Illinois Midland Railway Company:
Report of Independent Public Accountants................................ F-20
Balance Sheets as of December 31, 1994 and 1995, and February 8, 1996
(Unaudited)............................................................ F-21
Statements of Operations for the Years Ended December 31, 1993, 1994 and
1995, and the One Month and Eight Day Period Ended February 8, 1996
(Unaudited)............................................................ F-22
Statements of Shareholder's Equity for the Years Ended December 31,
1993, 1994 and 1995, and the One Month and Eight Day Period Ended
February 8, 1996 (Unaudited)........................................... F-23
Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and
1995, and the One Month and Eight Day Period Ended February 8, 1996
(Unaudited)............................................................ F-24
Notes to Financial Statements........................................... F-25
Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company and
Red Bank Railroad Company:
Report of Independent Public Accountants................................ F-30
Combined Balance Sheets as of December 31, 1994 and 1995, and March 31,
1996 (Unaudited)....................................................... F-31
Combined Statements of Operations for the Years Ended December 31, 1993,
1994 and 1995, and the Three Months Ended March 31, 1995 (Unaudited),
and March 31, 1996 (Unaudited)......................................... F-32
Combined Statements of Shareholder's Equity for the Years Ended December
31, 1993, 1994 and 1995, and the Three Months Ended March 31, 1996
(Unaudited)............................................................ F-33
Combined Statements of Cash Flows for the Years Ended December 31, 1993,
1994 and 1995, and the Three Months Ended March 31, 1995 (Unaudited),
and March 31, 1996 (Unaudited)......................................... F-34
Notes to Combined Financial Statements.................................. F-35
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UPON CONSUMMATION OF THE STOCK SPLIT DISCUSSED IN NOTE 14 TO THE CONSOLIDATED FINANCIAL STATEMENTS, WE EXPECT TO BE IN A POSITION TO RENDER THE FOLLOWING OPINION.
ARTHUR ANDERSEN LLP
CHICAGO, ILLINOIS
FEBRUARY 16, 1996
(EXCEPT WITH RESPECT TO MATTERS DISCUSSED IN
NOTE 14 AS TO WHICH THE DATE IS APRIL 22, 1996,
APRIL 29, 1996 AND JUNE , 1996)
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
the Stockholders of
Genesee & Wyoming Inc.:
We have audited the accompanying consolidated balance sheets of GENESEE & WYOMING INC. (a Delaware corporation) AND SUBSIDIARIES as of December 31, 1994 and 1995, and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. 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 conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 significant estimates made by 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 Genesee & Wyoming Inc. and Subsidiaries as of December 31, 1994 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 8 to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for postretirement benefits other than pensions.
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents........................ $ 5,884 $ 2,115 $ 6,588
Accounts receivable, net......................... 10,698 9,441 14,764
Materials and supplies........................... 1,550 1,512 2,295
Prepaid expenses and other....................... 1,005 1,455 1,747
Deferred income tax assets, net.................. 1,075 1,278 1,364
------- ------- --------
Total current assets........................... 20,212 15,801 26,758
------- ------- --------
PROPERTY AND EQUIPMENT, net........................ 49,263 61,574 70,609
------- ------- --------
SERVICE ASSURANCE AGREEMENT, net................... -- -- 14,851
------- ------- --------
OTHER ASSETS, net.................................. 413 1,054 3,641
------- ------- --------
Total assets................................. $69,888 $78,429 $115,859
======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt................ $ 4,230 $ 1,239 $ 2,894
Accounts payable................................. 13,501 8,408 17,103
Accrued expenses................................. 3,062 3,404 4,431
------- ------- --------
Total current liabilities...................... 20,793 13,051 24,428
------- ------- --------
LONG-TERM DEBT..................................... 28,410 38,702 63,313
------- ------- --------
OTHER LIABILITIES.................................. 1,629 2,043 2,055
------- ------- --------
DEFERRED INCOME TAX LIABILITIES, net............... 3,125 4,139 4,489
------- ------- --------
DEFERRED ITEMS--grants from governmental agencies.. 6,849 9,946 9,622
------- ------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS' EQUITY:
Class A common stock, $0.01 par value; 12,000,000
shares authorized; 1,501,937 shares issued and
outstanding..................................... 15 15 15
Class B common stock, $0.01 par value; 1,500,000
shares authorized; 846,556 shares issued and
outstanding..................................... 8 8 8
Additional paid-in capital....................... 1,340 1,340 1,340
Warrants outstanding............................. -- -- 471
Retained earnings................................ 7,719 9,185 10,118
------- ------- --------
Total stockholders' equity..................... 9,082 10,548 11,952
------- ------- --------
Total liabilities and stockholders' equity... $69,888 $78,429 $115,859
======= ======= ========
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The accompanying notes are an integral part of these consolidated financial statements.
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- ----------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- -------
(UNAUDITED)
OPERATING REVENUES............ $ 49,645 $ 55,419 $ 53,387 $13,391 $16,608
OPERATING EXPENSES:
Transportation............... 11,444 13,357 14,262 3,663 4,480
Maintenance of ways and
structures.................. 7,293 6,632 6,127 1,644 2,186
Maintenance of equipment..... 12,365 14,533 12,230 3,198 2,994
General and administrative... 9,284 9,282 10,309 2,434 2,809
Depreciation and
amortization................ 3,115 3,577 3,887 926 1,325
-------- -------- -------- ------- -------
Total operating expenses.... 43,501 47,381 46,815 11,865 13,794
-------- -------- -------- ------- -------
Income from operations...... 6,144 8,038 6,572 1,526 2,814
INTEREST EXPENSE.............. (2,864) (3,212) (3,405) (766) (1,274)
OTHER INCOME.................. 165 192 456 105 81
-------- -------- -------- ------- -------
Income before provision for
income taxes, extraordinary
item and cumulative effect
of accounting change....... 3,445 5,018 3,623 865 1,621
PROVISION FOR INCOME TAXES.... (1,428) (2,007) (1,472) (363) (656)
-------- -------- -------- ------- -------
Income before extraordinary
item and cumulative effect
of accounting change....... 2,017 3,011 2,151 502 965
EXTRAORDINARY ITEM FROM EARLY
EXTINGUISHMENT OF DEBT, net
of related income tax benefit
of $357,000.................. -- -- (494) -- --
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE FOR
POSTRETIREMENT BENEFITS, net
of related income tax benefit
of $263,000.................. (393) -- -- -- --
-------- -------- -------- ------- -------
NET INCOME.................... $ 1,624 $ 3,011 $ 1,657 $ 502 $ 965
======== ======== ======== ======= =======
EARNINGS PER COMMON SHARE:
Income before extraordinary
item and cumulative effect
of accounting change....... $ 0.88 $ 1.31 $ 0.92 $ 0.21 $ 0.41
Extraordinary item.......... -- -- (0.21) -- --
Cumulative effect of
accounting change.......... (0.18) -- -- -- --
-------- -------- -------- ------- -------
Net Income.................. $ 0.70 $ 1.31 $ 0.71 $ 0.21 $ 0.41
======== ======== ======== ======= =======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING.... 2,304 2,304 2,348 2,348 2,348
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The accompanying notes are an integral part of these consolidated financial statements.
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
CLASS A CLASS B
COMMON STOCK COMMON STOCK
----------------- -----------------
SHARES $0.01 SHARES $0.01 ADDITIONAL STOCKHOLDERS'
ISSUED AND PAR ISSUED AND PAR PAID-IN WARRANTS RETAINED EQUITY
OUTSTANDING VALUE OUTSTANDING VALUE CAPITAL OUTSTANDING EARNINGS TOTAL
----------- ----- ----------- ----- ---------- ----------- -------- -------------
BALANCE, December 31,
1992................... 1,480 $ 15 824 $ 8 $1,280 $ -- $ 3,272 $ 4,575
Net income............ -- -- -- -- -- -- 1,624 1,624
Cash dividends--$0.05
per share............ -- -- -- -- -- -- (125) (125)
----- ---- --- ---- ------ ----- ------- -------
BALANCE, December 31,
1993................... 1,480 15 824 8 1,280 -- 4,771 6,074
Stock options
exercised ........... 22 -- 22 -- 60 -- -- 60
Net income............ -- -- -- -- -- -- 3,011 3,011
Cash dividends--$0.03
per share............ -- -- -- -- -- -- (63) (63)
----- ---- --- ---- ------ ----- ------- -------
BALANCE, December 31,
1994................... 1,502 15 847 8 1,340 -- 7,719 9,082
Net income............ -- -- -- -- -- -- 1,657 1,657
Cash dividends--$0.08
per share............ -- -- -- -- -- -- (191) (191)
----- ---- --- ---- ------ ----- ------- -------
BALANCE, December 31,
1995................... 1,502 15 847 8 1,340 -- 9,185 10,548
Proceeds from issuance
of stock warrants
(Unaudited).......... -- -- -- -- -- 471 -- 471
Net income
(Unaudited).......... -- -- -- -- -- -- 965 965
Cash dividends--$0.01
per share
(Unaudited).......... -- -- -- -- -- -- (32) (32)
----- ---- --- ---- ------ ----- ------- -------
BALANCE, March 31, 1996
(Unaudited)............ 1,502 $ 15 847 $ 8 $1,340 $ 471 $10,118 $11,952
===== ==== === ==== ====== ===== ======= =======
|
The accompanying notes are an integral part of these consolidated financial statements.
GENESEE & WYOMING INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------- -----------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income.................... $ 1,624 $ 3,011 $ 1,657 $ 502 $ 965
Adjustments to reconcile net
income to net cash provided
by operating activities--
Cumulative effect of
accounting change........... 393 -- -- -- --
Depreciation and
amortization................ 3,115 3,577 3,887 926 1,325
Deferred income taxes........ 952 738 811 279 264
Gain on disposition of
property and equipment...... (55) (169) (195) (8) (627)
Write-off of other assets.... 180 675 -- -- --
Changes in assets and
liabilities--
Receivables................. 633 (3,226) 1,257 1,511 (5,042)
Materials and supplies...... (99) (214) 38 (5) (33)
Prepaid expenses and other.. (29) (236) (450) (439) (292)
Accounts payable and accrued
expenses................... 497 2,855 (4,751) (2,158) 9,227
Other assets and
liabilities, net........... 38 279 310 19 235
------- ------- -------- ------- --------
Net cash provided by
operating activities..... 7,249 7,290 2,564 627 6,022
------- ------- -------- ------- --------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of assets of Chicago
& Illinois Midland Railway
Company...................... -- -- -- -- (26,335)
Purchase of property and
equipment.................... (7,600) (6,153) (16,632) (1,135) (970)
Proceeds from disposition of
property..................... 166 824 318 8 1,555
------- ------- -------- ------- --------
Net cash used in investing
activities............... (7,434) (5,329) (16,314) (1,127) (25,750)
------- ------- -------- ------- --------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on long-
term borrowings, including
capital leases............... (4,951) (4,962) (16,999) (1,225) (326)
Proceeds from issuance of
long-term debt............... 7,557 2,476 24,300 -- 25,925
Debt issuance costs........... -- -- (641) -- (1,642)
Net proceeds (payments) on
grants....................... 243 1,755 3,512 405 (195)
Dividends paid................ (125) (63) (191) (95) (32)
Proceeds from issuance of
stock warrants............... -- -- -- -- 471
Proceeds from exercise of
stock options................ -- 60 -- -- --
------- ------- -------- ------- --------
Net cash provided by (used
in) financing activities. 2,724 (734) 9,981 (915) 24,201
------- ------- -------- ------- --------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS............... 2,539 1,227 (3,769) (1,415) 4,473
CASH AND CASH EQUIVALENTS,
beginning of period............ 2,118 4,657 5,884 5,884 2,115
------- ------- -------- ------- --------
CASH AND CASH EQUIVALENTS, end
of period...................... $ 4,657 $ 5,884 $ 2,115 $ 4,469 $ 6,588
======= ======= ======== ======= ========
CASH PAID DURING THE PERIOD FOR:
Interest...................... $ 2,850 $ 3,075 $ 3,204 $ 538 $ 1,240
Income taxes.................. 184 1,023 1,022 445 65
======= ======= ======== ======= ========
SUPPLEMENTAL NON-CASH INVESTING
ACTIVITY:
Assumption of liabilities in
connection with purchase of
assets of Chicago &
Illinois Midland Railway
Company.................... $ -- $ -- $ -- $ -- $ 1,162
======= ======= ======== ======= ========
|
The accompanying notes are an integral part of these consolidated financial statements.
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Data with respect to the three months ended March 31, 1995 and 1996, are unaudited.)
1. THE COMPANY'S BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Genesee & Wyoming Inc. and Subsidiaries (the "Company") operates 11 short- line and regional railroads in New York, Pennsylvania, Louisiana, Oregon, Texas and, beginning in 1996, Illinois (see Note 14), through its various subsidiaries. The Company, through its leasing subsidiary, also buys, sells, leases and manages railroad transportation equipment primarily for customers served by the Company's subsidiaries.
In the opinion of management, the unaudited financial statements for the three-month periods ended March 31, 1995 and 1996, are presented on a basis consistent with the audited financial statements and contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The results of operations for interim periods are not necessarily indicative of results of operations for the full year.
On May 18, 1995, the Company changed its name from Genesee & Wyoming Industries, Inc. to Genesee & Wyoming Inc.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.
Revenue Recognition
Revenues are estimated and recognized as shipments initially move onto the Company's tracks, which, due to the relatively short length of haul, is not materially different from the recognition of revenues as shipments progress.
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents for purposes of classification in the consolidated balance sheets and consolidated statements of cash flows. Cash equivalents are stated at cost, which approximates fair market value.
Materials and Supplies
Materials and supplies consist of items for improvement and maintenance of road property and equipment, and are stated at the lower of average cost or market.
Property and Equipment
Property and equipment are carried at historical cost. Acquired railroad property is recorded at the purchased cost. Major renewals or betterments are capitalized while routine maintenance and repairs, which do not improve or extend asset lives, are charged to expense when incurred. Gains or losses on sales or other dispositions are credited or charged to other income. Gains of approximately $790,000 and $593,000 realized by the leasing subsidiary on the sale or disposition of transportation equipment during fiscal year 1994 and the first quarter of 1996, respectively are classified in operating revenues. Depreciation is provided on the straight-line method over the useful lives of the property and are as follows:
Road properties................................................ 20-50 years Equipment...................................................... 3-20 years |
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Service Assurance Agreement
The service assurance agreement represents a commitment from a significant customer of the Company, through its subsidiary Illinois & Midland Railroad, Inc. (see Notes 2 and 14), which grants the Company the exclusive right to service three of the customer's facilities indefinitely. The service assurance agreement is amortized on a straight-line basis over the same period as the related track structure, which is 20 years. The Company continually evaluates whether later events and circumstances have occurred that indicate the remaining estimated useful life of the asset may not be recoverable. When factors indicate that the asset should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted future cash flows over the remaining life of the asset in measuring whether the asset is recoverable.
Net Income per Share
Net income per share is determined by dividing net income by the weighted average number of common shares outstanding during the periods, as adjusted for the stock split discussed in Note 14. The dilutive effect of unexercised stock options and stock warrants have not been included in the calculation as the effect would not be material.
Significant Customer Relationship
A large portion of the Company's operating revenues is attributable to customers operating in the salt, forest products and petroleum industries. The largest ten customers accounted for approximately 51%, 53% and 50% of the Company's revenues in 1993, 1994 and 1995, respectively. One customer in the salt industry accounted for approximately 20%, 12% and 9% of the Company's revenue in 1993, 1994 and 1995, respectively (see Note 14 for a discussion of recent developments of this significant customer). The Company regularly grants trade credit to all of its customers. In addition, the Company grants trade credit to other railroads through the routine interchange of traffic. Although the Company's accounts receivable include a diverse number of customers and railroads, the collection of these receivables is substantially dependent upon the economies of the regions in which the Company operates, the salt, forest products and petroleum industries, and the railroad sector of the economy in general.
Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:
Current assets and current liabilities: The carrying value approximates fair value due to the short maturity of these items.
Long-term debt: The fair value of the Company's long-term debt is based on secondary market indicators. Since the Company's debt is not quoted, estimates are based on each obligation's characteristics, including remaining maturities, interest rate, credit rating, collateral, amortization schedule and liquidity. The carrying amount approximates fair value.
Management 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. EXPANSION OF RAILROAD OPERATIONS:
Portland & Western Railroad, Inc.--In 1995 the Company formed a new subsidiary, the Portland & Western Railroad, Inc. ("P&W"). This subsidiary operates 107 miles of track in Oregon under two lease agreements. See Note 5 for further discussion.
Finger Lakes Railway Corporation--In July of 1995, the Company invested $175,000 to acquire 44% of the outstanding common stock of this entity. The Company also provided a $150,000 irrevocable letter of credit in order to provide assurance that the entity will comply with a certain agreement. This investment will be recorded on the equity method. The results of operations and financial position of this entity are not material.
Illinois & Midland Railroad, Inc.--Subsequent to year-end, the Company formed the Illinois & Midland Railroad, Inc. to purchase certain assets of the Chicago & Illinois Midland Railway Company for approximately $27.5 million. See Note 14 for further discussion of this acquisition.
Pittsburg & Shawmut Railroad, Inc.--Subsequent to year-end, the Company formed the Pittsburg & Shawmut Railroad, Inc. to purchase certain assets of the Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company and Red Bank Railroad Company for approximately $15.2 million. See Note 14 for further discussion of this acquisition.
3. PROPERTY AND EQUIPMENT:
Major classifications of property and equipment are as follows (amounts in thousands):
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
Road properties..................................... $41,420 $48,691 $57,203
Equipment and other................................. 21,596 30,540 32,323
------- ------- -------
63,016 79,231 89,526
Less--Accumulated depreciation and amortization..... 13,753 17,657 18,917
------- ------- -------
$49,263 $61,574 $70,609
======= ======= =======
|
4. OTHER ASSETS:
Other assets includes approximately $605,000 of deferred financing costs at December 31, 1995, net of accumulated amortization, which were capitalized in conjunction with the refinancing transaction during 1995 (see Note 6). These costs are amortized over the period covered by the related revolving credit agreement using the straight-line method, which is not materially different from the amortization computed using the effective-interest method.
In 1993 and 1994, the Company wrote off all road property which was being held for sale or future use to state the property at net realizable value. These write-offs (approximately $180,000 and $675,000 in 1993 and 1994, respectively) were recorded as a charge to maintenance of ways and structures expense.
5. LEASES:
Lessor
A subsidiary leases rolling stock to third parties under agreements that are accounted for as operating leases. The property held for lease on December 31, 1995, totaled $15,334,000 less accumulated depreciation of
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
$2,904,000. The following is a schedule of minimum future rentals receivable on noncancelable operating leases (amounts in thousands):
1996.............................................................. $ 3,335
1997.............................................................. 3,198
1998.............................................................. 2,910
1999.............................................................. 1,160
2000.............................................................. 1,160
Thereafter........................................................ 3,402
-------
$15,165
=======
|
Lessee
The Company has entered into several leases for rolling stock, locomotives and other equipment. Operating lease expense for the years ended December 31, 1993, 1994 and 1995, was approximately $2,264,000, $2,275,000 and $2,173,000, respectively. The following is a summary of future minimum payments under noncancelable leases (amounts in thousands):
OPERATING CAPITAL
LEASES LEASES
--------- -------
1996....................................................... $1,537 $479
1997....................................................... 1,220 --
1998....................................................... 957 --
1999....................................................... 581 --
2000....................................................... 263 --
Thereafter................................................. 181 --
------ ----
Total minimum payments..................................... $4,739 479
======
Less: Amount representing interest......................... (26)
----
Present value of minimum lease payments.................... $453
====
|
Also, the Company entered into a lease agreement with a Class I carrier for one of its subsidiaries to operate 185 miles of track in Oregon in 1992, and the subsidiary began operations in 1993. The Company has assumed all operating and financial responsibilities including maintenance and regulatory compliance. Under the lease, no payments to the lessor are required as long as the subsidiary only interchanges its freight traffic with the lessor. Through December 31, 1995, no payments were required under this lease arrangement. The lease is subject to an initial 20 year term and shall be renewed for successive ten year renewal terms, unless either party elects not to renew the lease. If the lessor terminates the lease for any reason, the lessor must reimburse the Company for its depreciated basis in the property.
In August, 1995, the P&W signed an agreement with a Class I carrier to lease and operate 53 miles of track in Oregon. The lease is subject to an initial 20 year term and shall be renewed for an additional ten years, unless either party elects not to renew the lease. Under the lease, no payments to the lessor are required as long as the subsidiary maintains minimum levels of traffic and provided the subsidiary interchanges its freight traffic with only the lessor and certain permitted carriers. The maximum annual lease payment required if the P&W did not move any traffic would be $1.3 million. In October, 1995, the P&W signed an agreement with another Class I carrier to lease and operate an additional 54 miles of connecting track in Oregon. The lease is subject to an initial three year term and shall be renewed for successive three year intervals, unless either party elects not to renew the lease. Under the lease, no payments to the lessor are required as long as the subsidiary interchanges its freight traffic with only the lessor and certain permitted carriers. Under both of these arrangements, the Company has assumed all operating and financial responsibilities including maintenance and regulatory compliance. Through December 31, 1995, no payments were required under either lease arrangement.
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A subsidiary of the Company has entered into a trackage rights agreement to operate over 91 miles of a Class I carrier. This agreement is terminable by either party after 1997.
6. LONG-TERM DEBT:
Long-term debt consists of the following (amounts in thousands):
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
Credit facilities with variable interest depending
upon certain financial ratios of the Company, as
defined (8.44% at December 31, 1995), due
partially in quarterly installments, with balance
due in 2001...................................... $ -- $24,300 $50,201
Promissory note payable with interest at 8% and
principal payments due annually of $1,188,000 if
certain conditions, as specified in the
agreement, are met, with balance due in 1999..... 9,306 9,122 9,122
Term loan payable in quarterly installments,
variable maturities through 2005 with interest
adjusted quarterly at 90-day treasury bill rate
plus 3.25%....................................... 6,691 6,066 5,895
Capital lease obligations with interest at 12.47%,
payable in monthly installments of $47,885
through 1996 (see Note 5)........................ 937 453 322
Secured promissory note with the State of
Illinois, interest at 3%, payable in annual
installments over 10 years beginning on the first
anniversary of the project completion date....... -- -- 667
Other long-term debt with interest rates varying
from 6.75% to 15%, refinanced in 1995 (see
below)........................................... 15,706 -- --
------- ------- -------
32,640 39,941 66,207
Less--Current portion............................. 4,230 1,239 2,894
------- ------- -------
Long-term debt, less current portion.............. $28,410 $38,702 $63,313
======= ======= =======
|
On June 2, 1995, the Company refinanced approximately $14.3 million ($15.7 million as of December 31, 1994) of previously existing notes and purchased approximately $6 million of rolling stock previously under an operating lease by entering into a credit facilities agreement. In conjunction with this refinancing transaction, an extraordinary charge for prepayment penalties and other financing costs on the early extinguishment of debt for approximately $851,000 ($494,000 net of income taxes) was incurred. These amounts have been recorded in the accompanying consolidated income statement as an extraordinary item, net of income taxes.
Subsequent to year-end, on February 8, 1996, the Company amended and restated the credit facilities agreement. In conjunction with this transaction, the Company incurred additional indebtedness of approximately $28.0 million, primarily for the purchase of certain assets of the Chicago & Illinois Midland Railway Company (see Note 14 for further discussion). The amended and restated credit facilities provide for a $40 million term loan and a $34 million revolving credit facility. The term loan requires varying quarterly principal payments beginning September 30, 1996, with the remaining balance payable in February, 2001. The revolving credit facility provides for a mandatory commitment reduction of $2.0 million on December 31, 1997, with the remaining balance payable in February, 2001. The Company may voluntarily reduce the commitment on the revolving credit facility at any time without penalty, provided that no reinstatement of the commitment amounts may occur. In conjunction with the amendment and restatement, the Company paid debt financing fees of $1.6
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
million, primarily to a financial institution. These costs have been capitalized in the accompanying balance sheets as of March 31, 1996 as an other asset and are being amortized over the period covered by the related credit facilities agreement using the straight-line method, which is not materially different from the amortization computed using the effective- interest method.
Both the term loan and the revolving credit facility accrue interest at prime or the Eurodollar rate, at the option of the Company, plus the applicable margin, which varies from 0% to 3% depending upon the Company's funded debt to EBITDA ratio, as defined in the agreement. Interest is payable in arrears based on certain elections of the Company, never to exceed three months outstanding. The Company pays a 1/2% per annum commitment fee on all unused portions of the credit facilities. Both the term loan and the revolving credit facility require mandatory prepayments when certain events occur. These events include, among other things, the generation of excess cash flow, the disposition of certain levels of assets not subject to prior liens and the sale of Company stock, all as defined in the agreement. These credit facilities are secured by substantially all the assets of the Company and the stock of certain subsidiaries. These facilities require the maintenance of certain covenants, including, but not limited to, funded debt to EBITDA, funded debt to net worth, cash flow coverage, EBIT to interest and minimum net worth, all as defined in the agreement. The Company is also limited in its ability to incur additional indebtedness, create liens on its assets, make certain capital expenditures and pay dividends greater than $32,000 in any one quarter.
The following is a summary of the maturities of long-term debt as of December 31, 1995, as adjusted to reflect the payment terms of the amended and restated credit facilities (amounts in thousands):
1996............................................................ $ 1,239
1997............................................................ 2,035
1998............................................................ 2,002
1999............................................................ 7,434
2000............................................................ 825
2001............................................................ 24,775
Thereafter...................................................... 1,631
-------
$39,941
=======
|
The promissory note payable with an outstanding balance of $9,122,000 at December 31, 1995, provides for annual principal payments of $1,188,000 provided that certain levels of revenue and cash flow are met. In accordance with these provisions, the Company was not required to make any principal payments in 1994 or 1995. The Company did, however, make principal payments of $177,000 and $184,000 in 1994 and 1995, respectively, due to additional requirements regarding the sale of assets, as defined in the agreement. Management believes that the Company will be required to make the full principal payments beginning in 1997 through the due date of the note. The annual debt maturity schedule has been adjusted accordingly.
The Company's debt has been secured by substantially all the assets of the Company and the stock of certain subsidiaries. Certain obligations require the maintenance of covenants including, but not limited to, funded debt to EBITDAR, funded debt to net worth, EBIT to interest, cash flow and the incurrence of additional indebtedness, as defined in the agreement. The Company and its subsidiaries were in compliance with the provisions of these covenants as of December 31, 1995.
7. INTEREST RATE RISK MANAGEMENT:
The Company uses derivative financial instruments, specifically interest rate caps and interest rate swaps, to manage its variable interest rate risk on long-term debt.
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest Rate Cap--In August, 1995, the Company entered into a three-year interest rate cap agreement whereby the Company paid $90,000 to a financial institution in order to cap the rate on three-month dollar deposits, as defined, to a fixed rate of 8.0%. The notional amount under this agreement reduces on a quarterly basis in varying amounts from $15,250,000 at September 30, 1995, to $11,438,000 at September 30, 1998 ($15,000,000 at December 31, 1995). The fees paid by the Company for the interest rate cap were capitalized and are amortized over the period covered by the agreement.
Interest Rate Swap--On February 14, 1996, the Company entered into a three- year interest rate swap agreement with a financial institution whereby the Company fixed its LIBOR interest rate at 5.14% by exchanging its variable interest rate on long-term debt for a fixed interest rate. The notional amount under this agreement is $10.0 million. Any fees paid or received under this arrangement are accrued as earned, the effect of which results in fixed interest expense over the period covered by the agreement.
Interest Rate Risk Management Commitment--In conjunction with amending and restating the Company's existing credit facilities as discussed in Note 6, the Company entered a commitment to provide interest rate protection for at least 50% of the commitment amount ($37.0 million as of February 8, 1996) under the credit facilities by June 30, 1996. This commitment will be waived if the Company's ratio of funded debt to net worth, as defined, is less than 1.50 to 1.00 as of June 30, 1996.
8. EMPLOYEE BENEFIT PLANS:
Pension
The Company administers a noncontributory defined benefit plan for the employees of a subsidiary who are members of a union and who meet minimum service requirements. Benefits are determined based on a fixed amount per year of credited service. The Company's funding policy is to make contributions for pension benefits based on actuarial computations which reflect the long-term nature of the plan. Contributions are subject to Board of Directors approval. The Company has met the minimum funding requirements according to the Employee Retirement Income Security Act.
Pension costs for 1993, 1994 and 1995 were approximately $13,000, $13,000, and $14,000, respectively. The pension liability recognized in the accompanying consolidated balance sheet at December 31, 1994 and 1995, was approximately $85,000 and $80,000, respectively. The projected benefit obligation was determined using a discount rate of 7.8%. The long-term rate of return on plan assets was 7.5%. The plan assets, which consist of fixed income securities, were approximately $109,000 and $117,000, respectively, at December 31, 1994 and 1995. The unrecognized net transition obligation is being amortized over the remaining service lives of plan participants.
Postretirement Benefits
The Company adopted Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (FAS 106), on January 1, 1993. This statement requires that employers recognize the cost of providing benefits other than pensions to retirees during the years an employee provides services.
Historically, the Company has provided certain health care and life insurance benefits for certain retired employees. Eligible employees include union employees for one of its subsidiaries, and certain nonunion employees who have reached the age of 55 with 30 or more years of service. The Company funds the plan on a pay-as-you-go basis.
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Total postretirement benefit costs for the years ended December 31, 1993, 1994 and 1995, were $711,000, $55,000 and $49,000, respectively, $656,000 of which in 1993 represented the immediate recognition of the transition obligation on the cumulative effect of accounting change for postretirement benefits. The funded status of the plan at December 31, 1994 and 1995, was as follows (amounts in thousands):
1994 1995
---- ----
Accumulated postretirement benefit obligation--
Fully eligible active participants.............................. $ 3 $ 4
Other active participants....................................... 114 145
Retirees........................................................ 460 486
---- ----
577 635
Plan assets at fair value......................................... -- --
---- ----
Accumulated postretirement benefit obligation in excess of plan
assets........................................................... 577 635
Unrecognized net gain resulting from change in actuarial assump-
tions............................................................ 99 51
---- ----
Accrued postretirement benefit cost............................... $676 $686
==== ====
|
For measurement purposes, a 10.0% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1996 and 1997. The rate was then assumed to gradually decrease to 5% by the year 2002, at which time the rate was assumed to remain level. To illustrate the effect of these assumptions, increasing the assumed health care cost trend by 1% each year would increase the accumulated postretirement benefit obligation as of December 31, 1995, by approximately $65,000 and the net periodic postretirement benefit cost for 1995 by approximately $6,000.
Relevant assumptions used in accounting for the postretirement benefit plan as of December 31 were as follows:
1994 1995
---- ----
Weighted average discount rate................................... 7.5% 7.5%
Long-term rate of return on plan assets.......................... N/A N/A
=== ===
|
Employee Bonus Programs
The Company has performance-based bonus programs which include a majority of nonunion employees. Key employees are granted bonuses on a discretionary basis. Total compensation of approximately $92,000, $314,000 and $308,000 was awarded under the various bonus plans in 1993, 1994 and 1995, respectively.
Profit Sharing
The Company maintains a defined contribution profit-sharing plan for two subsidiaries. There were no contributions in 1993, 1994 or 1995.
Effective January 1, 1994, the Company established two 401(k) plans covering union and nonunion employees who have met specified length of service requirements. The 401(k) plans qualify under Section 401(k) of the Internal Revenue Code as salary reduction plans. Employees may elect to contribute a certain percentage of their salary on a before-tax basis. For nonunion employees, the Company matches the participants contributions up to 1 1/2% of the participants salary. The Company's contributions to the plans in 1994 and 1995 were approximately $70,000 and $83,000, respectively.
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Postemployment Benefits
The Company does not provide postemployment benefits to its employees.
9. INCOME TAXES:
The Company files consolidated U.S. federal income tax returns which include all of its subsidiaries. The components of the provision for income taxes on income before extraordinary item and cumulative effect of accounting change are as follows (amounts in thousands):
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------------- ---------------
1993 1994 1995 1995 1996
------ ------ ------ ------- -------
(UNAUDITED)
Current--
Federal.................................. $ 473 $1,123 $ 550 $ 54 $ 332
State.................................... 3 146 111 30 60
Deferred................................... 952 738 811 279 264
------ ------ ------ ------- -------
$1,428 $2,007 $1,472 $ 363 $ 656
====== ====== ====== ======= =======
|
The provision for income taxes on income before extraordinary item and cumulative effect of accounting change in each period differs from that which would be computed by applying the statutory U.S. federal income tax rate to the income before taxes. The following is a summary of the effective tax rate reconciliation:
THREE MONTHS
YEARS ENDED ENDED
DECEMBER 31, MARCH 31,
---------------- --------------
1993 1994 1995 1995 1996
---- ---- ---- ------ ------
(UNAUDITED)
Tax provision at statutory rate.............. 34.0% 34.0% 34.0% 34.0% 34.0%
State income taxes, net of federal income tax
benefit..................................... 6.9 4.6 4.0 6.3 4.5
Other, net................................... .6 1.4 2.6 1.7 2.0
---- ---- ---- ------ ------
41.5% 40.0% 40.6% 42.0% 40.5%
==== ==== ==== ====== ======
|
The following summarizes the estimated tax effect of significant cumulative temporary differences that are included in the net deferred income tax liability, which is classified between current and long-term in the accompanying consolidated balance sheets (amounts in thousands):
DECEMBER 31,
---------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
Deferred tax assets--
Accruals and reserves not deducted for tax pur-
poses until paid.............................. $ 1,349 $ 1,438 $ 1,554
Alternative minimum tax credits................ 2,487 2,903 3,258
Net operating losses........................... 219 489 111
Investment tax credits......................... 156 52 --
Postretirement benefits........................ 271 272 272
Other.......................................... 140 74 63
------- ------- -------
4,622 5,228 5,258
Deferred tax liability--differences in deprecia-
tion and amortization........................... (6,672) (8,089) (8,383)
------- ------- -------
Net deferred tax liability................... $(2,050) $(2,861) $(3,125)
======= ======= =======
|
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's alternative minimum tax credits can be carried forward indefinitely; however, the Company must achieve future regular taxable income in order to realize this credit. The Company's net operating loss carryforwards expire between 2008 and 2010. The investment tax credits expire in 2000. Management does not believe that a valuation allowance is required for the deferred tax assets based on anticipated future profit levels and the reversal of current temporary differences.
10. GRANTS FROM GOVERNMENTAL AGENCIES:
During 1995, a subsidiary of the Company received a grant from the State of Pennsylvania of $3,500,000 for rehabilitation of a portion of the subsidiary's track. The agreement requires the State of Pennsylvania to reimburse the subsidiary for 75% of the total costs of the project. This project was approximately 85% completed as of December 31, 1995. Another subsidiary of the Company received a grant from the State of Louisiana of $300,000 for rehabilitation of a portion of the subsidiary's track. This project was substantially completed as of December 31, 1995.
During 1994, three subsidiaries of the Company received grants totaling approximately $1,755,000 from the State of Pennsylvania for the rehabilitation of a portion of each subsidiary's track. The agreements require the State to reimburse each subsidiary for 70%-75% of the total costs for each rehabilitation project. Each of these rehabilitation projects was completed by December 31, 1994.
During a prior year, a subsidiary of the Company received a grant from the State of New York of $4,000,000 for the rehabilitation of a portion of the subsidiary's track. This subsidiary also received a grant of $900,000 from the Federal Railroad Administration for the same rehabilitation project. The State of New York is entitled to 63.8% of the net liquidation value of the rehabilitated track upon abandonment. The State of New York agreement also requires the subsidiary to maintain the track structure by making capital improvements with a value equal to or less than $4,000,000, payable over a 10 year period beginning on April 1, 1994. The capital improvements are computed based on the number of loaded cars moved over the subsidiary's track. Failure by the Company to propose the capital improvements by March 1 of the following year will result in the State of New York assessing a penalty in the form of a usage fee, thereby requiring the Company to repay a portion of the grant equal to the required capital improvements. The Company believes that it has proposed and/or performed capital improvements which eliminate any repayments associated with the grant.
All of the aforementioned grants do not represent a future liability of the Company unless the Company abandons the rehabilitated track structure within a specified period of time, as defined in the respective agreements. As the Company does not intend to abandon the track, the Company has recorded additions to road property and has deferred the amount of the grants as the rehabilitation expenditures have been incurred. The amortization of the deferred grant is a noncash offset to depreciation expense over the useful life of the related assets and is not included as taxable income. During the years ended December 31, 1993, 1994 and 1995, the Company recorded offsets to depreciation expense from grant amortization of $279,000, $313,000 and $415,000, respectively.
11. COMMITMENTS AND CONTINGENCIES:
The Company has built its portfolio of railroad properties through the purchase or lease of road and track structure and through operating agreements. These transactions have related only to the physical assets of the railroad property. Historically, the Company does not assume the operations or liabilities of the divesting railroads.
In connection with the Company's lease of its 185-mile line in Oregon, the Company has committed to the lessor to rehabilitate 25 miles of track over five years, beginning February, 1993, at an estimated total cost of approximately $5.0 million. As of December 31, 1995, the Company has completed approximately $1.0 million of this rehabilitation.
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is a defendant in certain lawsuits resulting from the railroad operations. Management believes that adequate provision has been made in the financial statements for any expected liabilities which may result from disposition of such lawsuits. While it is possible that some of the foregoing matters may be settled at a cost greater than that provided for, it is the opinion of management that the ultimate liability, if any, will not be material to the Company.
12. STOCKHOLDERS' EQUITY:
The Company entered into an agreement in 1978 (extended in 1987) with its president whereby options to purchase 90,650 shares were granted. In 1994, the remaining outstanding options to purchase 44,400 shares were exercised.
In conjunction with the amendment and restatement of the Company's credit facilities as discussed in Note 6, detachable warrants were issued to a financial institution to purchase 41,847 shares of Class A Common Stock at an exercise price of $0.0005 per share. These warrants are exercisable at any time through March 1, 2006. Issuance of additional warrants for the purchase of 11,950 shares of Class A Common Stock are required if the Company does not successfully complete an initial public offering of at least $30 million in net proceeds by December 31, 1996. These warrants provide a put option whereby the warrant holder can require the Company to repurchase the shares based on market value, as defined in the agreement. This put option is exercisable under certain conditions after March 1, 2001. The warrants also provide a call option whereby the Company can elect to repurchase the shares based on market value, as defined in the agreement. This call option is exercisable under certain conditions after March 1, 2003. Management has valued the warrants at approximately $471,000, the amount of which was recorded as a debt discount in the three-month period ending March 31, 1996. The discount is being amortized over the period covered by the related credit facilities agreement using the straight-line method, which is not materially different from the amortization computed using the effective-interest method.
13. ACCOUNTING PRONOUNCEMENTS:
In March, 1995, Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("FAS 121") was issued. Under FAS 121, an impairment loss must be recognized for long-lived assets and certain identifiable intangibles to be held and used by an entity whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. FAS 121 is effective for financial statements issued for fiscal years beginning after December 15, 1995, and must be adopted on a prospective basis. Restatement of previously issued financial statements is not permitted. The Company adopted FAS 121 prospectively in the first quarter of 1996, the adoption of which did not have a material impact on the financial condition or results of operations of the Company.
Statement of Financial Accounting Standards No. 123, "Accounting for Stock- based Compensation" (effective for fiscal years beginning after December 15, 1995) encourages, but does not require, employers to adopt a fair value method of accounting for employee stock-based compensation, and requires increased stock-based compensation disclosures if the fair value method is not adopted. The Company does not intend to elect the fair value method for stock options. Accordingly, implementation of this Statement will have no effect on the Company's operating results or financial condition.
14. POST DECEMBER 31, 1995 EVENTS:
Illinois & Midland Railroad, Inc.--On February 8, 1996, a newly-formed subsidiary, the Illinois & Midland Railroad, Inc., purchased certain assets, primarily road and track structure, of the Chicago & Illinois Midland Railway Company for approximately $27.5 million, including related costs and the assumption of certain
liabilities. The purchase price was allocated to purchased inventory ($750,000), assumed note receivable ($1,220,000), property ($10,546,000), and the service assurance agreement ($14,981,000). This subsidiary will operate approximately 126 miles of track in the State of Illinois. A significant portion of this subsidiary's operating revenues (83% in 1995) is attributable to coal shipments for one customer which is an electric utility. The acquisition was accounted for as a purchase. The allocation of the purchase price is based on preliminary estimates and may be revised at a later date.
Pittsburg & Shawmut Railroad, Inc.--On April 29, 1996, a newly formed subsidiary, the Pittsburg & Shawmut Railroad, Inc. purchased certain assets, primarily road and track structure, of the Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company, and Red Bank Railroad Company for approximately $15.2 million, including related costs and the assumption of a grant from the Commonwealth of Pennsylvania. In addition, the purchase and sale agreement provides for additional contingency payments of up to $2.5 million. A portion of these payments are required (up to a maximum of $500,000) if certain coal shipments during any calendar year from 1997-1999, as defined, exceed 290,000 tons. The remaining contingency payments (up to a maximum of $2.0 million) are calculated as 25% of the gross revenues attributable to certain coal shipments that exceed 564,793 tons during any calendar year from 2000-2009, as defined. Upon resolution of the amount of the contingency payments, there will be an additional element of cost related to the transaction, which will be recorded as excess cost over the fair market value of tangible net assets acquired and amortized over the same period as the related track structure, which is 20 years. A significant portion of this subsidiary's revenue is attributable to coal shipments. The acquisition was accounted for as a purchase. The allocation of the purchase price is based on preliminary estimates and may be revised at a later date.
Pro Forma for Acquisitions--Results for the operations of the Illinois & Midland Railroad, Inc. and the Pittsburg & Shawmut Railroad, Inc. are included within the consolidated financial statements subsequent to February 8, 1996, and April 29, 1996, respectively. Unaudited pro forma results assuming both acquisitions had been made as of January 1, 1995, are as follows (in thousands):
THREE MONTHS ENDED
-----------------------------
MARCH 31, 1995 MARCH 31, 1996
-------------- --------------
(UNAUDITED) (UNAUDITED)
Revenues.......................................... $18,204 $19,448
Net income........................................ 1,393 280
Net income per share.............................. $0.59 $0.12
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The above information reflects adjustments for only depreciation, amortization and interest expense based on the new cost basis and debt structure of the Company. Income per share information has been adjusted for the stock split, but not for the underwritten initial public offering.
Recent Developments of Significant Customer--As discussed in Note 1, a significant portion of the Company's revenue is attributable to a customer operating in the salt industry. This customer accounted for approximately 9% of the Company's revenue for 1995, of which 40% was for freight hauling and 60% represented car rental revenue. Similar amounts for 1993 were 20%, 61% and 39%, respectively. Similar amounts for 1994 were 12%, 43% and 57%, respectively. On March 12, 1994, this customer experienced a subsidence and subsequent flooding at its Retsof, New York, salt mine. Salt shipments by rail ceased until August, 1994. Rail shipments then resumed and continued, at a lower level than experienced before the subsidence, until September, 1995, when the mine closed. Car rental revenue from long-term operating leases with this customer is unaffected.
This customer had previously announced its intentions to construct a new mine. On April 22, 1996, this customer announced that a new mine will not be constructed and that the closed mine will be converted to a distribution center. In anticipation of the construction of a new mine, the Company incurred approximately $600,000 of costs in connection with construction of a rail spur. While management anticipates that it will be reimbursed for these costs, there can be no assurance that such reimbursement will occur.
GENESEE & WYOMING INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Initial Public Offering and Related Stock Transactions--The Company intends to file a registration statement with the Securities and Exchange Commission for an underwritten initial public offering of between 2.5 and 3.0 million shares of Class A Common Stock (the Common Stock Offering). The proceeds of the Common Stock Offering will be used to pay down borrowings on the credit facilities.
In connection with the Common Stock Offering, the Company, effective June , 1996, changed the par value of its Class A and Class B Common Stock from $10 per share to $.01 per share and increased the shares authorized to 12 million and 1.5 million shares, respectively. The rights and privileges of Class B Common Stock changed to substantially the same as Class A Common Stock, except it will carry 10 votes per share, be convertible into Class A Common Stock and have transfer restrictions. The Class A Common Stock also has a 10% dividend preference over Class B Common Stock, as and if dividends are declared by the Board of Directors. Also, the Company executed an 18.5 to 1 stock split and reclassified the Company's outstanding Class A Common Stock into Class A and Class B Common Stock, depending on the election of the shareholder. For purposes of this statement the reclassification has been assumed to be equal between Class A and Class B Common Stock.
Also, the Company established an incentive and nonqualified stock option plan for key employees and a nonqualified stock option plan for nonemployee directors that will allow employees and directors to purchase up to an aggregate of 500,000 shares of Class A Common Stock. In addition, the Company established an employee stock purchase plan and reserved 450,000 shares under the plan. The plan allows employees to purchase stock at market value.
All references in the consolidated financial statements of the Company to the number of shares authorized and outstanding of Class A and Class B Common Stock have been retroactively adjusted to reflect the reclassification of the capital stock and the stock split.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Genesee & Wyoming Inc.:
We have audited the accompanying balance sheets of CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY (an Illinois corporation) as of December 31, 1994 and 1995, and the related statements of operations, shareholder's equity and cash flows for each of the three years in the period ended December 31, 1995. 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 conducted our audits in accordance with generally accepted auditing standards. 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provides 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 Chicago & Illinois Midland Railway Company as of December 31, 1994 and 1995, and the results of its operations and its cash flows for the each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois,
April 4, 1996
CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
--------------- FEBRUARY 8,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................... $ 46 $ 419 $ 124
Accounts receivable............................. 3,972 4,360 3,127
Materials and supplies.......................... 993 733 750
Other current assets............................ 541 302 859
------- ------- -------
Total current assets.......................... 5,552 5,814 4,860
------- ------- -------
PROPERTY AND EQUIPMENT, NET....................... 27,321 10,630 10,546
------- ------- -------
LONG-TERM RECEIVABLE FROM AFFILIATE............... 360 439 439
------- ------- -------
OTHER ASSETS, NET................................. 15,888 15,790 15,711
------- ------- -------
Total assets................................. $49,121 $32,673 $31,556
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LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable................................ $ 7,029 $ 8,367 $ 8,129
Accrued expenses................................ 1,509 1,286 1,740
------- ------- -------
Total current liabilities..................... 8,538 9,653 9,869
------- ------- -------
LONG-TERM DEBT:
Affiliates...................................... 8,500 8,500 8,500
Other........................................... 9,323 5,281 4,712
------- ------- -------
Total long-term debt.......................... 17,823 13,781 13,212
------- ------- -------
OTHER LIABILITIES................................. 1,395 1,252 1,095
------- ------- -------
DEFERRED INCOME TAX LIABILITIES, NET.............. 12,394 6,462 6,439
------- ------- -------
COMMITMENTS AND CONTINGENCIES (NOTE 10)
SHAREHOLDER'S EQUITY:
Common stock, no par value; 10,000,000 shares
authorized; 3,130,016 shares issued and out-
standing....................................... 3,524 3,524 3,524
Retained earnings (deficit)..................... 5,447 (1,999) (2,583)
------- ------- -------
Total shareholder's equity.................... 8,971 1,525 941
------- ------- -------
Total liabilities and shareholder's equity... $49,121 $32,673 $31,556
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The accompanying notes are an integral part of these balance sheets.
CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
STATEMENTS OF OPERATIONS
(IN THOUSANDS)
ONE MONTH AND
EIGHT DAY
YEARS ENDED DECEMBER 31, PERIOD ENDED
---------------------------- FEBRUARY 8,
1993 1994 1995 1996
-------- -------- -------- -------------
(UNAUDITED)
OPERATING REVENUES................. $ 13,983 $ 9,365 $ 13,733 $1,420
OPERATING EXPENSES:
Transportation.................... 3,017 2,547 2,593 532
Maintenance of ways and struc-
tures............................ 1,702 1,752 1,814 411
Maintenance of equipment.......... 1,401 2,579 1,659 390
General and administrative........ 2,693 2,134 2,203 757
Depreciation and amortization..... 1,569 1,579 1,437 184
-------- -------- -------- ------
Total operating expenses....... 10,382 10,591 9,706 2,274
-------- -------- -------- ------
Income (loss) from operations.. 3,601 (1,226) 4,027 (854)
INTEREST EXPENSE................... (1,345) (1,613) (1,461) (107)
OTHER INCOME....................... 2,162 533 1,525 17
LOSS ON SALE OF ASSETS (Note 11)... -- -- (16,082) --
-------- -------- -------- ------
Income (loss) before income
taxes......................... 4,418 (2,306) (11,991) (944)
PROVISION (BENEFIT) FOR INCOME TAX-
ES................................ 1,747 (850) (4,545) (360)
-------- -------- -------- ------
NET INCOME (LOSS).................. $ 2,671 $ (1,456) $ (7,446) $ (584)
======== ======== ======== ======
|
The accompanying notes are an integral part of these financial statements.
CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS)
COMMON STOCK
-------------
RETAINED
EARNINGS
SHARES AMOUNT (DEFICIT) TOTAL
------ ------ --------- -------
BALANCE, January 1, 1993....................... 3,130 $3,524 $ 4,232 $ 7,756
Net income................................... -- -- 2,671 2,671
----- ------ ------- -------
BALANCE, December 31, 1993..................... 3,130 3,524 6,903 10,427
Net loss..................................... -- -- (1,456) (1,456)
----- ------ ------- -------
BALANCE, December 31, 1994..................... 3,130 3,524 5,447 8,971
Net loss..................................... -- -- (7,446) (7,446)
----- ------ ------- -------
BALANCE, December 31, 1995..................... 3,130 3,524 (1,999) 1,525
Net loss (Unaudited)......................... -- -- (584) (584)
----- ------ ------- -------
BALANCE, February 8, 1996 (Unaudited).......... 3,130 $3,524 $(2,583) $ 941
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The accompanying notes are an integral part of these financial statements.
CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
ONE MONTH AND
EIGHT DAY
YEARS ENDED DECEMBER 31, PERIOD ENDED
-------------------------- FEBRUARY 8,
1993 1994 1995 1996
------- -------- ------- -------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................... $ 2,671 $ (1,456) $(7,446) $(584)
Adjustments to reconcile net income
(loss) to net cash (used in) pro-
vided by operating activities--
Depreciation and amortization...... 1,569 1,579 1,439 184
Deferred income taxes.............. 387 (850) (5,932) (23)
Gain on disposition of equipment... -- -- (1,074) --
Loss on sale of assets (Note 11)... -- -- 16,082 --
Changes in assets and liabilities--
Accounts receivable.............. (250) 697 (388) 1,233
Materials and supplies........... 190 294 (167) (17)
Other current assets............. (63) (76) 239 (557)
Accounts payable and accrued ex-
penses.......................... (2,357) (1,624) 1,115 216
Other assets and liabilities,
net............................. (2,582) 146 (176) (131)
------- -------- ------- -----
Net cash (used in) provided by
operating
activities...................... (435) (1,290) 3,692 321
------- -------- ------- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment.. (874) (1,362) (2,829) (47)
Proceeds from disposition of prop-
erty and equipment................. 83 66 4,007 --
Deposit on equipment................ -- -- (376) --
Advances to affiliate, net.......... -- (360) (79) --
------- -------- ------- -----
Net cash (used in) provided by
investing activities............ (791) (1,656) 723 (47)
------- -------- ------- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term
debt............................... 1,075 2,498 271 11
Principal payments on long-term
debt............................... -- -- (4,313) (580)
------- -------- ------- -----
Net cash provided by (used in)
financing
activities...................... 1,075 2,498 (4,042) (569)
------- -------- ------- -----
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS......................... (151) (448) 373 (295)
CASH AND CASH EQUIVALENTS, beginning
of period........................... 645 494 46 419
------- -------- ------- -----
CASH AND CASH EQUIVALENTS, end of pe-
riod................................ $ 494 $ 46 $ 419 $ 124
======= ======== ======= =====
CASH PAID DURING THE PERIOD FOR:
Interest........................... $ 1,350 $ 1,498 $ 1,548 $ 269
Income taxes (refunds)............. 1,830 (275) 1,574 --
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|
The accompanying notes are an integral part of these financial statements.
CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
NOTES TO FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE ONE MONTH AND EIGHT DAY PERIOD ENDED FEBRUARY 8,
1996 ARE UNAUDITED)
1. THE COMPANY'S BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Chicago & Illinois Midland Railway Company (the "Company") is a short-line railroad located in Illinois that operates over 126 miles of track, including 29 miles of trackage rights over two Class I carriers and a terminal switching carrier. The Company is a wholly-owned subsidiary of Pawnee Railroad Company ("Pawnee").
In the opinion of management, the unaudited financial statements for the one month and eight day period ended February 8, 1996, are presented on a basis consistent with the audited financial statements and contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The results of operations for the interim period are not necessarily indicative of results of operations for the full year.
Revenue Recognition
Revenues are estimated and recognized as shipments initially move onto the Company's tracks, which, due to the relatively short length of haul, is not materially different from the recognition of revenues as shipments progress.
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents for purposes of classification in the balance sheets and statements of cash flows. Cash equivalents are stated at cost, which approximates fair market value.
Materials and Supplies
Materials and supplies, consisting primarily of fuel and replacement parts, are valued at the lower of average cost or market.
Property and Equipment
Property and equipment are carried at historical cost. Major renewals or betterments are capitalized while routine maintenance and repairs, which do not improve or extend asset lives, are charged to expense when incurred. Gains or losses on sales or other dispositions are credited or charged to other income. Depreciation is provided using the straight-line method over the estimated useful lives of the property and are as follows:
Road properties............................................... 24-79 years Equipment..................................................... 8-33 years |
The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of the property and equipment may not be recoverable. When factors indicate that the asset should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted future cash flows over the remaining useful life of the asset in measuring whether the asset is recoverable.
Income Taxes
The Company is a member of a group that files a consolidated tax return. The consolidated amount of current and deferred tax expense is allocated among the members of the group based on each entitys tax attributes using a separate return approach.
CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Significant Customer Relationship
A large portion of the Company's operating revenues is attributable to the shipment of coal for an electric utility. This customer accounted for approximately 77%, 78% and 83% of the Company's operating revenues in 1993, 1994 and 1995, respectively. This traffic is covered under a service assurance agreement. See Note 4 for further discussion.
Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Company:
Current assets and current liabilities: The carrying amount approximates fair value due to the short maturity of these items.
Long-term debt: The fair value of the Company's long-term debt is based on secondary market indicators. Since the Company's debt is not quoted, estimates are based on each obligation's characteristics, including remaining maturities, interest rate, credit rating, collateral, amortization schedule and liquidity. The carrying amount approximates fair value.
Management 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. OTHER INCOME:
In 1993, the Company settled a significant lawsuit for a third-party crossing accident. Total cash paid for the settlement was $600,000, resulting in a gain, from reversal of the related reserve, of $1,900,000 which is included in other income.
In 1995, the Company sold various railcars and locomotives to third-parties for proceeds of approximately $4,007,000. The Company realized a gain on these transactions of approximately $1,074,000 which is included in other income.
3. PROPERTY AND EQUIPMENT:
Major classifications of property and equipment are as follows (amounts in thousands):
DECEMBER 31,
--------------- FEBRUARY 8,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
Road properties..................................... $26,922 $27,696 $27,550
Equipment and other................................. 6,046 2,741 2,922
------- ------- -------
32,968 30,437 30,472
Less--Accumulated depreciation...................... 5,647 19,807 19,926
------- ------- -------
$27,321 $10,630 $10,546
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CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. OTHER ASSETS:
Other assets at December 31, 1994 and 1995, consist of the following (amounts in thousands):
DECEMBER 31,
--------------- FEBRUARY 8,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
Service assurance agreement with significant cus-
tomer............................................. $17,238 $17,238 $17,238
Organization costs................................. 446 446 446
Other.............................................. 210 617 591
------- ------- -------
17,894 18,301 18,275
Less--Accumulated amortization..................... 2,006 2,511 2,564
------- ------- -------
$15,888 $15,790 $15,711
======= ======= =======
|
The service assurance agreement represents a commitment from the Company's significant customer which grants the Company the exclusive right to service three of the customer's facilities indefinitely. The service assurance agreement is being amortized on a straight-line basis over a 40-year period through the year 2029. Organization costs are being amortized over seven years through 1998. Amortization included in the statements of operations for each of the three years in the period ended December 31, 1995, was $505,000.
5. OPERATING LEASE AGREEMENTS:
The Company has entered into several leases for rolling stock. As of December 31, 1995, the Company is a lessee for 110 rotary gondolas. This agreement requires payments of $230 per car per month ($303,600 annually) through December 31, 1999, for total future minimum lease payments as of December 31, 1995 of $1,214,000. The Company subleases the same 110 rotary gondolas to another party. Actual future rental receipts from this sublease are dependent, in part, upon usage by the lessee. Minimum future rentals to be received under noncancelable leases in effect at December 31, 1995, are $442,000, all of which are due in 1996. The net effect of all lease arrangements are classified as a reduction in maintenance of equipment expense in the accompanying statements of income. Net reductions in maintenance of equipment expense for the years ended December 31, 1993, 1994 and 1995 were approximately $939,000, $1,249,000 and $358,000, respectively. Subsequent to year-end, the Company assigned both of the above lease arrangements to Illinois & Midland Railroad, Inc. in conjunction with the transaction discussed in Note 11.
6. LONG-TERM DEBT:
Long-term debt consists of the following (amounts in thousands):
DECEMBER 31,
--------------- FEBRUARY 8,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
Unsecured senior notes due to affiliate with
interest at 10.5%, due December 31, 1998.......... $ 8,500 $ 8,500 $ 8,500
Revolving line of credit with interest at prime or
the Eurodollar rate, as appropriate, plus an
applicable margin, as defined (9.00% and 7.94%,
respectively, at December 31, 1995), due according
to annual commitment reduction amounts with the
balance due on April 10, 1998, secured by
substantially all the assets of the Company....... 8,938 4,625 4,045
Secured promissory note with the State of Illinois,
interest at 3%, payable in annual installments
over 10 years beginning on the first anniversary
of the project completion date.................... 385 656 667
------- ------- -------
Total long-term debt............................. $17,823 $13,781 $13,212
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|
CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Subsequent to year-end, on February 8, 1996, all of the Company's long-term debt was either paid in full or assumed by Illinois & Midland Railroad, Inc. See Note 11 for further discussion.
Both the unsecured senior notes and the revolving line of credit require the maintenance of certain covenants, including, but not limited to, minimum net worth, minimum fixed obligation coverage and maximum debt to net worth. The Company was in compliance with the provisions of these covenants as of December 31, 1995.
7. RELATED PARTIES:
The unsecured senior notes for $8,500,000 (see Note 6) are payable to stockholders of Pawnee. As of December 31, 1994 and 1995, the Company owed interest totaling $223,000 on these notes. Interest expense on these notes for each of the three years ended December 31, 1995, was $893,000. Included in other current assets at December 31, 1994 and 1995, are $367,000 and $155,000, respectively, due from Pawnee and related entities.
During 1994, the Company advanced $1,360,600 at 8% interest to Pawnee Transportation Company ("PTC"), a wholly owned subsidiary of Pawnee, in connection with the construction of a coal unloading facility located at the Company's rail yard in Kincaid, Illinois. At December 31, 1994 and 1995, PTC owed $360,000 and $439,000, respectively, to the Company under this arrangement. Included in other income for the years ended December 31, 1994 and 1995, is $54,000 and $93,000, respectively, of interest earned from PTC.
8. EMPLOYEE BENEFIT PLANS:
Retirement benefits for all employees of the Company are provided for in accordance with the Railroad Retirement Act.
The Company has 401(k) plans in effect for all management and certain union employees. The 401(k) plans qualify under Section 401(k) of the Internal Revenue Code as salary reduction plans. Employees may elect to contribute a certain percentage of their salary on a before-tax basis. The Company matches 50% of eligible employee contributions up to a maximum percentage of the employee's salary, as approved by the Board of Directors. Such percentage was 6% in 1993 and ranged from 1% to 6% for 1994 and 3% to 4% in 1995. For the years ended December 31, 1993, 1994 and 1995, the Company contributed $44,000, $60,000 and $41,000, respectively, to those plans on behalf of its employees.
9. INCOME TAXES:
The components of the provision (benefit) for income taxes are as follows (amounts in thousands):
YEARS ENDED
DECEMBER 31, PERIOD ENDED
--------------------- FEBRUARY 8,
1993 1994 1995 1996
------ ----- ------- ------------
(UNAUDITED)
Current--
Federal................................ $ 955 $ -- $ 1,113 $(274)
State.................................. 221 -- 274 (63)
Deferred--
Federal ............................... 471 (701) (4,913) (19)
State.................................. 100 (149) (1,019) (4)
------ ----- ------- -----
$1,747 $(850) $(4,545) $(360)
====== ===== ======= =====
|
CHICAGO & ILLINOIS MIDLAND RAILWAY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The provision (benefit) for income taxes differs from that which would be
computed by applying the statutory U.S. federal income tax rate to income
(loss) before taxes. The following is a summary of the effective tax rate
reconciliation:
YEARS ENDED
DECEMBER 31, PERIOD ENDED
------------------- FEBRUARY 8,
1993 1994 1995 1996
---- ----- ----- ------------
(UNAUDITED)
Tax provision (benefit) at statutory
rate.................................... 34.0% (34.0)% (34.0)% (34.0) %
State income taxes, net of federal income
tax benefit............................. 4.8 (4.3) (4.9) (4.7)
Other, net............................... .7 1.4 1.0 .6
---- ----- ----- -----
39.5% (36.9)% (37.9)% (38.1)%
==== ===== ===== =====
|
The following summarizes the estimated tax effect of significant cumulative temporary differences that are included in the net deferred income tax liability in the accompanying balance sheets (amounts in thousands):
DECEMBER 31,
--------------- FEBRUARY 8,
1994 1995 1996
------- ------ -----------
(UNAUDITED)
Deferred tax liability--differences in depre-
ciation and amortization..................... $13,512 $6,993 $6,970
Accruals for casualty claims.................. (595) (518) (518)
Other......................................... (33) (13) (13)
NOL........................................... (490) -- --
------- ------ ------
Net deferred tax liability................ $12,394 $6,462 $6,439
======= ====== ======
|
Management does not believe that a valuation allowance is required for the deferred tax assets based on anticipated future profit levels and the reversal of current temporary differences.
10. COMMITMENTS AND CONTINGENCIES:
The Company is a defendant in certain lawsuits resulting from its railroad operations. Management believes that adequate provision has been made in the financial statements for any expected liabilities which may result from disposition of such lawsuits. While it is possible that some of the foregoing matters may be settled at a cost greater than that provided for, it is the opinion of management that the ultimate liability, if any, will not be material to the Company's results of operations or financial position.
11. SUBSEQUENT EVENT:
Subsequent to year-end, on February 8, 1996, the common stock of Pawnee was sold to Stanford PRC Acquisition Corporation ("Stanford"), and Stanford and Pawnee were merged into the Company. Also on this date, substantially all of the assets of the Company, primarily road and track structure, were sold to Illinois & Midland Railroad, Inc. (an unrelated entity) for approximately $27.5 million, including related costs and the assumption of certain liabilities. The sale of assets represented a loss of approximately $16.1 million, as the book value of the assets sold exceeded the purchase price. The Company recognized a loss on the sale of assets in the 1995 financial statements to write down the property and equipment ($15,655,000) and the materials and supplies ($427,000) to net realizable value. The proceeds from this transaction were used to pay off the remaining debt instruments. The Company is in the process of liquidating its remaining assets and liabilities. Operations of the railroad by the Company have ceased.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Genesee & Wyoming Inc.:
We have audited the accompanying combined balance sheets of THE PITTSBURG & SHAWMUT RAILROAD COMPANY, MOUNTAIN LAUREL RAILROAD COMPANY AND RED BANK RAILROAD COMPANY (Pennsylvania corporations) as of December 31, 1994 and 1995, and the related combined statements of operations, shareholder's equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 significant estimates made by 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 The Pittsburg & Shawmut Railroad Company, Mountain Laurel Railroad Company and Red Bank Railroad Company as of December 31, 1994 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
As explained in Note 4 to the financial statements, effective January 1, 1994, the Companies adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities."
Arthur Andersen LLP
Chicago, Illinois
March 8, 1996 (except with respect to
matters discussed in Note 11 as to
which the date is April 29, 1996)
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
COMBINED BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
----------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................... $ 1,421 $ 2,205 $ 2,697
Accounts receivable, net...................... 2,535 901 710
Materials and supplies........................ 322 192 183
Prepaid expenses and other.................... 240 254 298
Notes receivable from related parties......... 2,659 1,584 1,249
------- ------- -------
Total current assets........................ 7,177 5,136 5,137
PROPERTY AND EQUIPMENT, net..................... 26,789 14,944 14,480
OTHER ASSETS.................................... 1,218 105 84
------- ------- -------
Total assets........................... $35,184 $20,185 $19,701
======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt............. $ 1,675 $ -- $ 125
Accounts payable.............................. 1,549 971 784
Accrued expenses.............................. 583 530 433
------- ------- -------
Total current liabilities................... 3,807 1,501 1,342
------- ------- -------
LONG-TERM DEBT.................................. 5,584 4,025 3,900
------- ------- -------
OTHER LIABILITIES............................... 474 336 333
------- ------- -------
DEFERRED INCOME TAX LIABILITIES, net............ 6,491 1,991 1,921
------- ------- -------
DEFERRED ITEMS--grants from governmental agen-
cies........................................... 3,296 3,194 3,168
------- ------- -------
COMMITMENTS AND CONTINGENCIES (Note 10)
SHAREHOLDER'S EQUITY:
Preferred stock, $1 par value; 215,000 shares
authorized; 194,263 shares issued and 161,500
shares outstanding........................... 194 194 194
Common stock, $1 par value; 150,000 shares au-
thorized; 150,000 shares issued and outstand-
ing.......................................... 150 150 150
Additional paid-in capital.................... 7,653 7,653 7,653
Preferred stock held in treasury, 32,763
shares....................................... (33) (33) (33)
Pension liability adjustment.................. (141) (84) (84)
Unrealized gain on marketable securities...... 143 -- --
Retained earnings............................. 7,566 1,258 1,157
------- ------- -------
Total shareholder's equity.................. 15,532 9,138 9,037
------- ------- -------
Total liabilities and shareholder's eq-
uity.................................. $35,184 $20,185 $19,701
======= ======= =======
|
The accompanying notes are an integral part of these financial statements.
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
YEARS ENDED DECEMBER THREE MONTHS
31, ENDED MARCH 31,
----------------------- ----------------
1993 1994 1995 1995 1996
------ ------ ------- ------- -------
(UNAUDITED)
OPERATING REVENUES.................. $9,558 $8,795 $ 5,922 $1,675 $1,420
OPERATING EXPENSES:
Transportation.................... 1,747 1,561 1,027 377 261
Maintenance of ways and struc-
tures............................ 928 950 806 296 210
Maintenance of equipment.......... 1,138 1,275 846 233 215
General and administrative........ 2,477 3,021 1,918 499 400
Depreciation and amortization..... 1,732 1,801 1,808 462 442
------ ------ ------- ------- -------
Total operating expenses........ 8,022 8,608 6,405 1,867 1,528
------ ------ ------- ------- -------
Income (loss) from operations... 1,536 187 (483) (192) (108)
INTEREST EXPENSE.................... (725) (595) (481) (146) (78)
OTHER INCOME, net................... 331 334 730 132 15
LOSS ON SALE OF PROPERTY AND
EQUIPMENT (Note 11)................ -- -- (10,288) -- --
------ ------ ------- ------- -------
Income (loss) before income tax-
es............................. 1,142 (74) (10,522) (206) (171)
PROVISION (BENEFIT) FOR INCOME TAX-
ES................................. 457 -- (4,214) (84) (70)
------ ------ ------- ------- -------
NET INCOME (LOSS)................... $ 685 $ (74) $(6,308) $ (122) $ (101)
====== ====== ======= ======= =======
|
The accompanying notes are an integral part of these statements.
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS)
COMMON PREFERRED
PREFERRED STOCK STOCK ADDITIONAL TREASURY STOCK
------------------ ------------- PAID-IN ----------------- RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL SHARES AMOUNT EARNINGS
------- -------- ------ ------ ---------- ------- ------- --------
BALANCE AT JANUARY 1,
1993................... 194 $ 194 150 $150 $7,653 (33) $ (33) $ 7,157
Net income............ -- -- -- -- -- -- -- 685
Dividends............. -- -- -- -- -- -- -- (152)
------- -------- --- ---- ------ ------ ------- -------
BALANCE AT DECEMBER 31,
1993................... 194 194 150 150 7,653 (33) (33) 7,690
Net loss.............. -- -- -- -- -- -- -- (74)
Dividends............. -- -- -- -- -- -- -- (50)
------- -------- --- ---- ------ ------ ------- -------
BALANCE AT DECEMBER 31,
1994................... 194 194 150 150 7,653 (33) (33) 7,566
Net loss.............. -- -- -- -- -- -- -- (6,308)
------- -------- --- ---- ------ ------ ------- -------
BALANCE AT DECEMBER 31,
1995................... 194 194 150 150 7,653 (33) (33) 1,258
Net loss (Unaudited).. -- -- -- -- -- -- -- (101)
------- -------- --- ---- ------ ------ ------- -------
BALANCE AT MARCH 31,
1996 (Unaudited)....... 194 $194 150 $150 $7,653 (33) $(33) $ 1,157
======= ======== === ==== ====== ====== ======= =======
|
The accompanying notes are an integral part of these statements.
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS
ENDED MARCH
YEARS ENDED DECEMBER31, 31,
-------------------------- --------------
1993 1994 1995 1995 1996
------- -------- ------- ------ ------
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss)................. $ 685 $ (74) $(6,308) $ (122) $ (101)
Adjustments to reconcile net
income (loss) to net cash (used
in) provided by operating
activities--
Depreciation and amortization.... 1,732 1,801 1,808 462 442
Deferred income taxes............ (274) (169) (4,500) (84) (70)
Gain on disposition of property
and marketable securities....... (123) (131) (497) -- --
Write-off of note receivable..... 164 -- -- -- --
Loss on sale of property and
equipment (Note 11)............. -- -- 10,288 -- --
Changes in assets and
liabilities--
Account receivable, net........ (3,419) 2,014 1,634 823 191
Materials and supplies......... 94 53 130 9 9
Prepaid expenses and other..... (59) (50) (14) 3 (44)
Accounts payable and accrued
expenses...................... (1,453) 1,439 (632) (535) (284)
Other assets and liabilities,
net........................... (16) (15) (40) (2) 14
------- -------- ------- ------ ------
Net cash (used in) provided by
operating activities......... (2,669) 4,868 1,869 554 157
------- -------- ------- ------ ------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and
equipment........................ (1,524) (793) (407) (53) --
Proceeds from disposition of
property and equipment........... 134 246 287 -- --
Issuance of notes receivable, from
related parties.................. (188) (910) -- -- (575)
Receipts on notes receivable, from
related parties.................. 637 20 1,075 -- 910
Purchase of marketable securities. -- -- (548) -- --
Proceeds from sale of marketable
securities....................... 332 -- 1,742 -- --
------- -------- ------- ------ ------
Net cash (used in) provided by
investing activities......... (609) (1,437) 2,149 (53) 335
------- -------- ------- ------ ------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal payments on long-term
debt............................. (1,774) (3,168) (3,234) (108) --
Proceeds from grants.............. 3,500 -- -- -- --
Dividends paid.................... (152) (50) -- -- --
------- -------- ------- ------ ------
Net cash provided by (used in)
financing activities......... 1,574 (3,218) (3,234) (108) --
------- -------- ------- ------ ------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS........................ (1,704) 213 784 393 492
CASH AND CASH EQUIVALENTS, beginning
of period.......................... 2,912 1,208 1,421 1,421 2,205
------- -------- ------- ------ ------
CASH AND CASH EQUIVALENTS, end of
period............................. $ 1,208 $ 1,421 $ 2,205 $1,814 $2,697
======= ======== ======= ====== ======
CASH PAID DURING THE PERIOD FOR:
Interest.......................... $ 732 $ 602 $ 488 $ 107 $ 112
======= ======== ======= ====== ======
Income taxes...................... $ 1,012 $ -- $ -- $ -- $ --
======= ======== ======= ====== ======
|
The accompanying notes are an integral part of these statements.
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
(DATA WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 1995 AND 1996 ARE
UNAUDITED)
1. THE COMPANIES' BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements include the financial statements of The Pittsburg & Shawmut Railroad Company (P&S), Mountain Laurel Railroad Company (MNL) and Red Bank Railroad Company (RBK) (the Companies). The Companies are wholly owned subsidiaries of Arthur T. Walker Estate Corporation (ATWEC) which is wholly owned by Dumaines, a private trust. The Companies are short-line railroads that operate over approximately 237 miles of track in the Commonwealth of Pennsylvania.
In the opinion of management, the unaudited financial statements for the three-month periods ended March 31, 1995 and 1996, are presented on a basis consistent with the audited financial statements and contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation. The results of operations for interim periods are not necessarily indicative of results of operations for the full year.
Principles of Combination
The combined financial statements include the accounts of the Companies. All significant intercompany transactions and accounts have been eliminated in combination.
Revenue Recognition
Revenues are recognized based on the waybill, which, due to the relatively short length of haul, is not materially different from the recognition of revenues as shipments progress.
Cash Equivalents
The Companies consider all highly liquid instruments with a maturity of three months or less when purchased to be cash equivalents for purposes of classification in the combined balance sheets and combined statements of cash flows. Cash equivalents are stated at cost, which approximates fair market value.
Materials and Supplies
Materials and supplies consist of items for improvement and maintenance of road property and equipment, and are stated at the lower of average cost or market.
Property and Equipment
Property and equipment are carried at historical cost. Major renewals or betterments are capitalized while routine maintenance and repairs, which do not improve or extend asset lives, are charged to expense when incurred. Gains or losses on sales or other dispositions are credited or charged to other income. Depreciation is provided on the straight-line method over the useful lives of the property as follows:
Road properties............................................... 10-35 years Equipment..................................................... 5-20 years |
Income Taxes
The Companies are members of a group that file a consolidated tax return. The consolidated amounts of current and deferred tax expense is allocated among the members of the group based on each entity's tax attributes using a separate return approach.
Significant Customer Relationship
A large portion of the Companies' operating revenue is generated from shipments of bituminous coal. The five largest coal shippers in 1993, 1994 and 1995 accounted for 65% or more of the Companies' revenue.
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Revenue has decreased over the past two years primarily due to reductions in coal shipments. The Companies regularly grant trade credit to all their customers. In addition, the Companies grant trade credits to other railroads through the routine interchange of traffic. The collection of the Companies' accounts receivable is substantially dependent upon the economy of the region in which the Companies operate, the coal industry, and the railroad sector of the economy in general.
Disclosures About Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of each class of financial instrument held by the Companies:
Current assets and current liabilities: The carrying value approximates fair value due to the short maturity of these items.
Long-term debt: Since the Companies' debt is not quoted, estimates are based on each obligation's characteristics, including remaining maturities, interest rate, credit rating, collateral, amortization schedule and liquidity. The carrying amount approximates fair value.
Management 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. NOTES RECEIVABLE FROM RELATED PARTIES:
The Companies have notes receivable from the following related entities (amounts in thousands):
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
ATWEC................................................ $1,581 $ 674 $1,249
Brookport Resources Company, an affiliate company.... 168 0 0
Shawmut Development Corporation, an affiliate compa-
ny.................................................. 910 910 0
------ ------ ------
$2,659 $1,584 $1,249
====== ====== ======
|
3. PROPERTY AND EQUIPMENT:
Major classifications of property and equipment are as follows (amounts in thousands):
DECEMBER 31,
--------------- MARCH 31,
1994 1995 1996
------- ------- -----------
(UNAUDITED)
Road properties..................................... $30,026 $30,212 $30,212
Equipment and other................................. 19,230 18,973 18,973
------- ------- -------
49,256 49,185 49,185
Less--Accumulated depreciation...................... 22,467 34,241 34,705
------- ------- -------
$26,789 $14,944 $14,480
======= ======= =======
|
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The notes are non-interest-bearing and are payable upon demand. Subsequent to December 31, 1995, the note from Shawmut Development Corporation was paid in full. The Companies issued an additional $575,000 demand note to ATWEC in two separate distributions, in January and March of 1996.
4. OTHER ASSETS:
Included in other assets are marketable securities of $1,074,000 in 1994. Effective January 1, 1994, the Companies adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The adoption of SFAS No. 115 requires that equity securities that have readily determinable fair values shall be classified as "available-for-sale" if not held for the objective of generating profits on short-term differences in price. Based on the Companies' intentions, the debt and equity securities are classified and treated as available-for-sale. At December 31, 1994, debt and equity securities were stated at lower of aggregate cost or market.
SFAS No. 115 further requires that unrealized holding gains and losses related to available-for-sale securities shall be excluded from earnings and reported as a net amount in a separate component of shareholder's equity until realized.
The following summarizes the effect of applying SFAS No. 115 (in thousands):
Cost basis........................................................ $ 931
------
Gross unrealized holding--
Gains........................................................... 171
Losses.......................................................... (28)
------
Net unrealized gain........................................... 143
------
Market value at December 31, 1994................................. $1,074
======
|
All of the marketable securities were sold in 1995 for a realized gain of approximately $264,000 that is included in other income.
5. EMPLOYEE BENEFIT PLANS:
Pension
ATWEC administers a noncontributory defined benefit plan and a deferred compensation arrangement for the employees of its subsidiaries. The specific attributes of the defined benefit plan and the deferred compensation arrangement are allocated to each subsidiary (including the Companies) based on the Projected Benefit Obligation per individual per entity. Benefits are determined based on years of service, compensation during the last five years of employment and participation in the profit sharing plan or the defined benefit plan. For the deferred compensation arrangement, benefits are based on a fixed amount per year. The Companies' funding policy is to make contributions for pension and deferred compensation benefits based on actuarial computations which reflect the long-term nature of the plans. The Companies have met the minimum funding requirements according to the Employee Retirement Income Security Act.
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Pension cost for both plans combined for 1993, 1994 and 1995 was approximately $53,000, $50,000 and $31,000, respectively. The funded status at December 31, 1994 and 1995, was as follows (amounts in thousands):
1994 1995
----- -----
Actuarial present value of benefit obligations................
Vested benefits............................................. $ 779 $ 656
Nonvested benefits.......................................... -- --
----- -----
Accumulated benefit obligation and projected benefit obliga-
tion......................................................... 779 656
Plan assets................................................... 266 294
----- -----
Projected benefit obligation in excess of plan assets......... (513) (362)
Unrecognized net transition obligation........................ 99 84
Unrecognized prior service costs.............................. 21 14
Unrecognized net loss......................................... 145 69
Adjustment to recognize minimum liability..................... (265) (167)
----- -----
Pension liability recognized in the combined balance sheet.... $(513) $(362)
===== =====
|
The projected benefit obligation was determined using a discount rate of 7%. The long-term rate of return on plan assets was 8%.
Profit Sharing
ATWEC has a profit sharing program for all non-collective bargaining employees. Benefits for profit sharing are determined based on earnings of ATWEC. Allocations to employees are based on eligible wages. Profit sharing contributions were approximately $14,000, $14,000 and $56,000 in 1993, 1994 and 1995, respectively. Contributions are subject to Board of Directors approval.
6. LONG-TERM DEBT:
Long-term debt consists of the following (amounts in thousands):
DECEMBER 31,
------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
Note A payable to ATWEC bearing interest at 6%,
payable in annual principal payments of $120,000
beginning in January of 1998 and interest payable
semiannually, secured by all the property with the
balance due January 1, 2017......................... $2,400 $2,400 $2,400
Note B payable to ATWEC bearing interest at 6%,
payable in annual principal payments of $125,000 and
interest payable semiannually, secured by all
property, due in January of 1997.................... 250 125 125
Note payable to Dumaines bearing interest at prime
plus 2% on the effective date of the note, interest
payable quarterly, with principal and interest
balance due December of 1997........................ 1,500 1,500 1,500
Loan payable bearing interest at prime and repaid in
1995................................................ 1,849 -- --
Term note bearing interest at prime and repaid in
1995................................................ 1,260 -- --
------ ------ ------
7,259 4,025 4,025
Less--Current portion................................ 1,675 -- 125
------ ------ ------
Long-term debt................................... $5,584 $4,025 $3,900
====== ====== ======
|
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The following is a summary of the maturities of long-term debt as of December 31, 1995 (amounts in thousands):
1996.............................................................. $ 0
1997.............................................................. 1,625
1998.............................................................. 120
1999.............................................................. 120
2000.............................................................. 120
Thereafter........................................................ 2,040
------
$4,025
======
|
At December 31, 1995, the prime interest rate was 8.5%.
7. TRANSACTIONS WITH RELATED PARTIES:
Revenue
Included within revenues are $891,000, $461,000 and $167,000 for 1993, 1994 and 1995, respectively, for shipments for ATWEC subsidiaries.
Interest Expense
Included within interest expense is approximately $296,000, $288,000 and $319,000 for 1993, 1994 and 1995, respectively, for notes payable to related parties.
Management Fees
Walker Management Company, a wholly owned subsidiary of ATWEC, allocates to the Companies compensation and benefits for executives to perform certain accounting, legal, communications, data processing, administrative and other services ("corporate services") that are not specifically attributable to the Companies. In addition, occupancy and other corporate office costs are allocated to the Companies. These fees are approximately $324,000, $350,000, $308,000 and $77,000 in the years ended December 31, 1993, 1994 and 1995 and the three months ended March 31, 1996, and are included in general and administrative expenses in the combined statements of operations. Management believes that the Walker Management Company corporate services allocated to the Companies represent the cost of the services provided and that the costs are reasonable.
8. INCOME TAXES:
The components of the provision for income taxes are as follows (amounts in thousands):
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
------------------- ----------------
1993 1994 1995 1995 1996
---- ----- ------- ------- -------
(UNAUDITED)
Current--
Federal................................ $339 $ 145 $ 67 $ -- $ --
State.................................. 66 26 (7) -- --
Deferred................................. 52 (171) (4,274) (84) (70)
---- ----- ------- ------- -------
$457 $ -- $(4,214) $ (84) $ (70)
==== ===== ======= ======= =======
|
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The provision for taxes on income in each period differs from that which would be computed by applying the statutory U.S. federal income tax rate to the income before taxes. The following is a summary of the major items affecting the provision (in thousands):
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------------- ----------------
1993 1994 1995 1995 1996
---- ----- ------- ------- -------
(UNAUDITED)
Tax expense at statutory rate (34%). $388 $ (25) $(3,577) $ (70) $ (58)
State income taxes, net of federal
income tax benefit................. 101 7 (940) (18) (15)
Effect of change in state tax rates
on deferred taxes.................. -- 19 226 -- --
Other, net.......................... (32) (1) 77 4 3
---- ----- ------- ------- -------
$457 $ -- $(4,214) $ (84) $ (70)
==== ===== ======= ======= =======
|
The following summarizes the estimated tax effect of significant cumulative temporary differences that are included in the net deferred income tax liability in the accompanying combined balance sheets (amounts in thousands):
DECEMBER 31,
-------------- MARCH 31,
1994 1995 1996
------ ------ -----------
(UNAUDITED)
Deferred tax assets--
Accruals and reserves not deducted for tax
purposes until paid.......................... $ (289) $ (173) $ (173)
Alternative minimum tax credits............... (387) (463) (463)
Net operating losses.......................... (302) (188) (143)
Other......................................... (408) (548) (548)
Deferred tax liability--differences in deprecia-
tion........................................... 7,877 3,363 3,248
------ ------ ------
Net deferred tax liability.................... $6,491 $1,991 $1,921
====== ====== ======
|
The Companies' alternative minimum tax credits can be carried forward indefinitely; however, the Companies must achieve future regular taxable income in order to realize this credit. The Companies' net operating loss carryforwards (NOL) consist entirely of federal NOLs as state NOLs were used, and excesses lost, in 1995. The Companies' federal net operating loss carryforwards begin to expire in 2009.
Management does not believe that a valuation allowance is required for the deferred tax assets based on anticipated tax gain from the sale of the assets (see Note 11) and the reversal of current temporary differences.
9. GRANTS FROM GOVERNMENTAL AGENCIES:
During 1993, the MNL received a grant from the Commonwealth of Pennsylvania of $3.5 million for acquisition and initial start up costs as well as rail rehabilitation. The agreement required the Commonwealth of Pennsylvania to reimburse the MNL for 50% of the total costs of the project ($7 million). This project was completed as of December 31, 1993.
The aforementioned grant does not represent a future liability of MNL unless MNL abandons the rehabilitated track structure within a specified period of time, as defined in the agreement. As MNL does not intend to abandon the track, MNL has recorded additions to road property and has deferred the amount of the grant as the rehabilitation expenditures have been incurred. The amortization of the deferred grant is a noncash offset to depreciation expense over the useful life of the related assets and is not included as taxable income.
THE PITTSBURG & SHAWMUT RAILROAD COMPANY,
MOUNTAIN LAUREL RAILROAD COMPANY AND
RED BANK RAILROAD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
10. COMMITMENTS AND CONTINGENCIES:
The Companies are defendants in certain lawsuits resulting from the railroad operations. Management believes that adequate provision has been made in the financial statements for any expected liabilities which may result from disposition of such lawsuits. While it is possible that the foregoing matters may be settled at a cost greater than that provided for, it is the opinion of management that the ultimate liability, if any, will not be material to the Companies' results of operations and financial position.
The RBK operates under a lease and operating agreement which is renewable on a year-to-year basis beginning in 1996. The lease agreement requires payments to be made by MNL based on per ton of traffic moved on the RBK. Lease expense related to this agreement in 1993, 1994 and 1995 was $338,000, $244,000 and $121,000, respectively.
11. SUBSEQUENT EVENT:
Subsequent to year-end, on April 29, 1996, substantially all of the assets of the Companies, primarily property and equipment, were sold to Pittsburg & Shawmut Railroad, Inc. (an unrelated entity) for approximately $11.7 million in cash, excluding related costs and the assumption of the grant from the Commonwealth of Pennsylvania. In addition, the purchase and sale agreement provides that ATWEC or the Companies may receive additional contingency payments of up to $2.5 million in the event coal revenues exceed certain agreed upon levels. The sale of road property represented a loss of approximately $10.3 million, as the book value of the assets sold exceeded the purchase price. The Companies recognized a loss on the sale of property and equipment in the 1995 financial statements to write down property and equipment to net realizable value.
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMA- TION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO- SPECTUS IN CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU- THORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTI- TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SECURITIES COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAW- FUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PRO- SPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE DATES AS OF WHICH THE INFORMATION IS FURNISHED.
TABLE OF CONTENTS
PAGE
----
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Recent Developments....................................................... 10
Use of Proceeds........................................................... 11
Dividend Policy........................................................... 12
Capitalization............................................................ 13
Dilution.................................................................. 14
Selected Consolidated Financial and Operating Data........................ 15
Pro Forma Financial Information........................................... 16
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 20
Business.................................................................. 29
Property.................................................................. 37
Management................................................................ 41
Certain Transactions...................................................... 45
Principal Stockholders.................................................... 46
Description of Capital Stock.............................................. 47
Shares Eligible for Future Sale........................................... 49
Underwriting.............................................................. 50
Notice to Ontario Residents...............................................
Legal Matters............................................................. 51
Experts................................................................... 51
Additional Information.................................................... 52
Index to Financial Statements............................................. F-1
|
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGA- TION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,500,000 SHARES
GENESEE & WYOMING INC.
CLASS A COMMON STOCK
($.01 PAR VALUE)
SCHRODER WERTHEIM & CO.
FURMAN SELZ
, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the offering are estimated as follows:
ITEM AMOUNT
---- --------
Registration fee................................................ $ 15,863
NASD fee........................................................ 5,100
Nasdaq National Market application fee.......................... 29,243
Blue sky fees and expenses...................................... *
Printing expenses............................................... *
Legal fees and expenses......................................... *
Accounting fees and expenses.................................... *
Transfer agent and registrar fees............................... *
Miscellaneous expenses.......................................... *
--------
Total......................................................... $875,000
========
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ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Paragraph 10 of the Registrant's Restated Certificate of Incorporation provides that the Registrant shall indemnify its directors and officers to the fullest extent authorized by the Delaware General Corporation Law (the "DGCL").
With respect to indemnification of directors and officers, Section 145 of the DGCL provides that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Under this provision of the DGCL, the termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.
Furthermore, the DGCL provides that a corporation shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall
II-1
determine upon application that, despite the adjudication of liability but in view of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Paragraph 9 of the Registrant's Restated Certificate of Incorporation contains a provision, authorized by Section 102(b)(7) of the DGCL, which provides that a director of the Registrant shall not be personally liable to the Registrant or its stockholders for monetary damages for a breach of fiduciary duty as a director, except for liability of the director (a) for any breach of the director's duty of loyalty to the Registrant or its stockholders, (b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL, relating to the payment of unlawful dividends or unlawful stock repurchases or redemptions, or (d) for any transaction from which the director derived an improper personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1993, the Registrant has sold the following shares of common stock which were not registered under the Securities Act of 1933, as amended (the "Act") (the following does not give effect to the stock split and reclassification of the Registrant's common stock referenced in the Prospectus forming a part of this Registration Statement):
NUMBER OF AGGREGATE
DATE OF SALE NAME OF INVESTOR SHARES CONSIDERATION
------------ ---------------- --------- -------------
10/22/93 John M. Randolph................................ 800 $20,000
11/5/93 Sandra B. Ringo................................. 200 $ 5,000
Mark W. Hastings and Susan M. Hastings, as joint
12/22/93 tenants......................................... 800 $20,000
10/25/94 Mortimer B. Fuller, III......................... 2,400 $30,000
|
The sale to Mr. Fuller was upon exercise by him of stock options granted in 1978. All of the other sales were made following the Registrant's repurchase of the shares from a stockholder. All of the shares listed on the table were sold for cash except those sold to Mr. and Mrs. Hastings, for which Mr. Hastings executed a promissory note which has since been paid.
On February 8, 1996, the Registrant issued to The First National Bank of Boston, for a purchase price of $0, a warrant to purchase 2,262 shares of common stock at an exercise price of $.01 per share. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources."
In May 1994, Willamette & Pacific Railroad, Inc., a subsidiary of the Registrant, issued $990,000 in aggregate principal amount of Subordinated Secured Promissory Notes, guaranteed by the Registrant, to ten accredited investors, including four related parties. See "Certain Transactions."
Each of the issuances of securities described above was made by private offering in reliance on the exemption from the registration provisions of the Act provided by Section 4(2) of the Act.
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ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits filed as part of this Registration Statement:
EXHIBIT
NUMBER DESCRIPTION
------- -----------
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation and Certificates of Amendment dated
October 12, 1989, February 21, 1991 and May 18, 1995
**3.2 Form of Restated Certificate of Incorporation
3.3 By-laws
4 The exhibits referenced under "3" hereof are incorporated herein by
reference.
*4.1 Specimen stock certificate representing shares of Class A Common
Stock.
**4.2 Form of Class B Stockholders' Agreement dated as of May 20, 1996,
among the Registrant, its executive officers and its Class B
stockholders
4.3 Promissory Note dated December 28, 1989 of GWI Leasing Corporation in
favor of Deutsche Credit Corporation
4.4 Railcar Finance Notes dated July 8, 1991 and November 27, 1991 of GWI
Leasing Corporation in favor of Deutsche Credit Corporation
4.5 Railcar Finance Notes, dated November 27, 1991 and December 31, 1991
of GWI Leasing Corporation in favor of Deutsche Credit Corporation
4.6 Promissory Note dated October 7, 1991 of Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc.
4.7 Amended and Restated Loan and Security Agreement dated December 28,
1989 between GWI Leasing Corporation and Deutsche Credit Corporation,
and Amendment No. 1 dated December 28, 1989
4.8 Loan and Security Agreement dated December 27, 1990 between GWI
Leasing Corporation and Deutsche Credit Corporation, and Amendments
dated June 28, 1991 and November 22, 1991
4.9 Guaranty dated December 27, 1990 of the Registrant in favor of
Deutsche Credit Corporation
4.10 Amended and Restated Revolving Credit and Term Loan Agreement dated as
of February 8, 1996 among the Registrant and certain of its
Subsidiaries, The First National Bank of Boston, as agent, and the
Banks party thereto
4.11 Revolving Credit Note dated as of February 8, 1996 of the Registrant
and certain of its subsidiaries in favor of The First National Bank of
Boston
4.12 Term Note dated as of February 8, 1996 of the Registrant and certain
of its Subsidiaries in favor of The First National Bank of Boston
4.13 Amended and Restated Security Agreement dated as of February 8, 1996
among the Registrant, certain of its Subsidiaries and The First
National Bank of Boston
4.14 Amended and Restated Stock Pledge Agreement dated as of February 8,
1996 between the Registrant and The First National Bank of Boston
4.15 Amended and Restated Collateral Assignment of Partnership Interests
dated as of February 8, 1996 of the Registrant and GWI Dayton, Inc. in
favor of The First National Bank of Boston
**4.16 Amendment No. 1 to Amended and Restated Revolving Credit and Term Loan
Agreement dated as of April 26, 1996 among the Registrant and certain
of its Subsidiaries, The First National Bank of Boston, as agent and
the Banks' party thereto.
*5.1 Opinion of Harter, Secrest & Emery
9.1 Voting Agreement and Stock Purchase Option dated March 21, 1980 among
Mortimer B. Fuller, III, Mortimer B. Fuller, Jr. and Frances A.
Fuller, and amendments thereto dated May 7, 1988 and March 29, 1996
10 The exhibits referenced under "4" hereof are incorporated herein by
reference.
**10.1 Form of Genesee & Wyoming Inc. 1996 Stock Option Plan
**10.2 Form of Genesee & Wyoming Inc. Stock Option Plan for Outside Directors
10.3 Form of Employment Agreement between the Registrant and each of its
executive officers
**10.4 Form of Genesee & Wyoming Inc. Employee Stock Purchase Plan
10.5 Agreement dated December 7, 1994 between Allegheny & Eastern Railroad,
Inc. and its Engineering Department Employees
|
II-3
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.6 Agreement dated March 29, 1995 between Allegheny & Eastern Railroad,
Inc. and its Mechanical Department Employees
10.7 Agreement dated July 1, 1992 between Buffalo & Pittsburgh Railroad,
Inc. and its Car Repair Department Employees, and the proposed changes
thereto dated September 16, 1994
10.8 Agreement dated December 1, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and its Engineering Department Employees
10.9 Agreement dated April 30, 1991 between Buffalo & Pittsburgh Railroad,
Inc. and the American Train Dispatchers Association
10.10 Agreement dated February 9, 1995 between Buffalo & Pittsburgh
Railroad, Inc. and the International Association of Machinists
10.11 Agreement dated August 22, 1994 between Buffalo & Pittsburgh Railroad,
Inc. and the United Transportation Union (Train and Engine Service
Employees)
10.12 Agreement dated November 7, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union (Representing
Clerks and Storekeepers)
10.13 Agreement dated November 1, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union (Representing
Yardmasters)
10.14 Agreement dated September 1, 1990 between Genesee & Wyoming Railroad
Company and the United Transportation Union, and Tentative Agreement
dated February 21, 1995 between Genesee & Wyoming Railroad Company and
United Transportation Union Local Union 982
10.15 United Transportation Union Agreement dated May 1, 1994 between
Rochester & Southern Railroad, Inc. and its employees represented by
United Transportation Union
10.16 Shared Use Agreement for Albany Yard dated February 20, 1993 between
Southern Pacific Transportation Company and Willamette & Pacific
Railroad, Inc.
10.17 Trackage Rights Agreement (Albany-Eugene Yard) dated February 20, 1993
between Southern Pacific Transportation Company and Willamette &
Pacific Railroad, Inc.
10.18 Westside Oregon Lines Cooperative Marketing Agreement dated February
20, 1993 between Willamette & Pacific Railroad, Inc. and Southern
Pacific Transportation Company
10.19 Trackage Rights Agreement dated March 11, 1987 between Southern
Pacific Transportation Company and Louisiana & Delta Railroad, Inc.
10.20 Trackage Rights Agreement dated July 1, 1986 between Rochester &
Southern Railroad, Inc. and Genesee and Wyoming Railroad Company, and
undated Modification
10.21 Master Supplemental Agreement dated October 7, 1991 between CSX
Transportation, Inc., Buffalo, Rochester and Pittsburgh Railway
Company and Buffalo & Pittsburgh Railroad, Inc.
10.22 Assignment and Assumption Agreement for the Allegheny and Western
Railway Company Lease dated October 7, 1991 among CSX Transportation,
Inc., Buffalo, Rochester and Pittsburgh Railway Company and Buffalo &
Pittsburgh Railroad, Inc.
10.23 Mortgage and Assignment of Leases, Rents, Issues and Profits (New
York) dated as of October 7, 1991 by Buffalo & Pittsburgh Railroad,
Inc. in favor of CSX Transportation, Inc.
10.24 Security Agreement (New York) dated as of October 7, 1991 between
Buffalo & Pittsburgh Railroad, Inc. and CSX Transportation, Inc.
10.25 Mortgage and Assignment of Leases, Rents, Issues and Profits
(Pennsylvania) dated as of October 7, 1991 by Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc.
10.26 Security Agreement (Pennsylvania) dated as of October 7, 1991 between
Buffalo & Pittsburgh Railroad, Inc. and CSX Transportation, Inc.
10.27 Lease Agreement for Real Property between Butler, Pennsylvania and
Eidenau, Pennsylvania dated as of October 7, 1991 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.28 Lease Agreement for Personal Property associated with Butler to
Eidenau dated as of October 7, 1991 between CSX Transportation, Inc.
and Buffalo & Pittsburgh Railroad, Inc.
10.29 Memorandum of Lease dated October 7, 1991 between CSX Transportation,
Inc. and Buffalo & Pittsburgh Railroad, Inc.
|
II-4
EXHIBIT
NUMBER DESCRIPTION
------- -----------
+10.30 Lease Agreement for Real Property on the Northern Subdivision dated as
of October 7, 1991 between CSX Transportation, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
+10.31 Lease Agreement for Personal Property on the Northern Subdivision
dated as of October 7, 1991 between CSX Transportation, Inc. and
Buffalo & Pittsburgh Railroad, Inc.
10.32 Lease Agreement for Real Property at Buffalo Creek Yard dated as of
October 7, 1991 among CSX Transportation, Inc., Buffalo, Rochester and
Pittsburgh Railway Company, Inc. and Buffalo & Pittsburgh Railroad,
Inc.
10.33 Memorandum of Lease dated October 7, 1991 among CSX Transportation,
Inc., Buffalo, Rochester and Pittsburgh Railway Company, Inc. and
Buffalo & Pittsburgh Railroad, Inc.
10.34 Agreement Relating to Interchange at Buffalo, NY dated as of July 18,
1988 between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
10.35 Agreement Relating to Interchange at New Castle, PA dated as of July
18, 1988 between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
10.36 Agreement Relating to Trackage Rights between New Castle, PA and
Eidenau, PA dated as of July 18, 1988 between CSX Transportation, Inc.
and Buffalo & Pittsburgh Railroad, Inc.
10.37 Agreement Relating to Fallback Trackage Rights between Eidenau and WS
Tower, PA dated as of July 18, 1988 between CSX Transportation, Inc.
and Buffalo & Pittsburgh Railroad, Inc.
+10.38 Lease Agreement dated December 30, 1992 between Southern Pacific
Transportation Company and Willamette & Pacific Railroad, Inc.
10.39 Lease Agreement dated September 1, 1994 between Railcar, Ltd. and GWI
Leasing Corporation
10.40 Locomotive Lease Agreement and Letter Agreement (Equipment Schedule
01) dated October 17, 1994 between Keycorp Leasing Ltd. and GWI
Leasing Corporation
10.41 Lease Agreement dated May 3, 1994 between Greenbrier Railcar, Inc. and
GWI Leasing Corporation
+10.42 Allegheny-International Paper Transportation Service Agreement dated
November 24, 1992 between Allegheny & Eastern Railroad, Inc. and
International Paper Company
+10.43 Conrail-Allegheny Operating Contract dated November 24, 1992 between
Consolidated Rail Corporation and Allegheny & Eastern Railroad, Inc.
10.44 Lease recorded December 19, 1881 between The Seneca Nation of New York
Indians and The Great Valley & Bradford Railroad Co.
10.45 Assignment and Agreement dated September 20, 1994 among CMC Railroad
I, Ltd., GWI Switching Services, L.P. and Southern Pacific
Transportation Company
+10.46 Buffalo Terminal Operating Agreement dated July 18, 1988 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.47 First Amendment to Buffalo Terminal Operating Agreement dated December
, 1990 between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
+10.48 Operating Agreement and Car Storage Yard Agreement Consent to
Assignments dated as of September 20, 1994 between NCC Charlie Company
and GWI Switching Services L.P. with Exhibit I (Amended and Restated
Car Storage Yard Agreement dated September 20, 1994 between Southern
Pacific Transportation Company and CMC Railroad I, Ltd.) and Exhibit
II (Amended and Restated Car Storage Yard Agreement dated September
20, 1994 between Southern Pacific Transportation Company and CMC
Railroad I, Ltd.)
10.49 Trackage Rights Agreement dated March 12, 1994 between Southern
Pacific Transportation Company and GWI Switching Services L.P.
10.50 First Amendment to Trackage Rights Agreement dated September 20, 1994
between Southern Pacific Transportation Company and GWI Switching
Services L.P.
10.51 Indenture of Lease and Option to Purchase Agreement dated January 17,
1992 between Southern Pacific Transportation Company and Louisiana and
Delta Railroad, Inc.
10.52 Lease Agreement dated November 7, 1991 between CIS Corporation and
Buffalo & Pittsburgh Railroad, Inc.
|
II-5
EXHIBIT
NUMBER DESCRIPTION
------- -----------
10.53 Notice and Acknowledgement of Assignment dated as of November 1, 1993
between James P. Hassett as Trustee for CIS Corporation, Buffalo &
Pittsburgh Railroad, Inc. and ATEL Financial Corporation
10.54 Agreement relating to Trackage Rights dated July 18, 1988 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.55 Commercial Agreement dated March 11, 1987 between Louisiana & Delta
Railroad, Inc. and Southern Pacific Transportation Company
10.56 Assignment and Assumption Agreement dated March 11, 1987 between
Louisiana & Delta Railroad, Inc. and Southern Pacific Transportation
Company
10.57 Administrative Agreement dated as of February 19, 1985 between
Consolidated Rail Corporation and Genesee & Wyoming Railroad Company
10.58 Interchange Agreement (Goodman Street Yard) dated December 13, 1984
between Consolidated Rail Corporation and Genesee & Wyoming Railroad
Company
10.59 Revolver A Note dated June 2, 1995 of the Registrant in favor of The
First National Bank of Boston, as Agent
10.60 Revolver B Note dated June 2, 1995 of the Registrant in favor of The
First National Bank of Boston, as Agent
10.61 Asset Purchase Agreement dated as of February 8, 1996 between
Illinois & Midland Railroad, Inc. and Stanford PRC Acquisition Corp.
10.62 Guaranty dated as of February 8, 1996 of the Registrant in favor of
Stanford PRC Acquisition Corp.
10.63 Assignment and Assumption Agreements dated as of February 8, 1996
between Chicago & Illinois Midland Railway Company and Illinois &
Midland Railroad, Inc. (six)
10.64 Warrant Purchase Agreement dated as of February 8, 1996 between the
Registrant and The First National Bank of Boston
10.65 Agreement dated February 6, 1996 between Illinois & Midland Railroad,
Inc. and the United Transportation Union
+10.66 Lease Agreement dated as of August 18, 1995 between Southern Pacific
Transportation Company and Portland & Western Railroad, Inc.
+10.67 Lease Agreement dated September 15, 1995 between Burlington Northern
Railroad Company and Portland & Western Railroad, Inc.
10.68 Lease Agreement dated as of October 1, 1982 between Livingston County
Industrial Development Agency and Genesee and Wyoming Railroad
10.69 Lease Agreement dated as of February 1, 1995 between Livingston
County Industrial Development Agency and Genesee and Wyoming Railroad
Company
**+10.70 Asset Purchase Agreement dated April 19, 1996 among Pittsburg &
Shawmut Railroad, Inc., Genesee & Wyoming Inc., The Pittsburg &
Shawmut Railroad Company, Red Bank Railroad Company, Mountain Laurel
Railroad Company and Arthur T. Walker Estate Corporation, and
Amendment No. 1 to Asset Purchase Agreement dated April 19, 1996
**10.71 Amendment No. 1 to Warrant Purchase Agreement dated as of May 31,
1996 between the Registrant and FSC Corp.
**11.1 Statement re computation of per share earnings
12.1 Exhibit has been omitted because the required information is included
in the financial statements or notes thereto forming part of this
Registration Statement.
**21.1 Subsidiaries of the Registrant
**23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Harter, Secrest & Emery (contained in Exhibit 5.1)
24.1 Officers' and Directors' Power of Attorney
**27 Financial Data Schedule (EDGAR filed only)
|
**Filed with this Amendment.
*To be filed by amendment.
+ Confidential treatment requested as to certain portions, which have been filed separately with the Commission pursuant to an application for such treatment.
II-6
(b) Financial Statement Schedules:
All schedules have been omitted either as inapplicable or because the required information is included in the financial statements or notes thereto forming part of this Registration Statement.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement, certificates in such denominations and registered in such names as required by the Underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this Registration Statement as of the time that it was declared effective.
(2) For the purpose of determining any liability under the Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
II-7
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE 7TH DAY OF JUNE, 1996.
Genesee & Wyoming Inc.
/s/ Mortimer B. Fuller, III
By: _________________________________
MORTIMER B. FULLER, III
PRESIDENT
|
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED AND ON THE 7TH DAY OF JUNE, 1996.
SIGNATURE TITLE
/s/ Mortimer B. Fuller, III Chairman of the Board, President and
- ------------------------------------- Chief Executive Officer (Principal
MORTIMER B. FULLER, III Executive Officer)
/s/ Mark W. Hastings Senior Vice President, Chief
- ------------------------------------- Financial Officer and Treasurer
MARK W. HASTINGS (Principal Financial Officer)
/s/ Alan R. Harris Senior Vice President and Chief
- ------------------------------------- Accounting Officer (Principal
ALAN R. HARRIS Accounting Officer)
* Director
- -------------------------------------
JAMES M. FULLER
* Director
- -------------------------------------
LOUIS S. FULLER
* Director
- -------------------------------------
JOHN M. RANDOLPH
* Director
- -------------------------------------
PHILIP J. RINGO
/s/ Mortimer B. Fuller, III
*By: ________________________________
MORTIMER B. FULLER, III
ATTORNEY-IN-FACT
|
II-8
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
1.1 Form of Underwriting Agreement
3.1 Certificate of Incorporation and Certificates of Amendment
dated October 12, 1989, February 21, 1991 and May 18, 1995
**3.2 Form of Restated Certificate of Incorporation
3.3 By-laws
4 The exhibits referenced under "3" hereof are incorporated
herein by reference.
*4.1 Specimen stock certificate representing shares of Class A
Common Stock.
**4.2 Form of Class B Stockholders' Agreement dated as of May 20,
1996, among the Registrant, its executive officers and its
Class B stockholders
4.3 Promissory Note dated December 28, 1989 of GWI Leasing
Corporation in favor of Deutsche Credit Corporation
4.4 Railcar Finance Notes dated July 8, 1991 and November 27, 1991
of GWI Leasing Corporation in favor of Deutsche Credit
Corporation
4.5 Railcar Finance Notes, dated November 27, 1991 and December 31,
1991 of GWI Leasing Corporation in favor of Deutsche Credit
Corporation
4.6 Promissory Note dated October 7, 1991 of Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc.
4.7 Amended and Restated Loan and Security Agreement dated December
28, 1989 between GWI Leasing Corporation and Deutsche Credit
Corporation, and Amendment No. 1 dated December 28, 1989
4.8 Loan and Security Agreement dated December 27, 1990 between GWI
Leasing Corporation and Deutsche Credit Corporation, and
Amendments dated June 28, 1991 and November 22, 1991
4.9 Guaranty dated December 27, 1990 of the Registrant in favor of
Deutsche Credit Corporation
4.10 Amended and Restated Revolving Credit and Term Loan Agreement
dated as of February 8, 1996 among the Registrant and certain
of its Subsidiaries, The First National Bank of Boston, as
agent, and the Banks party thereto
4.11 Revolving Credit Note dated as of February 8, 1996 of the
Registrant and certain of its subsidiaries in favor of The
First National Bank of Boston
4.12 Term Note dated as of February 8, 1996 of the Registrant and
certain of its Subsidiaries in favor of The First National Bank
of Boston
4.13 Amended and Restated Security Agreement dated as of February 8,
1996 among the Registrant, certain of its Subsidiaries and The
First National Bank of Boston
4.14 Amended and Restated Stock Pledge Agreement dated as of
February 8, 1996 between the Registrant and The First National
Bank of Boston
4.15 Amended and Restated Collateral Assignment of Partnership
Interests dated as of February 8, 1996 of the Registrant and
GWI Dayton, Inc. in favor of The First National Bank of Boston
**4.16 Amendment No. 1 to Amended and Restated Revolving Credit and
Term Loan Agreement dated as of April 26, 1996 among the
Registrant and certain of its Subsidiaries, The First National
Bank of Boston, as agent and the Banks' party thereto.
*5.1 Opinion of Harter, Secrest & Emery
9.1 Voting Agreement and Stock Purchase Option dated March 21, 1980
among Mortimer B. Fuller, III, Mortimer B. Fuller, Jr. and
Frances A. Fuller, and amendments thereto dated May 7, 1988 and
March 29, 1996
10 The exhibits referenced under "4" hereof are incorporated
herein by reference.
**10.1 Form of Genesee & Wyoming Inc. 1996 Stock Option Plan
**10.2 Form of Genesee & Wyoming Inc. Stock Option Plan for Outside
Directors
10.3 Form of Employment Agreement between the Registrant and each of
its executive officers
**10.4 Form of Genesee & Wyoming Inc. Employee Stock Purchase Plan
10.5 Agreement dated December 7, 1994 between Allegheny & Eastern
Railroad, Inc. and its Engineering Department Employees
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EXHIBIT
NUMBER DESCRIPTION PAGE
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10.6 Agreement dated March 29, 1995 between Allegheny & Eastern
Railroad, Inc. and its Mechanical Department Employees
10.7 Agreement dated July 1, 1992 between Buffalo & Pittsburgh
Railroad, Inc. and its Car Repair Department Employees, and the
proposed changes thereto dated September 16, 1994
10.8 Agreement dated December 1, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and its Engineering Department Employees
10.9 Agreement dated April 30, 1991 between Buffalo & Pittsburgh
Railroad, Inc. and the American Train Dispatchers Association
10.10 Agreement dated February 9, 1995 between Buffalo & Pittsburgh
Railroad, Inc. and the International Association of Machinists
10.11 Agreement dated August 22, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union (Train and
Engine Service Employees)
10.12 Agreement dated November 7, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union
(Representing Clerks and Storekeepers)
10.13 Agreement dated November 1, 1994 between Buffalo & Pittsburgh
Railroad, Inc. and the United Transportation Union
(Representing Yardmasters)
10.14 Agreement dated September 1, 1990 between Genesee & Wyoming
Railroad Company and the United Transportation Union, and
Tentative Agreement dated February 21, 1995 between Genesee &
Wyoming Railroad Company and United Transportation Union Local
Union 982
10.15 United Transportation Union Agreement dated May 1, 1994 between
Rochester & Southern Railroad, Inc. and its employees
represented by United Transportation Union
10.16 Shared Use Agreement for Albany Yard dated February 20, 1993
between Southern Pacific Transportation Company and Willamette
& Pacific Railroad, Inc.
10.17 Trackage Rights Agreement (Albany-Eugene Yard) dated February
20, 1993 between Southern Pacific Transportation Company and
Willamette & Pacific Railroad, Inc.
10.18 Westside Oregon Lines Cooperative Marketing Agreement dated
February 20, 1993 between Willamette & Pacific Railroad, Inc.
and Southern Pacific Transportation Company
10.19 Trackage Rights Agreement dated March 11, 1987 between Southern
Pacific Transportation Company and Louisiana & Delta Railroad,
Inc.
10.20 Trackage Rights Agreement dated July 1, 1986 between Rochester
& Southern Railroad, Inc. and Genesee and Wyoming Railroad
Company, and undated Modification
10.21 Master Supplemental Agreement dated October 7, 1991 between CSX
Transportation, Inc., Buffalo, Rochester and Pittsburgh Railway
Company and Buffalo & Pittsburgh Railroad, Inc.
10.22 Assignment and Assumption Agreement for the Allegheny and
Western Railway Company Lease dated October 7, 1991 among CSX
Transportation, Inc., Buffalo, Rochester and Pittsburgh Railway
Company and Buffalo & Pittsburgh Railroad, Inc.
10.23 Mortgage and Assignment of Leases, Rents, Issues and Profits
(New York) dated as of October 7, 1991 by Buffalo & Pittsburgh
Railroad, Inc. in favor of CSX Transportation, Inc.
10.24 Security Agreement (New York) dated as of October 7, 1991
between Buffalo & Pittsburgh Railroad, Inc. and CSX
Transportation, Inc.
10.25 Mortgage and Assignment of Leases, Rents, Issues and Profits
(Pennsylvania) dated as of October 7, 1991 by Buffalo &
Pittsburgh Railroad, Inc. in favor of CSX Transportation, Inc.
10.26 Security Agreement (Pennsylvania) dated as of October 7, 1991
between Buffalo & Pittsburgh Railroad, Inc. and CSX
Transportation, Inc.
10.27 Lease Agreement for Real Property between Butler, Pennsylvania
and Eidenau, Pennsylvania dated as of October 7, 1991 between
CSX Transportation, Inc. and Buffalo & Pittsburgh Railroad,
Inc.
10.28 Lease Agreement for Personal Property associated with Butler to
Eidenau dated as of October 7, 1991 between CSX Transportation,
Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.29 Memorandum of Lease dated October 7, 1991 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
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EXHIBIT
NUMBER DESCRIPTION PAGE
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+10.30 Lease Agreement for Real Property on the Northern Subdivision
dated as of October 7, 1991 between CSX Transportation, Inc.
and Buffalo & Pittsburgh Railroad, Inc.
+10.31 Lease Agreement for Personal Property on the Northern
Subdivision dated as of October 7, 1991 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.32 Lease Agreement for Real Property at Buffalo Creek Yard dated
as of October 7, 1991 among CSX Transportation, Inc., Buffalo,
Rochester and Pittsburgh Railway Company, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
10.33 Memorandum of Lease dated October 7, 1991 among CSX
Transportation, Inc., Buffalo, Rochester and Pittsburgh Railway
Company, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.34 Agreement Relating to Interchange at Buffalo, NY dated as of
July 18, 1988 between CSX Transportation, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
10.35 Agreement Relating to Interchange at New Castle, PA dated as of
July 18, 1988 between CSX Transportation, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
10.36 Agreement Relating to Trackage Rights between New Castle, PA
and Eidenau, PA dated as of July 18, 1988 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
10.37 Agreement Relating to Fallback Trackage Rights between Eidenau
and WS Tower, PA dated as of July 18, 1988 between CSX
Transportation, Inc. and Buffalo & Pittsburgh Railroad, Inc.
+10.38 Lease Agreement dated December 30, 1992 between Southern
Pacific Transportation Company and Willamette & Pacific
Railroad, Inc.
10.39 Lease Agreement dated September 1, 1994 between Railcar, Ltd.
and GWI Leasing Corporation
10.40 Locomotive Lease Agreement and Letter Agreement (Equipment
Schedule 01) dated October 17, 1994 between Keycorp Leasing
Ltd. and GWI Leasing Corporation
10.41 Lease Agreement dated May 3, 1994 between Greenbrier Railcar,
Inc. and GWI Leasing Corporation
+10.42 Allegheny-International Paper Transportation Service Agreement
dated November 24, 1992 between Allegheny & Eastern Railroad,
Inc. and International Paper Company
+10.43 Conrail-Allegheny Operating Contract dated November 24, 1992
between Consolidated Rail Corporation and Allegheny & Eastern
Railroad, Inc.
10.44 Lease recorded December 19, 1881 between The Seneca Nation of
New York Indians and The Great Valley & Bradford Railroad Co.
10.45 Assignment and Agreement dated September 20, 1994 among CMC
Railroad I, Ltd., GWI Switching Services, L.P. and Southern
Pacific Transportation Company
+10.46 Buffalo Terminal Operating Agreement dated July 18, 1988
between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
10.47 First Amendment to Buffalo Terminal Operating Agreement dated
December , 1990 between CSX Transportation, Inc. and Buffalo &
Pittsburgh Railroad, Inc.
+10.48 Operating Agreement and Car Storage Yard Agreement Consent to
Assignments dated as of September 20, 1994 between NCC Charlie
Company and GWI Switching Services L.P. with Exhibit I (Amended
and Restated Car Storage Yard Agreement dated September 20,
1994 between Southern Pacific Transportation Company and CMC
Railroad I, Ltd.) and Exhibit II (Amended and Restated Car
Storage Yard Agreement dated September 20, 1994 between
Southern Pacific Transportation Company and CMC Railroad I,
Ltd.)
10.49 Trackage Rights Agreement dated March 12, 1994 between Southern
Pacific Transportation Company and GWI Switching Services L.P.
10.50 First Amendment to Trackage Rights Agreement dated September
20, 1994 between Southern Pacific Transportation Company and
GWI Switching Services L.P.
10.51 Indenture of Lease and Option to Purchase Agreement dated
January 17, 1992 between Southern Pacific Transportation
Company and Louisiana and Delta Railroad, Inc.
10.52 Lease Agreement dated November 7, 1991 between CIS Corporation
and Buffalo & Pittsburgh Railroad, Inc.
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EXHIBIT
NUMBER DESCRIPTION PAGE
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10.53 Notice and Acknowledgement of Assignment dated as of November
1, 1993 between James P. Hassett as Trustee for CIS
Corporation, Buffalo & Pittsburgh Railroad, Inc. and ATEL
Financial Corporation
10.54 Agreement relating to Trackage Rights dated July 18, 1988
between CSX Transportation, Inc. and Buffalo & Pittsburgh
Railroad, Inc.
10.55 Commercial Agreement dated March 11, 1987 between Louisiana &
Delta Railroad, Inc. and Southern Pacific Transportation
Company
10.56 Assignment and Assumption Agreement dated March 11, 1987
between Louisiana & Delta Railroad, Inc. and Southern Pacific
Transportation Company
10.57 Administrative Agreement dated as of February 19, 1985 between
Consolidated Rail Corporation and Genesee & Wyoming Railroad
Company
10.58 Interchange Agreement (Goodman Street Yard) dated December 13,
1984 between Consolidated Rail Corporation and Genesee &
Wyoming Railroad Company
10.59 Revolver A Note dated June 2, 1995 of the Registrant in favor
of The First National Bank of Boston, as Agent
10.60 Revolver B Note dated June 2, 1995 of the Registrant in favor
of The First National Bank of Boston, as Agent
10.61 Asset Purchase Agreement dated as of February 8, 1996 between
Illinois & Midland Railroad, Inc. and Stanford PRC Acquisition
Corp.
10.62 Guaranty dated as of February 8, 1996 of the Registrant in
favor of Stanford PRC Acquisition Corp.
10.63 Assignment and Assumption Agreements dated as of February 8,
1996 between Chicago & Illinois Midland Railway Company and
Illinois & Midland Railroad, Inc. (six)
10.64 Warrant Purchase Agreement dated as of February 8, 1996
between the Registrant and The First National Bank of Boston
10.65 Agreement dated February 6, 1996 between Illinois & Midland
Railroad, Inc. and the United Transportation Union
+10.66 Lease Agreement dated as of August 18, 1995 between Southern
Pacific Transportation Company and Portland & Western
Railroad, Inc.
+10.67 Lease Agreement dated September 15, 1995 between Burlington
Northern Railroad Company and Portland & Western Railroad,
Inc.
10.68 Lease Agreement dated as of October 1, 1982 between Livingston
County Industrial Development Agency and Genesee and Wyoming
Railroad
10.69 Lease Agreement dated as of February 1, 1995 between
Livingston County Industrial Development Agency and Genesee
and Wyoming Railroad Company
**+10.70 Asset Purchase Agreement dated April 19, 1996 among Pittsburg
& Shawmut Railroad, Inc., Genesee & Wyoming Inc., The
Pittsburg & Shawmut Railroad Company, Red Bank Railroad
Company, Mountain Laurel Railroad Company and Arthur T. Walker
Estate Corporation, and Amendment No. 1 to Asset Purchase
Agreement dated April 19, 1996
**10.71 Amendment No. 1 to Warrant Purchase Agreement dated as of May
31, 1996 between the Registrant and FSC Corp.
**11.1 Statement re computation of per share earnings
12.1 Exhibit has been omitted because the required information is
included in the financial statements or notes thereto forming
part of this Registration Statement.
**21.1 Subsidiaries of the Registrant
**23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Harter, Secrest & Emery (contained in Exhibit 5.1)
24.1 Officers' and Directors' Power of Attorney
**27 Financial Data Schedule (EDGAR filed only)
|
**Filed with this Amendment.
*To be filed by amendment.
+ Confidential treatment requested as to certain portions, which have been filed separately with the Commission pursuant to an application for such
treatment.
EXHIBIT 3.2
RESTATED
CERTIFICATE OF INCORPORATION
OF
GENESEE & WYOMING INC.
DULY ADOPTED IN ACCORDANCE WITH SECTIONS 245 AND 242
OF THE DELAWARE GENERAL CORPORATION LAW
INCORPORATED ON SEPTEMBER 1, 1977
This Restated Certificate of Incorporation restates and integrates, and further amends, the provisions of the Corporation's Certificate of Incorporation as heretofore amended or supplemented. The amendments effected by this Restated Certificate of Incorporation are:
(i) changes in the designation of Class A Voting Common Stock to "Class A Common Stock" and Class B Non-Voting Common Stock to "Class B Common Stock;"
(ii) an increase in the number of authorized shares of:
(a) Class A Common Stock from 150,000 shares to 12,000,000 shares; and
(b) Class B Common Stock from 10,000 shares to 1,500,000 shares;
(iii) changes in the par values and voting, conversion and dividend rights of Class A Common Stock and Class B Common Stock;
(iv) changes in the provisions of the Corporation's Certificate of Incorporation relating to liability of directors and indemnification;
(v) addition of a provision requiring the affirmative vote of not less than two-thirds of the combined voting power of all of the outstanding shares of common stock of the Corporation for approval of certain actions;
(vi) addition of a provision permitting the Board of Directors to consider a variety of factors in determining the best interests of the Corporation; and
(vii) addition of a provision instituting a classified Board of Directors.
The Certificate of Incorporation of the Corporation, as amended and restated in its entirety, is set forth as follows:
To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.
A. Twelve Million (12,000,000) shares of Class A Common Stock, par value $.01 per share (the "Class A Common"); and
B. One Million Five Hundred Thousand (1,500,000) shares of Class B Common Stock, par value $.01 per share (the "Class B Common").
The Class A Common and the Class B Common shall be identical in all respects and shall entitle the holders thereof to the same rights, privileges and limitations, except as otherwise provided herein. The relative rights, privileges and limitations of the Class A Common and the Class B Common are as follows:
(i) The holders of Class A Common and Class B Common shall be entitled to vote as separate classes on all matters as to which a class vote is now, or hereafter may be, required by law.
(ii) On all other matters, the holders of Class A Common and Class B Common shall vote together as a single class, provided that the holders of Class A Common shall have one vote per share and the holders of Class B Common shall have ten votes per share.
(iii) There shall be no cumulative voting of any shares of either the Class A Common or the Class B Common.
stating that such holder has transferred the shares, or a stated number of the shares, represented by such certificate or certificates and (b) a written statement advising as to whether or not the transfer is an Excluded Transfer. In the event that, according to such statement, the transfer is an Excluded Transfer, the transferor shall also deliver to the Corporation proof acceptable to the Corporation and its counsel of the nature of the Excluded Transfer. If the transferor does not claim an Excluded Transfer, the transfer of shares and automatic conversion of shares of Class B Common into shares of Class A Common under this Article 4(b)(iii) shall be deemed to have been effected as of the close of business on the date on which the transferor surrenders such certificate or certificates representing shares of Class B Common and delivers such notice, and at such time the rights of the holder of record of the converted shares of Class B Common shall cease and the person or persons in whose name or names the certificate or certificates for shares of Class A Common are to be issued because of the conversion shall be deemed to have become the holder or holders of record of the Class A Common represented thereby. If the transferor claims an Excluded Transfer, the transfer shall be deemed to have been effected as of the close of business on the date on which the transferor surrenders such certificate or certificates representing shares of Class B Common, but only following the determination by the Corporation and its counsel that the proof of Excluded Transfer submitted by the transferor is acceptable. In the event the transferor claims an Excluded Transfer and the Corporation and its counsel determine that the submitted proof is not acceptable, the Corporation shall so advise the transferor by written notice accompanied by any share certificates and stock powers previously tendered by the transferor.
dividend paid on each share of Class B Common by ten percent (rounded up, if necessary, to the nearest one-hundredth of a cent).
limited) to the fullest extent permitted by the Delaware General Corporation Law as so amended. No repeal or modification of the foregoing provisions of this Article 9 nor, to the fullest extent permitted by law, any modification of law, shall adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification.
any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In any suit brought by an indemnitee to enforce a right to indemnification hereunder (other than a suit brought by an indemnitee to enforce a right to an advancement of expenses) it shall be a defense that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. In any suit by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or stockholders) to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or stockholders) that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the indemnitee, be a defense of such a suit. In any suit brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses hereunder, or by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to such indemnification or to such advancement of expenses, under this Article 10 or otherwise, shall be on the Corporation.
(a) Without the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the Common Stock of the Corporation entitled to vote thereon (voting together as one class), the Corporation shall not:
(i) consolidate with or merge into or with any other Person (as hereinafter defined) unless the Corporation is the survivor of such consolidation or merger and no Change of Control (as hereinafter defined) has occurred thereby; or
(ii) sell, lease, exchange, transfer (by liquidation or otherwise), or otherwise dispose of all or substantially all of its properties and assets (or the properties and assets of all of its Subsidiaries (as hereinafter defined), taken as a whole) to any Person or Persons, whether in a single transaction or a series of related transactions; or
(iii) amend or otherwise modify or repeal this Article 11.
(b) For the purposes of this Article 11, the following terms shall have the following meanings:
(i) "Affiliate" of a Person is any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, such Person.
(ii) "Change of Control" shall be deemed to have occurred if and when any Person or Persons shall become the beneficial owner or owners, directly or indirectly, of shares of the Class A Common and/or the Class B Common which represent 50 percent or more of the votes represented by all outstanding shares of Class A Common and Class B Common.
(iii) "Control" (including the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
(iv) "Person" means and includes any individual, partnership, corporation, trust, unincorporated organization or other entity, and any government or governmental authority, agency or political subdivision thereof. The term "Persons" shall include a Person and all Affiliates of such Person. The term "Person" and "Persons" shall also include any person or group of persons within the meaning of the Securities Exchange Act of 1934, as amended.
(v) "Subsidiaries" means, with respect to the Corporation, all corporations, partnerships, joint ventures, trusts and other entities of which the Corporation, directly or indirectly, owns an amount of voting securities, or possesses other ownership
interests, having the power, direct or indirect, to elect a majority of the Board of Directors or other governing body thereof.
Immediately prior to the effectiveness of this Restated Certificate of Incorporation, there were issued and outstanding 126,946 shares of Class A Voting Common Stock, no shares of Class B Non-Voting Common Stock, and a warrant to purchase 2,262 shares of Class A Voting Common Stock (the "Warrant"). Immediately upon the effectiveness of this Restated Certificate of Incorporation, each issued and outstanding share of Class A Voting Common Stock and each share of Class A Voting Common Stock underlying the Warrant, without further act or deed on the part of the holder of such share or Warrant, shall become either (i) 18.5 shares of Class A Common or (ii) if, prior to the effectiveness of this Restated Certificate of Incorporation, the holder of such share or Warrant has executed a Class B Stockholders' Agreement in the form offered by the Corporation which restricts the transfer of shares of Class B Common, 9.25 shares of Class A Common and 9.25 shares of Class B Common. In connection therewith, the Corporation shall not issue any fractional shares of Class A Common or Class B Common. In the event that any holder of Class A Voting Common Stock is entitled to a fractional share of Class A
Common or Class B Common, the Corporation shall pay to such holder the fair value of such fractional share, as determined by the Board of Directors.
This Restated Certificate of Incorporation shall be effective on the date of filing by the Secretary of State of the State of Delaware.
We, the undersigned Chairman of the Board, President and Chief Executive Officer and Secretary, respectively, of the Corporation, for the purpose of restating and integrating, and further amending, the provisions of the Certificate of Incorporation of the Corporation, as heretofore amended or supplemented, hereby certify: that this Restated Certificate of Incorporation, and the amendments contained herein, were duly adopted by the Board of Directors of the Corporation, declaring their advisability, at a meeting duly called and in accordance with Sections 242 and 245 of the Delaware General Corporation Law; that thereafter, this Restated Certificate of Incorporation, and the amendments contained herein, were proposed by the Board of Directors and duly authorized and approved by the stockholders of the Corporation in accordance with Sections 242 and 245 of the Delaware General Corporation Law at a meeting of the stockholders of the Corporation duly called and held upon notice in accordance with Section 222 of the Delaware General Corporation Law; and that the capital of the Corporation shall not be reduced under or by reason of the amendments contained herein. Accordingly, we have hereunder set our hands and seal this ______ day of ____________________, 1996, and hereby affirm the truth of the statements contained herein under the penalties of perjury.
[SEAL]
EXHIBIT 4.2
THIS AGREEMENT dated as of May 20, 1996 is made by and among Genesee & Wyoming Inc., a Delaware corporation (the "Corporation"), Mortimer B. Fuller, III ("Fuller"), the undersigned Executive Officers of the Corporation (as defined below), and the undersigned holders of record of shares of the Corporation's Class B Common Stock (the "Stockholders").
Effective upon the filing of the Restated Certificate of Incorporation of the Corporation, Fuller, the Stockholders and certain Executive Officers will own, in the aggregate, all of the issued and outstanding shares of the Class B Common Stock, par value $.01 per share, of the Corporation (the "Class B Common Stock"), and the parties believe it to be in their respective best interests to restrict the transfer of any and all shares of the Class B Common Stock now or hereafter owned by any of the parties hereto (collectively, the "Shares"), to grant certain options to purchase the Shares and to provide for the disposition of the Shares upon the occurrence of certain events.
The parties therefore agree as follows:
As used herein, the following terms shall have the following meanings:
Neither Fuller nor any Stockholder nor any Executive Officer shall, during his lifetime or upon his death, cause or permit any Transfer of Shares now or hereafter owned by him except in accordance with this Agreement. The parties agree that they shall not cause nor permit the transfer on the books of the Corporation of any Shares now or hereafter owned by Fuller, any Stockholder or any Executive Officer unless the transfer is made in accordance with this Agreement.
Notwithstanding any other provision hereof to the contrary, if the employment of any Executive Officer (the "Departing Executive") by the Corporation shall terminate for any reason, including his death or disability, then he shall be deemed to have offered, as of the date of termination of his employment, to sell all Shares held of record or beneficially by him (the "Terminated Shares") pursuant to all of the provisions of Article 4, except that if, upon expiration of the option period provided by Section 4.3, Fuller and the Executive Officers have not exercised their options so as to purchase, in the aggregate, all of the remaining Terminated Shares, then such remaining Terminated Shares shall thereupon be converted into shares of the Class A Common Stock, $.01 par value per share, of the Corporation, in accordance with the procedure for voluntary conversion of the Class B Common Stock of the Corporation described in the Restated Certificate of Incorporation of the Corporation. For purposes of this Article 5, the Terminated Shares shall include, without limitation, all Shares held of record by the Departing Executive, his spouse, his children and his grandchildren, and all Shares held in trust for the benefit thereof.
The price at which all Shares shall be purchased hereunder shall be the fair market value per share (the "Market Value") of the Class A Common Stock of the Corporation (the "Class A Common Stock") on the date of such purchase. For purposes of this Agreement, the Market Value of the Class A Common Stock shall be the closing price of the Class A Common Stock on the principal national securities exchange on which the Class A Common Stock is then listed or admitted to trading (if the Class A Common Stock is then listed or admitted to trading on any national securities exchange), and the closing price shall be the last reported sale price regular way or, in case no such sale takes place on such date, the last reported sale price regular way on the next preceding day on which a sale took place. If the Class A Common Stock is not then so listed on a national securities exchange, the Market Value of the Class A Common Stock on
any date shall be the closing price (the last reported sale price regular way) in the over-the-counter market as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq"), if the closing price of the Class A Common Stock is then reported by Nasdaq. If the closing price of the Class A Common Stock is not then reported by Nasdaq, the Market Value of the Class A Common Stock on any date shall be deemed to be the mean between the representative closing bid and asked prices of the Class A Common Stock in the over-the-counter market as reported by Nasdaq. If the Class A Common Stock is not then reported by Nasdaq, the Market Value of the Class A Common Stock on any date shall be as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the Corporation for that purpose. If no member of the National Association of Securities Dealers, Inc. furnishes quotes with respect to the Class A Common Stock, Market Value shall be determined by such other reasonable method as is adopted by resolution of the Corporation's Board of Directors.
Every certificate representing any Shares which is now or hereafter issued to any Stockholder shall bear the following legend:
Transfer of the shares represented by this certificate is restricted by the terms of a certain Class B Stockholders' Agreement dated as of May 20, 1996 among the Corporation and its Class B stockholders, a copy of which is on file at the office of the Corporation.
(a) the consummation of a merger, consolidation or other corporate reorganization to which the Corporation is a party which provides for the issuance of cash, securities or other property to the holders of Shares in exchange for such Shares; or
(b) the consummation of a transaction by which any one person or entity acquires all of the Shares then outstanding; or
(c) the bankruptcy, receivership, liquidation or dissolution of the Corporation; or
(d) the execution by all of the parties hereto of a mutual agreement to terminate this Agreement.
The parties acknowledge that any breach of this Agreement will result in immediate harm to the other parties which will not be measurable or compensable in money damages. Therefore, if any party (or his personal representative) commences any action or proceeding to enforce the provisions of this Agreement, the party against whom the action or proceeding is brought hereby waives any claim or defense therein that the aggrieved party has an adequate remedy at law. In addition to any other legal remedy which may be available, the party commencing the action or proceeding shall be entitled to injunctive relief with respect to any breach or threatened breach of this Agreement and to specific performance of its terms.
This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and assigns. Notwithstanding the foregoing, no party shall assign or attempt to assign this Agreement or any interest herein without the prior written consent of all of the other parties hereto.
Any person or entity which hereafter acquires, in any manner, any Shares shall, and any
person who hereafter becomes an officer of the Corporation within the meaning of Rule 16a-1 promulgated under the Securities Exchange Act of 1934, as amended, may, become a party to this Agreement by dating and executing a copy hereof and delivering it to the Corporation. In such event, such person or entity shall be bound by all of the terms and conditions hereof and entitled to the benefits hereunder, as of the date of such execution.
IN WITNESS WHEREOF, we have executed this Agreement as of the day and year first above written.
Address
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71 Lewis Street GENESEE & WYOMING INC.
Greenwich, CT 06830
By:
----------------------------------
Mortimer B. Fuller, III
President
71 Lewis Street ----------------------------------
Greenwich, CT 06830 Mortimer B. Fuller, III
71 Lewis Street ----------------------------------
Greenwich, CT 06830 Mark W. Hastings
402 West Washington Street
New Iberia, LA 70560 ----------------------------------
Forrest L. Becht
201 North Penn Street
Punxsutawney, PA 15767 ----------------------------------
Charles W. Chabot
110 West 10th Avenue
P.O. Box 942
Albany, OR 97321 ----------------------------------
Robert I. Melbo
P.O. Box 139
15th and North Grand Avenue, East
Springfield, IL 62705 ----------------------------------
Spencer D. White
3 Parkway
P.O. Box 247
Leicester, NY 14481 ----------------------------------
Alan R. Harris
|
CLASS B STOCKHOLDERS
[Complete your address, sign here and print name under signature to agree to be bound by this Agreement]
- --------------------------------- - --------------------------------- ----------------------------------- - --------------------------------- ----------------------------------- (address of stockholder) (name and signature of stockholder) - --------------------------------- - --------------------------------- ----------------------------------- - --------------------------------- ----------------------------------- (address of stockholder) (name and signature of stockholder) |
EXHIBIT 4.16
AMENDMENT NO. 1 TO
AMENDED AND RESTATED REVOLVING
CREDIT AND TERM LOAN AGREEMENT
WHEREAS, the Borrowers, the Banks and the Agent are parties to that certain Amended and Restated Revolving Credit and Term Loan Agreement dated as of February 8, 1996 (as amended and in effect from time to time, the "Credit Agreement"), pursuant to which the Banks, upon certain terms and conditions, have made loans to and may issue letters of credit for the benefit of the Borrowers; and
WHEREAS, the Borrowers have requested that the Banks agree, and the Banks have agreed, on the terms and subject to the conditions set forth herein, to make certain changes to the Credit Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(a) The preamble to the Credit Agreement is amended by:
(i) inserting after the word "hereto" in clause (b) of the preamble, the following clause: ", (c) THE FIRST NATIONAL BANK OF CHICAGO and KEY BANK OF NEW YORK, as co-agents for such lending institutions"; and
(ii) deleting the parenthetical "(c)", and substituting therefor the parenthetical "(d)".
(b) Section 1.1 of the Credit Agreement is amended by inserting the following new definitions in the appropriate places in the alphabetical sequence thereof:
(c) The definition of "Consolidated Cash Flow" set forth in (S)1.1 of the Credit Agreement is amended by:
(i) deleting the word "or" at the end of clause (c)(ii), and substituting therefor a comma; and
(ii) inserting at the end of clause (c)(iii) the following clause:
"or (iv) in respect of the Oregon Rail Acquisition".
(d) The definition of "Walker Acquisition" set forth in (S)1.1 of the Credit Agreement is amended by inserting after the word "GWI" the parenthetical "(or a wholly owned Subsidiary of GWI)".
(e) The definition of "Walker Collateral Assignment" set forth in (S)1.1 of the Credit Agreement is amended by inserting after the word "GWI" the parenthetical "(or a wholly owned Subsidiary of GWI)".
(f) The definitions of "Loan Request", "Security Documents", "Term Loan", "Tranche", and "Tranche B" set forth in (S)1.1 of the Credit Agreement are amended and restated as follows:
(g) Section 3.1.2 of the Credit Agreement is amended by:
(i) deleting the dollar amount "$14,000,000" set forth in the first sentence of such section and substituting therefor the dollar amount "$12,159,500";
(ii) deleting the phrase "or an integral multiple thereof" in clause
(b)(i) of such subsection; and
(iii) deleting the last two sentences of such section and substituting therefor the following sentence: "Upon delivery of the Tranche B Request, the aggregate Term Loan Commitments of the Banks shall immediately be reduced by the amount (if any) by which $12,159,500 exceeds the principal amount requested in the Tranche B Request."
(h) Section 3.1 of the Credit Agreement is further amended by inserting a new subsection 3.1.3 as follows:
(i) Section 3.2. of the Credit Agreement is amended by deleting the date "April 30, 1996", and substituting therefor the date "June 30, 1996".
(j) Section 3.3 of the Credit Agreement is amended by deleting the words "and Tranche B" in the second sentence of such section, and substituting therefor the words ", Tranche B and Tranche C".
(k) Section 3.4 of the Credit Agreement is amended by:
(ii) deleting the heading "Percentage of Term Loan Outstanding on April 1, 1996" set forth in the heading of the table contained in such section, and substituting therefor the phrase "Percentage Payable".
(l) Section 8.17 of the Credit Agreement is amended by:
(i) deleting the words "and the Walker Acquisition" set forth in the first sentence of such section, and substituting therefor the words ", the Walker Acquisition and the Oregon Rail Acquisition"; and
(ii) deleting the "and" in the section sentence of such section, and substituting therefor a comma; and
(iii) inserting before the period at the end of the second sentence of such section the phrase "and the proceeds of Tranche C of the Term Loan shall be used by the Borrowers solely to finance the Oregon Rail Acquisition".
(m) Section 9.15 of the Credit Agreement is amended by inserting at the end of such section the following sentences: "Notwithstanding the foregoing, so long as Kittanning does not own assets having a gross book value in excess of $50,000 and does not have any Subsidiaries, Kittanning will not be subject to the provisions of this (S)9.15 and will not become a Borrower under this Agreement. In the event Kittanning at any time owns assets having a gross book value in excess of $50,000 or has any Subsidiaries, the Borrowers will promptly comply with the provisions of this (S)9.15 with respect to Kittanning."
(n) Section 10.1 of the Credit Agreement is amended by:
(i) deleting the period and the end of clause (o), and substituting therefor a semi-colon; and
(ii) inserting a new paragraph as follows:
(o) Section 10.3(k) of the Credit Agreement is amended by:
(i) deleting the period at the end of clause (v), and substituting therefor a semi-colon; and
(ii) inserting a new paragraph at the end of (S)10.3(k) as follows:
(p) Section 11.6 of the Credit Agreement is amended by deleting the parenthetical set forth in the first sentence thereof after the words "Capital Expenditures", and substituting therefor the following parenthetical: "(net of those Capital Expenditures reimbursed by third parties, in respect of Construction Projects for which reimbursements have been received or will be received from third parties, or in respect of the Oregon Rail Acquisition)".
(q) Section 13.5 of the Credit Agreement is amended by deleting the dollar amount "$14,000,000" set forth in clause (c) of such section, and substituting therefor the dollar amount "$12,159,500".
(r) Section 13 of the Credit Agreement is further amended by inserting a new subsection 13.6 as follows:
In addition to all other conditions to borrowing hereunder, in the case of a Tranche C Request, (a) the Agent shall be satisfied with the terms and conditions and documentation relating to the Oregon Rail Acquisition, (b) the Oregon Rail Acquisition shall have been duly consummated on the Oregon Rail Acquisition Date and, after giving effect thereto, WPR shall own the assets conveyed to it therein free and clear of all security interests, liens and encumbrances, (c) the purchase price of the assets acquired pursuant to the Oregon Rail Acquisition and all expenditures and transaction costs associated therewith shall not exceed $1,840,500 in the aggregate, (d) the Agent shall have received evidence that all consents and approvals necessary to complete the Oregon Rail Acquisition shall have been obtained and such consents and approvals shall be in form and substance satisfactory to the Agent, (e) the Borrowers shall have taken all actions necessary to grant to the Agent a first priority perfected security interest in the assets acquired in the Oregon Rail Acquisition, and (f) the Borrowers shall have complied with the provisions of (S)3.1.3 hereof.
(s) Section 14.3 of the Credit Agreement is amended by deleting the word "B-ank" and substituting therefor the word "Bank".
(t) Section 16.3 of the Credit Agreement is amended by deleting the phrase "may be liable" set forth in the last sentence of such section, and substituting therefor the phrase "shall be liable".
(u) Section 16.7 of the Credit Agreement is amended and restated in its entirety as follows:
(u) Section 16 of the Credit Agreement is further amended by inserting a new subsection 16.12 as follows:
(v) Section 27 of the Credit Agreement is amended by inserting after the phrase "the definition of Majority Banks may not be amended" set forth in the second sentence of such section the words "and the release of all or substantially all of the Collateral will not be permitted".
(b) The Amendment Documents and the Credit Agreement as amended hereby constitute legal, valid and binding obligations of such Borrower, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting generally the enforcement of creditors' rights.
(c) No approval or consent of, or filing with, any governmental agency or authority is required to make valid and legally binding the execution, delivery or performance by such Borrower of the Amendment Documents or the Credit Agreement as amended hereby, or the consummation by such Borrower of the transactions among the parties contemplated hereby and thereby or referred to herein.
(d) The representations and warranties contained in (S)8 of the Credit Agreement were correct at and as of the date made. Except to the extent that the facts upon which such representations and warranties were based have changed in the ordinary course of business (which changes, either singly or in the aggregate, have not been materially adverse) and after giving effect to the provisions hereof, such representations and warranties also are correct at and as of the date hereof.
(e) Such Borrower has performed and complied in all material respects with all terms and conditions herein required to be performed or complied with by it prior to or at the time hereof, and as of the date hereof, after giving effect to the provisions hereof, there exists no Event of Default or Default.
(a) Except as otherwise expressly provided by this Amendment, all of the terms, conditions and provisions of the Credit Agreement shall remain the same. It is declared and agreed by each of the parties hereto that the Credit Agreement, as amended hereby, shall continue in full force and effect, and that this Amendment and the Credit Agreement shall be read and construed as one instrument.
(b) THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS AN AGREEMENT UNDER SEAL AND SHALL BE CONSTRUED ACCORDING TO AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
(c) This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto by and against which enforcement hereof is sought.
(d) The Borrowers hereby agree to pay to the Agent, on demand by the Agent, all reasonable out-of-pocket costs and expenses incurred or sustained by the Agent in connection with the preparation of this Amendment (including reasonable legal fees).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.
THE FIRST NATIONAL BANK
OF BOSTON, individually and as Agent
By: /s/ Barbara W. Wilson
--------------------------
Name: Barbara W. Wilson
Title: Director
|
THE FIRST NATIONAL BANK OF CHICAGO, individually
and as Co-Agent
By: /s/ Karen J. Andrews
-------------------------
Name: Karen J. Andrews
Title: Vice President
|
KEY BANK OF NEW YORK, individually
and as Co-Agent
By: /s/ Timothy O. Merriman VP --------------------------- Name: Timothy O. Merriman Title: Vice President |
NATWEST BANK, N.A.
By: /s/ Louise M. Schneider ------------------------- Name: Louise M. Schneider Title: Vice President |
CORESTATES BANK, N.A.
By: /s/ Verna R. Prentice ------------------------ Name: Verna R. Prentice Title: Vice President |
NATIONAL CITY BANK, KENTUCKY
By:/s/ Don Pullen ----------------- Name: Don Pullen Title: Vice President |
UNION BANK OF CALIFORNIA, N.A.
By:/s/ Anthony B. Kwee ---------------------- Name: Anthony B. Kwee Title: Vice President |
LASALLE NATIONAL BANK
By:/s/ Kent Hammerstrom ----------------------- Name: Kent Hammerstrom Title: First Vice President |
GENESEE & WYOMING INC.
ROCHESTER & SOUTHERN
RAILROAD, INC.
LOUISIANA & DELTA RAILROAD,INC.
GENESEE AND WYOMING
RAILROAD COMPANY
BUFFALO & PITTSBURGH
RAILROAD, INC.
ALLEGHENY & EASTERN
RAILROAD, INC.
WILLAMETTE & PACIFIC
RAILROAD, INC.
GWI LEASING CORPORATION
GWI DAYTON, INC.
GWI RAIL MANAGEMENT CORPORATION
GENESEE & WYOMING INVESTORS,INC.
ILLINOIS & MIDLAND RAILROAD, INC.
By: /s/ Mark W. Hastings, Treasurer
-----------------------------
Mark W. Hastings, Treasurer
|
THE DANSVILLE AND MOUNT
MORRIS RAILROAD COMPANY
BRADFORD INDUSTRIAL
RAIL, INC.
RAILROAD SERVICES, INC.
By:/s/ Alan R. Harris, Treasurer ------------------------------ Alan R. Harris, Treasurer |
GWI SWITCHING SERVICES, L.P.
BY: GWI DAYTON, INC.
ITS GENERAL PARTNER
By:/s/ Mark W. Hastings, Treasurer
----------------------------------
Mark W. Hastings, Treasurer
|
PORTLAND & WESTERN RAILROAD,INC.
By:/s/ Anthony W. Mogytych
---------------------------------
Anthony W. Mogytych, President
|
EXHIBIT 10.1
GENESEE & WYOMING INC.
1996 STOCK OPTION PLAN
1. PURPOSE.
The Genesee & Wyoming Inc. 1996 Stock Option Plan (the "Plan"), effective ________________, 1996, is designed to create an incentive for executive and other employees of Genesee & Wyoming Inc., a Delaware corporation (the "Company"), and its subsidiaries, to remain in the employ of the Company and its subsidiaries and to contribute to their success by providing the opportunity for stock ownership. The Company may grant under the Plan both incentive stock options within the meaning of Section 422 of the Internal Revenue Code ("Incentive Stock Options") and stock options that do not qualify for treatment as Incentive Stock Options ("Nonstatutory Stock Options"). Unless expressly provided to the contrary, all references herein to "Options" include both Incentive Stock Options and Nonstatutory Stock Options.
2. ADMINISTRATION.
(a) The Plan shall be administered by a committee (the "Stock Option Committee") which shall be comprised of two or more members of the Board of Directors of the Company.
(b) Each member of the Stock Option Committee shall be a disinterested director of the Company within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(c) Subject to the express provisions of the Plan, the Stock Option Committee shall have the authority, in its discretion and without limitation:
(i) to determine the individuals to whom Options are granted, whether an Option is intended to be an Incentive Stock Option or a Nonstatutory Stock Option, the times when such individuals shall be granted Options, the number of shares to be subject to each Option, the term of each Option, the date when each Option shall become exercisable, whether an Option shall be exercisable in whole or in part in installments, the number of shares to be subject to each installment, the date each installment shall become exercisable, the term of each installment, and the option price of each Option;
(ii) to accelerate the date of exercise of any Option or any installment thereof (irrespective of any vesting schedule that may have been part of the grant of such Option); and
(iii) to make all other determinations necessary or advisable for administering the Plan.
(d) The Stock Option Committee shall act by majority vote. The decision of the Stock Option Committee on any question concerning or involving the interpretation or administration of the Plan shall, as between the Company and Option holders, be final and conclusive. The Stock Option Committee may consult with counsel, who may be counsel for the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel.
3. ELIGIBILITY.
(a) Participants in the Plan shall be selected by the Stock Option Committee from among the full-time employees of the Company, including those who are also directors or officers thereof. An employee on leave of absence may be considered as still in the employ of the Company for purposes of eligibility for participation in the Plan. All references in this Plan to employees of the Company shall include employees of any parent or subsidiary of the Company, as those terms are defined in Section 424 of the Internal Revenue Code.
(b) The right of the Company to terminate the employment of a Plan participant at any time, with or without cause, shall in no way be restricted by the existence of the Plan, any Option granted hereunder, or any stock option agreement relating thereto.
4. NUMBER OF SHARES.
Subject to the provisions of Section 5, the total number of shares of the Company's Class A Common Stock, par value $.01 per share (the "Class A Common Stock"), which may be issued under Options granted pursuant to the Plan shall not exceed 450,000. Shares subject to the Plan may be either authorized but unissued shares or shares that were once issued and subsequently reacquired by the Company. If any Option is surrendered before exercise, or lapses without exercise, or for any other reason ceases to be exercisable, the shares reserved therefor shall continue to be available for the grant of Options under the Plan. The Plan shall terminate on ________________, 2006, or the earlier dissolution of the Company, and no Option shall be granted after such date.
5. ADJUSTMENT PROVISIONS.
In the event that:
(a) in connection with a merger or consolidation of the Company or a sale by the Company of all or a part of its assets, the outstanding shares of Class A Common Stock are exchanged for a different number or class of shares of stock or other securities of the Company, or for shares of the stock or other securities of any other entity; or
(b) new, different or additional shares or other securities of the Company or of another entity are received by the holders of Class A Common Stock, whether by way of recapitalization or otherwise; or
(c) any dividend in the form of stock is made to the holders of Class A Common Stock, or any stock split or reverse split pertaining to Class A Common Stock is effected;
then the Stock Option Committee shall make the appropriate adjustment to:
(i) the number and kind of shares or other securities that may be issued upon exercise of Options yet to be granted;
(ii) the option price per share to be paid upon exercise of each outstanding Option; and
(iii) the number and kind of shares or other securities covered by each outstanding Option.
6. ANNUAL LIMITATION ON INCENTIVE STOCK OPTIONS.
The aggregate fair market value (determined as of the date the Option is granted) of the shares with respect to which Incentive Stock Options are exercisable for the first time by a grantee during any calendar year (under all plans of the Company and any parent and subsidiaries of the Company) shall not exceed $100,000.
7. OPTION PRICE.
(a) For purposes of the Plan, the term "Grant Date" shall mean the date on which the grant of an Option is duly authorized by the Stock Option Committee. The
option price at which an Option shall be exercisable shall be at least the fair market value per share of the Class A Common Stock on the Grant Date of such Option. However, if an Incentive Stock Option is granted to any person who would, after the grant of such Option, be deemed to own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company, or of any parent or subsidiary of the Company (a "Ten Percent Stockholder"), the option price shall be not less than 110 percent of the fair market value per share of the Class A Common Stock on the Grant Date of such Option.
(b) For purposes of the Plan, the fair market value per share of the Class A
Common Stock on any date ("Fair Market Value") shall be the closing price of the
Class A Common Stock on the principal national securities exchange on which the
Class A Common Stock is then listed or admitted to trading, and the closing
price shall be the last reported sale price regular way on such date (or, if no
sale takes place on such date, the last reported sale price regular way on the
next preceding date on which such sale took place), as reported by such
exchange. If the Class A Common Stock is not then so listed or admitted to
trading on a national securities exchange, then Fair Market Value shall be the
closing price (the last reported sale price regular way) of the Class A Common
Stock in the over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), if the closing price
of the Class A Common Stock is then reported by NASDAQ. If the Class A Common
Stock closing price is not then reported by NASDAQ, then Fair Market Value shall
be the mean between the representative closing bid and closing asked prices of
the Class A Common Stock in the over-the-counter market as reported by NASDAQ.
If the Class A Common Stock bid and asked prices are not then reported by
NASDAQ, then Fair Market Value shall be the quote furnished by any member of the
National Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If no member of the National Association of
Securities Dealers, Inc. then furnishes quotes with respect to the Class A
Common Stock, then Fair Market Value shall be determined by resolution of the
Company's Board of Directors. Notwithstanding the foregoing provisions of this
Section 7(b), if the Board of Directors shall at any time determine that it is
impracticable to apply the foregoing methods of determining Fair Market Value,
then the Board of Directors is hereby empowered to adopt any other reasonable
method for such purpose.
8. TERM OF OPTIONS.
Subject to the provisions of Section 18, the term of each Option shall be determined by the Stock Option Committee, but in no event shall an Option be exercisable, either in whole or in part, after the expiration of ten years from the Grant Date of such Option. Notwithstanding the foregoing, an Incentive Stock Option
granted to a Ten Percent Stockholder shall not be exercisable, either in whole or in part, after the expiration of five years from the Grant Date of such Option. The Stock Option Committee and an Option holder may at any time by mutual agreement terminate any Option held by such Option holder.
9. STOCK OPTION AGREEMENTS.
Each Option shall be evidenced by a written agreement which sets forth: (a) the number of shares subject to the Option; (b) the option price; (c) the vesting schedule of the Option or a statement that the Option is immediately exercisable in full; (d) the expiration date of the Option; (e) the method of payment on exercise of the Option; (f) whether the Option is an Incentive Stock Option or a Nonstatutory Stock Option; and (g) such additional provisions, not inconsistent with the Plan, as the Stock Option Committee may prescribe.
10. EXERCISE OF OPTIONS.
(a) Each Option, or any installment thereof, shall be exercised, whether in whole or in part, by giving written notice to the Company at its principal office, specifying the number of shares of Class A Common Stock being purchased and the purchase price being paid, and accompanied by payment in full of the purchase price.
(b) An Option holder shall pay for the shares subject to the Option by one or any combination of the following methods, as determined by the Stock Option Committee on the Grant Date of the Option: (i) in cash, or (ii) by delivery of shares of Class A Common Stock already owned by the Option holder. Any shares of Class A Common Stock that are so delivered to pay the option price shall be valued at Fair Market Value on the date of such Option exercise.
(c) The exercise of an Option shall be conditioned upon the Option holder
making arrangements satisfactory to the Stock Option Committee for the payment
to the Company of the amount of all taxes required by any governmental authority
to be withheld and paid over by the Company to the governmental authority on
account of the exercise. The payment of such withholding taxes to the Company
shall be made by one or any combination of the following methods, as determined
by the Stock Option Committee on the Grant Date of the Option: (i) in cash, or
(ii) by the Company withholding such taxes from any other compensation owed to
the Option holder by the Company or any of its subsidiaries.
11. NON-ASSIGNMENT.
Each Option by its terms shall provide that it is not transferable by the grantee otherwise than by will or the laws of descent and distribution, and that during the lifetime of the grantee, it is exercisable only by him.
12. DEATH OF GRANTEE.
In the event that a grantee shall die (i) while he is an employee of the Company, or within three months after termination of such employment, and (ii) prior to the complete exercise of Options granted to him under the Plan, then any such remaining Options with exercise periods outstanding may be exercised, in whole or in part, within one year after the date of the grantee's death and then only:
(a) by the grantee's estate or by such person(s) to whom the grantee's rights hereunder shall have passed under his will or the laws of descent and distribution;
(b) to the extent that the grantee was entitled to exercise the Option on the date of his death, and subject to all of the conditions on exercise imposed hereby; and
(c) prior to the expiration of the term of the Option.
13. TERMINATION OF EMPLOYMENT.
(a) During the lifetime of a grantee, an Option shall be exercisable only while he is an employee of the Company and has been an employee continuously since the Grant Date of the Option, or within three months after the date on which he ceases to be such an employee for any reason; provided, however, that in the case of a grantee who is permanently and totally disabled (within the meaning of Section 22(e)(3) of the Internal Revenue Code), such three-month period shall instead be one year.
(b) Any Option that is exercisable after termination of employment, as provided by Section 13(a), shall be exercisable only to the extent that the grantee would have been entitled to exercise the Option on the date of termination of employment; and further, no Option shall be exercisable after the expiration of the term thereof.
(c) For purposes of this Section 13, an employment relationship shall be treated as continuing during the period when a grantee is on military duty, sick leave or other bona fide leave of absence if the period of such leave does not exceed 90 days or, if
longer, so long as a statute or contract guarantees the grantee's right to re- employment with the Company. When the period of leave exceeds 90 days and the individual's right to re-employment is not so guaranteed, the employment relationship shall be deemed to have terminated on the 91st day of such leave.
14. ADDITIONAL REQUIREMENTS.
Each grant of an Option under the Plan, and (unless a Registration Statement with respect thereto shall then be effective under the Securities Act of 1933, as amended (the "Securities Act")) each issuance of shares of Class A Common Stock upon exercise of an Option, shall be conditioned upon the Company's prior receipt of a duly executed letter of investment intent, in form and content satisfactory to counsel for the Company, of the Option holder that such Option and such shares are being acquired by such holder solely for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of selling, transferring or disposing of the same. Any shares of Class A Common Stock acquired by the holder upon exercise of the Option may not thereafter be offered for sale, sold or otherwise transferred unless (a) a Registration Statement with respect thereto shall then be effective under the Securities Act, and the Company shall have been furnished with proof satisfactory to it that such holder has complied with applicable state securities laws, or (b) the Company shall have received an opinion of counsel in form and substance satisfactory to counsel for the Company that the proposed offer for sale, sale or transfer is exempt from the registration requirements of the Securities Act and may otherwise be transferred in compliance with the Securities Act and in compliance with any other applicable law, including all applicable state securities laws; and the Company may withhold transfer, registration and delivery of such securities until one of the foregoing conditions shall have been met.
15. LISTING AND REGISTRATION.
The Company, in its discretion, may postpone the issuance and delivery of shares upon any exercise of an Option until completion of such stock exchange listing, or registration or other qualification of such shares under any state or federal law, rule or regulation, as the Company may consider appropriate; and may require any person exercising an Option to make such representations and furnish such information as it considers appropriate in connection with the issuance of the shares in compliance with applicable law, including without limitation federal or state laws regulating the sale or issuance of securities. Notwithstanding the foregoing, the Company shall be under no obligation whatsoever to list, register or otherwise qualify any shares subject to Options under the Plan.
16. RIGHTS AS A STOCKHOLDER.
No Option holder shall have any rights as a stockholder with respect to the shares of Class A Common Stock purchased by him pursuant to the exercise of an Option until the date of the issuance to him of a stock certificate representing such shares. No adjustment shall be made for dividends or for distributions of any other kind with respect to shares for which the record date is prior to the date of the issuance to the Option holder of a certificate for the shares.
17. EFFECT OF ACQUISITION, REORGANIZATION OR LIQUIDATION.
Notwithstanding any provision to the contrary in this Plan or in any agreement evidencing Options granted hereunder, all Options with exercise periods then currently outstanding shall become immediately exercisable in full and remain exercisable until their expiration in accordance with their respective terms upon the occurrence of either of the following events:
(a) the first purchase of shares pursuant to a tender or exchange offer which is intended to effect the acquisition of more than 50% of the voting power of the Company (other than a tender or exchange offer made by the Company); or
(b) approval by the Company's stockholders of: (i) a merger or consolidation of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving corporation and which does not result in any reclassification or reorganization of the shares), (ii) a sale or disposition of all or substantially all of the Company's assets, or (iii) a plan of complete liquidation or dissolution of the Company.
18. CONDITIONAL OPTIONS.
Prior to approval and ratification of the Plan by the stockholders of the Company, the Stock Option Committee may grant "Conditional Options" under the Plan. In addition, in the event that any amendment to the Plan requires approval and ratification by the stockholders, then prior to such approval and ratification the Stock Option Committee may grant Conditional Options under the Plan. Conditional Options may be granted under the Plan only under the following conditions: (a) a Conditional Option shall be clearly identified as a Conditional Option; (b) the grant of a Conditional Option shall be expressly conditioned upon the approval and ratification of the Plan (or of the amendment to the Plan, as the case may be) by the stockholders of the Company; (c) such stockholder approval and ratification shall occur no later than the
Annual Meeting of Stockholders of the Company next following the effective date of the Plan (or of the amendment to the Plan, as the case may be); and (d) notwithstanding any other provision of the Plan, no holder of a Conditional Option shall have any right to exercise such Option prior to such approval and ratification of the Plan (or of the amendment to the Plan, as the case may be) by the stockholders. Notwithstanding any other provision of the Plan, prior to approval and ratification of the Plan (or of the amendment to the Plan, as the case may be) by the stockholders of the Company, no holder of a Conditional Option shall have any right to sell, assign, transfer, pledge or encumber the Conditional Option, or the shares underlying the Conditional Option, except by will or the laws of descent and distribution (unless, in the case of a holder who is subject to the provisions of Section 16 of the Exchange Act, transfer by will or the laws of descent and distribution would cause the Option to fail to satisfy the requirements of a conditional option under Rule 16b-3 promulgated under the Exchange Act). If the stockholders of the Company fail to approve and ratify the Plan (or the amendment to the Plan, as the case may be) at such Annual Meeting of Stockholders, then all Conditional Options granted hereunder conditioned upon such approval and ratification shall be automatically cancelled and shall immediately become null and void.
19. AMENDMENT OF PLAN.
The Plan may be amended at any time by the Board of Directors, provided that (except for amendments made pursuant to Section 5) no amendment made without the approval and ratification of the stockholders of the Company shall increase the total number of shares which may be issued under Options granted pursuant to the Plan, reduce the minimum option price, extend the latest date upon which Options may be granted or shall be exercisable, change the class of employees eligible to be granted Options, or otherwise materially increase the benefits accruing to participants under the Plan.
20. NO RESERVATION OF SHARES.
The Company shall be under no obligation to reserve shares of Class A Common Stock or other securities to satisfy the exercise of Options. The grant of Options hereunder shall not be construed as constituting the establishment of a trust of such shares, and no particular shares shall be identified as optioned or reserved for issuance hereunder. The Company shall have complied with the terms of the Plan if, at the time of its delivery of shares upon the exercise of any Option, it has a sufficient number of shares authorized and unissued, or issued and held in its treasury, which may then be delivered under the Plan, irrespective of the date on which such shares were authorized.
21. APPLICATION OF PROCEEDS.
The proceeds of the sale of shares of Class A Common Stock by the Company under the Plan will constitute general funds of the Company and may be used by the Company for any purpose.
22. CHOICE OF LAW.
The validity, interpretation and administration of the Plan and of any rules, regulations, determinations or decisions made hereunder, and the rights of any and all persons having or claiming to have any interest herein or hereunder, shall be determined exclusively in accordance with the laws of the State of Delaware (without regard to the choice of law provisions of such laws).
23. RULE 16B-3 QUALIFICATION.
Some or all of the Options granted under the Plan are intended to qualify under Rule 16b-3 promulgated under the Exchange Act.
24. IN GENERAL.
(a) As used herein, the masculine pronoun shall include the feminine and the neuter, as appropriate to the context.
(b) As used herein, the term "Section" shall mean the appropriate Section of the Plan.
* * * * *
THE FOREGOING GENESEE & WYOMING INC. 1996 STOCK OPTION PLAN WAS DULY ADOPTED BY THE BOARD OF DIRECTORS OF GENESEE & WYOMING INC. ON _____________, 1996, AND DULY APPROVED AND RATIFIED BY THE STOCKHOLDERS THEREOF ON ____________, 1996.
EXHIBIT 10.2
GENESEE & WYOMING INC.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
This GENESEE & WYOMING INC. STOCK OPTION PLAN FOR OUTSIDE DIRECTORS (this "Plan"), effective ___________, 1996, is established to attract, retain and compensate highly qualified individuals who are not employees or affiliates of Genesee & Wyoming Inc., a Delaware corporation (the "Company"), or any of its subsidiaries, for their service as members of the Board of Directors of the Company (the "Board of Directors"), and to enable them to increase their ownership of the Company's Class A Common Stock, par value $.01 per share (the "Class A Common Stock"). As used herein, the term "Shares" shall mean the Class A Common Stock or such other securities, if any, as may result from an adjustment under Section 10 hereof.
1. ELIGIBILITY. Each member of the Board of Directors (including any member elected after the effective date of this Plan) who is neither an employee of the Company or any of its subsidiaries, nor an employee or other representative of a significant stockholder of the Company (each, a "Participating Director"), is eligible to participate in this Plan.
2. STOCK OPTIONS. All stock options granted under this Plan ("Options") shall be non-statutory stock options to purchase Shares.
3. SHARES AVAILABLE. Subject to adjustment as provided by Section 10 hereof, the total number of Shares which may be issued pursuant to Options granted hereunder shall not exceed 50,000. Shares subject to Options may be either authorized but unissued shares or shares that were once issued and subsequently reacquired by the Company. If any Option is surrendered before exercise, or lapses without exercise, or for any other reason ceases to be exercisable, in whole or in part, the Shares reserved for the unexercised portion thereof shall continue to be available for the grant of Options hereunder.
4. GRANTS OF OPTIONS.
(a) GRANT DATES; NUMBER OF SHARES. As of the closing date of the initial public offering of the Company's securities (the "Closing Date"), each Participating Director shall automatically be granted an Option to purchase 8,000 Shares. Each person who becomes a member of the Board of Directors after the Closing Date (a "New Director"), shall automatically be granted an Option to purchase 2,000 Shares
on the date he first becomes a Participating Director. On each of [May 12], 1997 and [May 24], 1998 (each, a "Grant Date"), each New Director in office on such date shall automatically be granted an Option to purchase 1,000 Shares; provided, however that no Options shall be granted on such Grant Dates unless the Company's net income, after taxes, for the then most recently completed fiscal year, as shown on the Company's audited financial statements for that fiscal year, exceeds by at least 10 percent the Company's net income, after taxes, for the immediately preceding fiscal year.
(b) ELECTION TO DECLINE OPTION. Any Participating Director may, by written notice received by the Company prior to the Grant Date of such Option, elect to decline an Option, in which case such Option shall not be granted to him; provided, however, that at no time shall the Company pay or provide to such Participating Director anything of value in lieu of the declined Option. In addition, any Participating Director may, by written notice received by the Company prior to the Grant Date of such Option, revoke a previous election to decline an Option.
5. EXERCISE PRICE. The price at which each Option shall be exercisable shall be the fair market value per share (the "Fair Market Value") of the Shares on the Grant Date of such Option. The Fair Market Value of the Shares on the Closing Date shall be the price at which the Shares are sold in the Company's initial public offering. The Fair Market Value of the Shares on any subsequent date shall be the closing price of the Shares on the principal national securities exchange on which the Shares are then listed or admitted to trading (if the Shares are then listed or admitted to trading on any national securities exchange), and the closing price shall be the last reported sale price regular way on such date (or, in case no such sale takes place on such date, the last reported sale price regular way on the next preceding date on which such sale took place), as reported by such exchange. If the Shares are not then so listed on a national securities exchange, the Fair Market Value of the Shares on any date shall be the closing price (the last reported sale price regular way) in the over-the-counter market as reported by the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), if the closing price of the Shares is then reported by NASDAQ. If the closing price of the Shares is not then reported by NASDAQ, the Fair Market Value of the Shares on any date shall be deemed to be the mean between the representative closing bid and asked prices of the Shares in the over-the-counter market as reported by NASDAQ. If the Shares are not then reported by NASDAQ, the Fair Market Value of the Shares on any date shall be as furnished by any member of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If no member of the National Association of Securities Dealers, Inc. furnishes quotes with respect to the Shares,
Fair Market Value shall be determined by such other reasonable method as is adopted by resolution of the Board of Directors.
6. VESTING; EXPIRATION. Each Option shall vest and become exercisable over a three-year period, in increments of one-third on each anniversary date of the Grant Date. Each Option shall expire on the tenth anniversary of the Grant Date, and to the extent any Option remains unexercised on such tenth anniversary, it shall be forfeited.
7. CESSATION OF SERVICE.
(a) CESSATION OF SERVICE. Upon a Participating Director's cessation of service as a member of the Board of Directors for any reason other than his death, only those Options (or portions thereof) that have vested by the date of cessation of service shall thereafter be exercisable by him, and such Options must be exercised within 90 days after cessation of service (but in no event after the expiration of the Option) or they shall be forfeited.
(b) LOSS OF ELIGIBILITY. If a Participating Director becomes an employee of the Company or otherwise no longer satisfies the requirements for eligibility set forth in Section 1 hereof, then all Options already granted to him hereunder shall continue in full force and effect, in accordance with their original terms, for so long as he remains a member of the Board of Directors, but he shall be entitled to no further grants of Options hereunder.
8. DEATH. Upon the death of a Participating Director while serving as a member of the Board of Directors, only those Options (or portions thereof) that have vested by the date of death shall thereafter be exercisable by his legal representative, and such Options must be exercised within six months after the date of death (but in no event after the expiration of the Option) or they shall be forfeited.
9. METHOD OF EXERCISE. An Option shall be exercised by written notice to the Company specifying the number of whole Shares to be purchased and accompanied by full payment, in cash, for such Shares. Alternatively, the exercise price of an Option may be paid, in whole or in part, by delivery of Shares already owned by the Participating Director (or his estate), which will be accepted in exchange at the Fair Market Value of the Shares on the date of exercise. Upon determining that compliance with this Plan has occurred, including compliance with such reasonable requirements as the Company may impose pursuant to Section 11 hereof, the Company shall issue certificates for the Shares purchased.
10. ADJUSTMENT PROVISIONS. In the event (but only in the event) that:
(a) in connection with a merger or consolidation of the Company or a sale by the Company of all or a part of its assets, the outstanding Shares are exchanged for a different number or class of shares of stock or other securities of the Company, or for shares of the stock or other securities of any other entity; or
(b) new, different or additional shares or other securities of the Company or of another entity are received by the holders of Shares; or
(c) any dividend in the form of stock is paid to the holders of Shares, or any stock split or reverse split pertaining to the Shares is effected;
then appropriate adjustments shall be made to:
(i) the number and kind of shares or other securities that may be issued upon exercise of Options not yet granted;
(ii) the exercise price per share to be paid upon exercise of each outstanding Option; and
(iii) the number and kind of shares or other securities covered by each outstanding Option.
11. TAXES; COMPLIANCE WITH LAWS.
(a) TAXES. The Company, if necessary or desirable, may pay or withhold the amount of any tax attributable to any Shares deliverable under this Plan, and the Company may defer making delivery until it is reimbursed or indemnified to its satisfaction for that tax.
(b) SECURITIES LAWS COMPLIANCE. Each grant of an Option hereunder, and (unless a Registration Statement with respect thereto shall then be effective under the Securities Act of 1933, as amended (the "1933 Act")) each issuance of Shares upon exercise of an Option, shall be conditioned upon the Company's prior receipt of a duly executed letter of investment intent, in form and content satisfactory to counsel for the Company, of the Option holder that such Option and such Shares are being acquired by such Option holder solely for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of
selling, transferring or disposing of the same. Any Shares acquired by the Option holder upon exercise of the Option may not thereafter be offered for sale, sold or otherwise transferred unless (i) a Registration Statement with respect thereto shall then be effective under the 1933 Act, and the Company shall have been furnished with proof satisfactory to it that such Option holder has complied with applicable state securities laws, or (ii) the Company shall have received an opinion of counsel in form and substance satisfactory to counsel for the Company that the proposed offer for sale, sale or transfer is exempt from the registration requirements of the 1933 Act and the Shares may otherwise be transferred in compliance with the 1933 Act and in compliance with any other applicable law, including all applicable state securities laws; and the Company may withhold transfer, registration and delivery of such securities until one of the foregoing conditions shall have been met. Unless a Registration Statement with respect thereto shall then be effective under the 1933 Act, each certificate representing Shares issued upon exercise of an Option shall bear an appropriate legend reflecting the foregoing. Options are exercisable, and Shares can be delivered under this Plan, only in compliance with all applicable federal and state laws and the rules of all stock exchanges or trading markets on which the Shares are listed or traded at any time. An Option may not be exercised, and Shares may not be issued under any Option, until the Company has obtained the necessary consent or approval, if any, of every regulatory body, federal or state, having jurisdiction over such matters as the Company deems advisable.
12. NOTICES. All notices and other communications required or permitted under this Plan shall be written, and shall be either delivered personally or sent by registered or certified first-class mail, postage prepaid and return receipt requested, or by telex or telecopier, addressed as follows: if to the Company, to the Company's principal office at 71 Lewis Street, Greenwich, Connecticut 06830; and if to a Participating Director or his legal representative, to the address last furnished by such person to the Company. Each such notice and communication that is (a) delivered personally shall be deemed to have been given when delivered, (b) given by mail shall be deemed to have been given when it is deposited in the United States mail in the manner specified herein, and (c) given by telex or telecopier shall be deemed to have been given when it is so transmitted and the appropriate answer back is received. A party may change its address for the purpose hereof by giving notice in accordance with the provisions of this Section 12 (provided the notice of change of address shall be deemed given only when received).
13. EFFECT OF ACQUISITION, REORGANIZATION OR LIQUIDATION.
Notwithstanding any provision to the contrary in this Plan or in any agreement evidencing Options granted hereunder, all Options with exercise periods then currently outstanding shall become immediately exercisable in full and remain exercisable until their expiration in accordance with their respective terms upon the occurrence of either of the following events:
(a) the first purchase of shares pursuant to a tender or exchange offer which is intended to effect the acquisition of more than 50% of the voting power of the Company (other than a tender or exchange offer made by the Company); or
(b) approval by the Company's stockholders of: (i) a merger or consolidation of the Company with or into another corporation (other than a merger or consolidation in which the Company is the surviving corporation and which does not result in any reclassification or reorganization of the shares), (ii) a sale or disposition of all or substantially all of the Company's assets, or (iii) a plan of complete liquidation or dissolution of the Company.
14. ADMINISTRATION AND AMENDMENT OF PLAN. This Plan shall be administered by the Board of Directors. This Plan may be terminated or amended by the Board of Directors as it deems advisable; provided, however, that any amendment that changes the timing of the grant of Options, the eligibility requirements for Participating Directors, the method of determining the exercise price of Options, the vesting schedule or expiration date of Options, or the number of Shares subject to Options shall not be made more frequently than every six months unless otherwise necessary to comply with the Internal Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of 1974, as amended, or any regulations thereunder. No amendment of this Plan may revoke or alter in a manner adverse to a Participating Director any Options then outstanding.
15. NONTRANSFERABILITY. No Option granted under this Plan is transferable other than by will or the laws of descent and distribution. During a Participating Director's lifetime, an Option may only be exercised by him.
16. NO ADDITIONAL RIGHTS. Except as provided in this Plan, no Participating Director shall have any claim or right to be granted an Option under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any person any right to continue to serve as a member of the Board of Directors. No
person, estate or other entity shall have any rights as a stockholder of the Company with respect to Shares subject to Options until a certificate for such Shares has been delivered to the person exercising the Option in accordance with the terms of this Plan.
17. CHOICE OF LAW. The validity, interpretation and administration of this Plan and of any rules, regulations, determinations or decisions made hereunder, and the rights of any and all persons having or claiming to have any interest herein or hereunder, shall be determined exclusively in accordance with the laws of the State of Delaware (without regard to the choice of law provisions of such laws).
18. INTERPRETATION. As used herein, and as appropriate to the context, the masculine pronoun shall include the feminine and the neuter, and the singular shall include the plural.
* * * * * *
THE FOREGOING GENESEE & WYOMING INC. STOCK OPTION PLAN FOR OUTSIDE DIRECTORS WAS DULY ADOPTED BY THE BOARD OF DIRECTORS OF GENESEE & WYOMING INC. ON _______________, 1996, AND DULY APPROVED AND RATIFIED BY THE STOCKHOLDERS THEREOF ON __________________, 1996.
EXHIBIT 10.4
GENESEE & WYOMING INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE AND EFFECT OF PLAN
The purpose of the Plan is to secure for the Company and its stockholders the benefits of the incentive inherent in the ownership of common stock by present and future employees of the Company and its subsidiaries. The Plan is intended to conform with the provisions of Rule 16b-3 of the Act and the terms of Code section 423.
2. DEFINITIONS
Where indicated by initial capital letters, the following terms shall have the following meanings:
a. Act: The Securities Exchange Act of 1934, as amended.
b. Base Compensation: The regular earnings of an Eligible Employee, including overtime and bonuses, and salary reduction contributions pursuant to elections under a plan subject to Code sections 125 or 401(k).
c. Board: The Board of Directors of the Company.
d. Code: The Internal Revenue Code of 1986, as amended, or any subsequently enacted federal revenue law. A reference to a particular section of the Code shall include a reference to any regulations issued under the section and to the corresponding section of any subsequently enacted federal revenue law.
e. Committee: The committee established pursuant to Section 4 to be responsible for the general administration of the Plan.
f. Class A Common Stock: The Company's Class A Common Stock, $.01 par value per share.
g. Company: Genesee & Wyoming Inc. and any successor by merger, consolidation or otherwise.
h. Custodian: Has the meaning given it by Section 13.
i. Eligible Employee: Any employee of the Company or any subsidiary of the Company that meets the eligibility requirements of Section 5.
j. Enrollment Form: The form filed with the Committee authorizing payroll deductions pursuant to Section 6.
k. Fair Market Value: The last reported sale price, regular way, of the Class A Common Stock as reported by Nasdaq on the date in question, or, if the Class A Common Stock shall not have traded on Nasdaq on such date, the last reported sale price, regular way, so reported on the first day prior thereto on which the Class A Common Stock so traded.
l. Investment Account: Has the meaning given it by Section 13.
m. Investment Date: The second to last business day of each calendar month on which shares of Class A Common Stock are or could be traded on Nasdaq.
n. Issuance Date: The date on or about which certificates representing shares of Common Stock held in a Participating Employee's Investment Account are issued to the Participating Employee or sold pursuant to his direction.
o. Nasdaq: The Nasdaq Stock Market.
p. Participating Employee: An Eligible Employee who elects to participate in the Plan by filing an Enrollment Form pursuant to Section 6.
q. Payroll Deduction Account: The account established for a Participating Employee to hold payroll deductions pursuant to Section 6.
r. Plan: The "Genesee & Wyoming Inc. Employee Stock Purchase Plan," as set forth herein and as amended from time to time.
s. Purchase Price: The price for each share of Class A Common Stock, which shall be the Fair Market Value of such share on the Investment Date.
t. Section: The appropriate section of the Plan.
3. SHARES SUBJECT TO THE PLAN
Subject to the provisions of Section 12, the total number of shares of Class A Common Stock which may be purchased by employees under the Plan shall not exceed 450,000. Shares subject to the Plan may be either authorized but unissued shares or shares that were once issued and subsequently reacquired by the Company.
4. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee appointed by the Board which shall be comprised of two or more members of the Board. Each member of the Committee shall be a disinterested director of the Company within the meaning of Rule 16b-3 promulgated under the Act. The Committee shall be the Stock Option Committee under the Genesee & Wyoming Inc. 1996 Stock Option Plan unless the Board shall appoint another committee to administer the Plan.
Subject to the express provisions of the Plan, the Committee shall have the authority to take any and all actions necessary to implement the Plan and to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, and to make all other determinations necessary or advisable in administering the Plan. All of such determinations shall be final and binding upon all persons. A quorum of the Committee shall consist of a majority of its members and the Committee may act by vote of a majority of its members at a meeting at which a quorum is present, or without a meeting by a written consent to the action taken signed by all members of the Committee. The Committee may request advice or assistance or employ such other persons as are necessary for proper administration of the Plan.
5. ELIGIBLE EMPLOYEES
Any employee of the Company or of any subsidiary of the Company shall be eligible to participate in the Plan, except an employee (a) whose customary employment is twenty hours or less per week, or (b) who has been employed for less than two years. No director of the Company who is not an employee shall be eligible to participate in the Plan.
6. ELECTION TO PARTICIPATE
An employee may become a Participating Employee effective on the first day of any calendar month coincident with or following the date he becomes an Eligible Employee by filing with the Committee an Enrollment Form authorizing specified regular payroll deductions from his Base Compensation. Such regular payroll deductions shall be subject to a maximum deduction of 10% of Base Compensation for each pay period. All regular payroll deductions shall be credited to the Payroll Deduction Account that the Company has established in the name of the Participating Employee.
A Participating Employee may at any time withdraw from the Plan and cease to be a Participating Employee. An employee who ceases to be a Participating Employee shall receive a refund of the amount in his Payroll Deduction Account and may not again become a Participating Employee for six months. A Participating Employee
may, to be effective as of the first day of the next following calendar month, increase or decrease his payroll deduction by filing a new Enrollment Form.
Enrollment Forms must be filed with the Committee not less than ten days before the beginning of a calendar month to be effective for that month, unless a shorter period of time is prescribed by the Committee. An Enrollment Form not filed within the prescribed filing period shall be effective the first day of the calendar month following the calendar month when it would otherwise become effective.
As a condition of participation in the Plan, each Participating Employee agrees to notify the Company if he sells or otherwise disposes of any Class A Common Stock purchased by him under the Plan within two years of the Investment Date on which such shares were purchased.
7. PURCHASE OF SHARES
Each Participating Employee having eligible funds in his Payroll Deduction Account on an Investment Date shall be deemed, without any further action, to have purchased the number of shares which the eligible funds in his Payroll Deduction Account could purchase at the Purchase Price on that Investment Date. The Payroll Deduction Account of each such Participating Employee shall be charged for the amount of such purchase and shares shall be issued to the Participating Employee as of the Investment Date. Such shares may be uncertificated and held by the Custodian in accordance with Section 13.
8. REGISTRATION OF SHARES
Shares of Class A Common Stock will be registered only in the name of the Participating Employee or, if he so indicates on his Enrollment Form, in his name jointly with one other person, with right of survivorship.
9. LIMITATION ON PURCHASES
(a) During any one calendar year, no Participating Employee shall have the right to purchase under the Plan (and all other plans qualified under Code section 423) shares of stock of the Company and its subsidiaries having a Fair Market Value (determined at the time such right is granted) in excess of $25,000. The purpose of this limitation is to comply with Code section 423(b)(8) and shall be interpreted accordingly.
(b) A Participating Employee's Payroll Deduction Account may not be used to purchase Class A Common Stock on any Investment Date to the extent that after such purchase the Participating Employee would own (or be considered as owning within
the meaning of Code section 424(d)) stock possessing 5 percent or more of the total combined voting power or value of all classes of stock of the Company or of its subsidiaries. For this purpose, stock which the Participating Employee may purchase under any outstanding option shall be treated as owned by such Participating Employee. As of the first Investment Date on which this Section 9(b) limits a Participating Employee's ability to purchase Class A Common Stock, the employee shall cease to be a Participating Employee.
10. RIGHTS AS A STOCKHOLDER
None of the rights or privileges of a stockholder of the Company shall exist with respect to shares of Class A Common Stock purchased under the Plan until the date as of which such shares are issued.
11. RIGHTS NOT TRANSFERABLE
Except as expressly provided in Section 14, neither compensation deductions credited to a Participating Employee's Payroll Deduction Account nor any rights with regard to participation in the Plan nor the right to receive shares of Class A Common Stock shall be transferable in any way by a Participating Employee.
12. CHANGE IN CAPITAL STRUCTURE
In the event of a stock dividend, stock split or combination of shares, recapitalization or merger in which the Company is the surviving corporation or other change in the Company's capital stock applicable to all stockholders generally, the number and kind of shares of stock or other securities of the Company to be subject to the Plan, the maximum number of shares or other securities which may be delivered under the Plan, and other relevant provisions shall be appropriately adjusted by the Committee, whose determination shall be binding on all persons.
If the Company is a party to a consolidation or a merger in which the Company is not the surviving corporation, a transaction that results in the acquisition of substantially all of the Company's outstanding stock by a single person or entity, or a sale or transfer of substantially all of the Company's assets, the Committee may take such actions with respect to the Plan as the Committee deems appropriate.
Notwithstanding anything in the Plan to the contrary, the Committee may take the foregoing actions without the consent of any Participating Employee, and the Committee's determination shall be conclusive and binding on all persons for all purposes.
13. INVESTMENT ACCOUNT
Notwithstanding any other provision of the Plan to the contrary, the Board, in its sole discretion, may appoint a custodian to hold the Class A Common Stock purchased under the Plan (the "Custodian"). The Custodian shall maintain a separate account for each Participating Employee (the "Investment Account"). Each Investment Account shall be in the name of the Participating Employee or, if he so indicates on his Enrollment Form, in his name jointly with one other person, with right of survivorship.
A Participating Employee shall have the right at any time, by written instruction to the Custodian, to obtain a certificate for the whole shares then credited to his Investment Account, or to direct that any whole shares then credited to his Investment Account be sold by the Custodian on the open market and the net proceeds thereof be remitted to him (with all expenses incurred in the sale of such shares being paid by the Participating Employee). In either such case, any fractional shares then credited to the Participating Employee's Investment Account shall remain so credited or, if the Participating Employee so instructs the Custodian, the Fair Market Value thereof, as of the Issuance Date, shall be paid to him in cash. When so requested by a Participating Employee or otherwise required by the terms of the Plan, the Custodian shall direct the Company's transfer agent to issue in the name of the Participating Employee (of, if he so indicates on his Enrollment Form, in the name of such Participating Employee jointly with one other person with right of survivorship) a stock certificate representing the whole shares of Common Stock then credited to his Investment Account. Notwithstanding the foregoing, if on any Issuance Date the Company does not have a currently effective Registration Statement on Form S-8 under the Securities Act of 1933, as amended, covering the shares subject to the Plan, then the Custodian may postpone the issuance of the Participating Employee's stock certificates or the sale of such shares until such Registration Statement is effective.
Expenses incurred in the purchase of shares and all expenses of the Custodian shall be paid by the Company.
14. RETIREMENT, TERMINATION AND DEATH
In the event of a Participating Employee's death or retirement or termination of employment for any reason, or in the event that a Participating Employee ceases to be such, then no further purchase of shares shall be made by him under the Plan. In such event, the amount remaining in his Payroll Deduction Account shall be refunded to him, and a certificate shall be issued, as provided in Section 13, representing the whole shares then credited to his Investment Account (with the Fair Market Value, as of the date of such event, of any fractional shares paid to him in cash). In the event of a Participating Employee's death, the amount in his Payroll Deduction Account
shall be delivered to the beneficiary designated by the Participating Employee in a writing filed with the Company. If no beneficiary has been designated, or if the designated beneficiary does not survive the Participating Employee, such amount shall be delivered to his estate.
15. AMENDMENT OF THE PLAN
The Board may at any time, or from time to time, amend the Plan in any
respect; provided, however, that the stockholders of the Company must approve
any amendment that would materially (i) increase the benefits accruing to
Participating Employees under the Plan, (ii) increase (other than pursuant to
Section 12) the number of securities that may be issued under the Plan, or (iii)
modify the requirements as to eligibility for participation in the Plan.
16. TERMINATION OF THE PLAN
The Plan and all rights of employees hereunder shall terminate:
(a) on the Investment Date that Participating Employees become entitled to purchase a number of shares greater than the number of shares remaining available for purchase; or
(b) at any date at the discretion of the Board of Directors.
In the event that the Plan terminates under circumstances described in (a) above, the shares remaining as of the termination date shall be purchased by Participating Employees on a pro rata basis. Upon termination of the Plan, all amounts in an employee's Payroll Deduction Account that are not used to purchase Class A Common Stock will be refunded to him, and certificates shall be issued, as provided in Section 13, representing the whole shares then credited to each Participating Employee's Investment Account (with the Fair Market Value, as of the date on which the Plan was terminated, of any fractional shares paid to him in cash).
17. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon (a) due approval of the Plan by the stockholders of the Company, and (b) the effectiveness of a Registration Statement on Form S-8 under the Securities Act of 1933, as amended, covering the shares of Class A Common Stock subject to the Plan.
18. GOVERNMENT AND OTHER REGULATIONS
The Plan, and the grant and exercise of the rights to purchase shares hereunder, and the Company's obligation to sell and deliver shares upon the exercise of rights to purchase shares, shall be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any regulatory or government agency as may, in the opinion of counsel for the Company, be required.
19. INDEMNIFICATION OF COMMITTEE
Service on the Committee shall constitute service as a director of the Company so that members of the Committee shall be entitled to indemnification and reimbursement as directors of the Company pursuant to its Certificate of Incorporation and Bylaws.
20. INTERPRETATION
As used herein, and as appropriate to the context, the masculine pronoun shall include the feminine and the neuter, and the single shall include the plural.
* * * * * *
THE FOREGOING GENESEE & WYOMING INC. EMPLOYEE STOCK PURCHASE PLAN WAS DULY
ADOPTED BY THE BOARD OF DIRECTORS OF GENESEE & WYOMING INC. ON __________, 1996.
THE EFFECTIVE DATE OF THE PLAN, AS DEFINED IN SECTION 17 OF THE PLAN, IS
_______________________.
EXHIBIT 10.70
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, dated April 19, 1996 is made by and among Pittsburg & Shawmut Railroad, Inc., a Delaware corporation ("BUYER"), Genesee & Wyoming Inc., a Delaware corporation ("GWI"), The Pittsburg & Shawmut Railroad Company, a Pennsylvania corporation ("P&S"), Red Bank Railroad Company, a Pennsylvania corporation ("RED BANK"), Mountain Laurel Railroad Company, a Pennsylvania corporation ("MOUNTAIN LAUREL") and Arthur T. Walker Estate Corporation, a Delaware corporation ("ATWEC"). P&S, Red Bank and Mountain Laurel are each referred to individually herein as a "SELLER" and collectively as "SELLERS".
In consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1. PURCHASE AND SALE
SECTION 1.1 TRANSFER OF ASSETS. Subject to all of the terms and conditions of this Agreement, at the Closing (as hereinafter defined), each Seller agrees to sell, transfer, convey, assign and deliver to Buyer, and Buyer agrees to purchase and accept from each Seller, all of the following:
(a) Each Seller's real property and interests therein described in Schedule 1.1(a), including railroad ties and track bed (the "REAL PROPERTY");
(c) Sellers' inventories and stores selected by Buyer in its sole discretion and as described in Schedule 1.1(c), having an aggregate book value of $50,000.00 (the "INVENTORIES");
(d) all of Sellers' interest in and to all of the contracts identified in Schedule 2.1, including but not limited to product and service warranties (the "CONTRACTS");
(e) all of Sellers' interest in and to (1) all patents, applications for patents, copyrights, license agreements, assumed names, trade names, trademark and/or service mark registrations, applications for trademark and/or service mark registrations, trademarks and service marks of Sellers, as more particularly described in Sche-
dule 1.1(e), and the goodwill associated therewith, and all variants thereof, including all rights to use the names "The Pittsburg & Shawmut Railroad Company", "Red Bank Railroad Company" and "Mountain Laurel Railroad Company" to the exclusion of Sellers and ATWEC, and (2) all of Sellers' other proprietary information, including trade secrets, know-how, product designs and specifications, operating data, customer lists and other information pertaining to their respective businesses (other than those relating to Excluded Assets) (the "INTANGIBLE ASSETS");
(f) copies or originals (as mutually determined by Sellers and Buyer) of all of each Seller's business and operational records, including employee records of any employee of any Seller who is hired by Buyer, office and sales records, blueprints, marketing strategies, business plans, studies and inventory lists and records (but expressly excluding each Seller's capital stock records, corporate minute books, bank account records and tax returns) (the "RECORDS"); and
(g) all of the issued and outstanding capital stock of Kittanning Equipment Leasing Company (the "KITTANNING STOCK").
The Real Property, the Tangible Personal Property, the Inventories, the Contracts, the Intangible Assets, the Records and the Kittanning Stock are collectively referred to herein as the "PURCHASED ASSETS".
SECTION 1.2 USE OF SELLERS' NAMES. In furtherance of the purchase and sale of the Purchased Assets hereunder, at the Closing, each Seller and ATWEC shall cause each Seller's corporate name to be changed to a name completely dissimilar to "The Pittsburg & Shawmut Railroad Company", "Red Bank Railroad Company" and "Mountain Laurel Railroad Company", and thereafter shall not adopt, use, cause to be used, or approve or sanction the use of any such names, or any names so similar as to cause confusion therewith.
SECTION 1.3 PURCHASE PRICE.
SECTION 1.4 PAYMENT OF PURCHASE PRICE. Subject to the terms and conditions of this Agreement, at the Closing Buyer shall pay the Purchase Price to Sellers in immediately available funds by wire transfer or other means acceptable to Sellers.
SECTION 1.5 SUPPLEMENTAL PURCHASE PRICE. A supplemental purchase price (the "Supplemental Purchase Price") shall be paid as additional consideration for the Purchased Assets under, and contingent upon, the following terms and conditions.
(a)
(b)
Buyer's books and records with respect to the shipments which are the subject of this Section 1.5.
ARTICLE 2. LIABILITIES AND CONTRACTS
SECTION 2.1 CONTRACTS ASSUMED. Subject to the terms and conditions of this Agreement, at the Closing, Buyer shall assume and become responsible to pay, perform and discharge the Contracts of Sellers identified (or otherwise described) in Schedule 2.1 and each other Contract of Sellers which, at or before the Closing, is placed (or otherwise described) on a revised Schedule 2.1 executed by Buyer and Sellers.
SECTION 2.2 NO ASSUMPTION OF LIABILITIES OR OTHER CONTRACTS. Except as provided in Section 2.1 or Article 10, it is expressly understood and agreed that Buyer does not assume nor shall it be liable for any liability, obligation, claim against or Contract of Sellers of any kind or nature, at any time existing or asserted, whether or not accrued, whether fixed, contingent or otherwise, whether known or unknown, and whether or not recorded on the books and records of Sellers, arising out of or by reason of this or any other transaction or event occurring prior or subsequent to the Closing.
ARTICLE 3. SELLERS' AND ATWEC'S REPRESENTATIONS AND WARRANTIES
Each Seller, with respect to its own affairs, and ATWEC, with respect to its own affairs, hereby represents and warrants to Buyer and to GWI, except as set forth in Schedule 3, the Disclosure Statement, as follows:
SECTION 3.1 SELLER ORGANIZATION, STANDING AND QUALIFICATION. Each Seller is a duly organized, validly existing corporation, chartered and in good standing, under the laws of the Commonwealth of Pennsylvania; is duly licensed, qualified to do business, and in good standing in each jurisdiction in which the ownership and operation of its business requires such licensing or qualifications except for those states or jurisdictions in which the failure to be so qualified will not have a Material Adverse Effect; and has full corporate power and authority and all permits, consents and authorizations necessary to own and lease its properties and to carry on its business as now conducted, including but not limited to, any fictitious name registrations required to be filed, the absence of which will not have a Material Adverse Effect. For purposes of this Agreement, the term "Material Adverse Effect" means a material adverse effect on the financial condition of the Sellers in the aggregate or their assets, properties, liabilities, operations or conditions taken as a whole.
SECTION 3.2 ATWEC ORGANIZATION, STANDING AND QUALIFICATION. ATWEC is a duly organized, validly existing corporation, chartered and in good standing, under the laws
of the State of Delaware. ATWEC has all necessary corporate power and authority to execute and deliver this Agreement, to comply with the provisions hereof and to consummate the transactions contemplated hereby.
SECTION 3.3 SUBSIDIARIES. Each Seller has no subsidiaries, other than Kittanning Equipment Leasing Company ("KELC"), a subsidiary of P&S.
SECTION 3.4 CAPITALIZATION OF SELLER. All of the issued and outstanding shares of each Seller's capital stock are owned by ATWEC.
SECTION 3.5 CORPORATE DOCUMENTS. All of Sellers' corporate books are accurate as to the actions contained therein, and the Bylaws contained therein are the Bylaws of each Seller as of the date of this Agreement and shall be the Bylaws of such Seller as of the Closing Date.
SECTION 3.6 AUTHORIZATION. Each Seller's and ATWEC's execution and delivery of this Agreement, its compliance with the provisions hereof and the consummation of all of the transactions contemplated hereby have all been duly and validly authorized by all necessary corporate action on the part of each Seller and ATWEC, and this Agreement is valid and binding upon each Seller and ATWEC in accordance with its terms.
SECTION 3.7 NO CONFLICT. Neither the execution and delivery of this Agreement by any Seller or ATWEC, nor compliance by any Seller or ATWEC with any of the provisions hereof, nor the consummation of the transactions contemplated hereby, will:
(a) conflict with or result in a breach of any provision of such Seller's or ATWEC's respective Certificate of Incorporation or By-laws;
(b) result in a default, or give rise to any right of termination, cancellation or acceleration, under any term, condition or provision of any Contract, Encumbrance or other instrument or obligation to which such Seller, any subsidiary of such Seller is a party or by which they or any of their respective properties or assets may be bound which default or right will have a Material Adverse Effect; or
(c) violate any order, writ, injunction, decree, statute, rule or regulation applicable to such Seller, any subsidiary of such Seller, or any of their respective properties or assets which violation will have a Material Adverse Effect.
For purposes of this Agreement the term "ENCUMBRANCE" means and includes (a) all interests securing obligations owed to any Person, whether based on common law, statute or Contract, including those arising from mortgages, indentures, deeds of trust, leases, collateral assignments of lease and rights, liens, pledges, conditional sales contracts, consignments and bailments, (b) all reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, charges, claims, leases and other similar title exceptions and encumbrances, (c) all liens of any taxing authority, and (d) all landlords', mechanics', materialmen's, warehousemen's, carriers' and similar liens.
SECTION 3.8 FINANCIAL STATEMENTS. True and correct copies of Balance Sheets for each Seller as of December 31, 1994, and December 31, 1995, true and accurate copies of Operating and Revenue Statements for each Seller for the twelve (12) month periods ending December 31, 1994 and December 31, 1995, respectively, have been furnished to Buyer by Sellers. Within forty-five (45) days after the Closing Date, true and correct copies of the Balance Sheet, as of the Closing Date, as well as Operating and Revenue Statements for Seller from December 31, 1995 through the Closing Date shall be furnished to Buyer by Sellers. All of the foregoing Balance Sheets, Operating and Revenue Statements shall collectively constitute the "FINANCIAL STATEMENTS". The Financial Statements (1) are in accordance with the books and records of Sellers in all material respects; and (2) present fairly the financial condition of Sellers at the dates of such Financial Statements and their results of operations for the respective period then ending; and (3) except for the interim statements described above, the same have been prepared in accordance with generally accepted accounting principles, consistently applied with prior periods.
SECTION 3.9 UNDISCLOSED LIABILITIES. Except as set forth in the Financial Statements and except with respect to Environmental Laws which are separately treated in Section 3.14, each Seller has no outstanding debt, liability or other obligation, whether accrued, absolute, contingent or otherwise and whether due or to become due other than debts, liabilities or obligations incurred in the ordinary course of business or which would not have a Material Adverse Effect.
SECTION 3.10 TAXES, TAX RETURNS AND AUDITS.
(a) All federal, state and local tax returns as to the operations of each Seller which are required by law to be filed on or before the Closing Date have been timely filed, and all taxes, interest, penalties and assessments for said periods which were due and owing pursuant to said tax returns, or pursuant to any assessments or otherwise for any taxable periods ending on or prior to the Closing Date for or which returns were due prior to the Closing Date have been paid, except for any such tax, interest, penalty or assessment which is being contested in good faith by such Seller and with respect to which such Seller has set aside adequate reserves on its books and except where the failure to file any such return or to pay any such tax, interest, penalty or assessment would not have a Material Adverse Effect. True and correct copies of all federal and state tax returns for each Seller's 1993 and 1994 tax years have been furnished to Buyer by such Seller.
(b) To the knowledge of each Seller, there are no pending investigations or proceedings relating to, or claims asserted for, taxes or assessments against such Seller. Each Seller has timely paid in full all property taxes and other assessments levied on its assets and properties which have heretofore become due and payable except for any such tax or other assessment which is being contested in good faith by each Seller and with respect to which each Seller has set aside adequate reserves on its books and except where the failure to file any such return or to pay any such tax, interest, penalty or assessment would not have a Material Adverse Effect. There are in effect no agreements, waivers or other arrangements providing for an extension of time with
regard to the assessment of any tax, or any deficiency with respect thereto, against any Seller. There are no actions, suits, proceedings, investigations or claims now pending against any Seller relating to any taxes or assessments, or any claims or deficiencies with respect thereto.
(c) All applicable estimated federal, state and local income tax payments or deposits for 1995 which were due and payable prior to the date hereof, including the quarterly estimates for the third and fourth quarters of 1995 have been made.
SECTION 3.11 TITLE TO ASSETS. Each Seller has good title to Purchased Assets other than the Real Property being transferred by it, free and clear of restrictions on, or conditions to, transfer or assignment, and of mortgages, liens, pledges, charges, encumbrances and security interests, except minor liens or encumbrances that, in the aggregate with all other Sellers, are not material in amount and do not materially detract from or materially interfere with the present use of any material properties, or materially impair the business operations of Sellers in the aggregate (the foregoing collectively referred to as "PERMITTED ENCUMBRANCES").
SECTION 3.12 REAL PROPERTY. Since December 31, 1993, no Seller has received any written notice that the operations on and use of the Real Property by Seller do not conform to all applicable zoning and similar laws, rules and regulations. To each Seller's knowledge, the operations on and use of the Real Property by each Seller conform to all applicable zoning and similar laws, rules and regulations except to the extent non-compliance would not have a Material Adverse Effect.
SECTION 3.13 NO THIRD PARTY RIGHTS OR OPTIONS. Except for certain statutory rights of the Commonwealth of Pennsylvania to a priority in acquiring abandoned railroad property or rights of reversion in the event the Real Property ceases to be used for railroad purposes and except with respect to any leased assets, there are no outstanding rights or options in any third party to acquire any Purchased Assets or any interest therein, or to acquire any assets or other properties of any Seller or any interest therein (excluding, however, any such rights or options which may have been granted by Buyer or GWI).
SECTION 3.14 COMPLIANCE WITH LAWS. Since December 31, 1993, no Seller has received any written notice from any governmental agency of any violations of any applicable federal, state or local law or regulation affecting its assets or the operation of its business, except for any such notice which has been or will be complied with prior to the Closing. Since December 31, 1993, no Seller has received any written notice from any governmental agency that it must remove, repair or restore any bridge or grade crossing, except for any such notice which has been or will be complied with prior to the Closing. Sellers warrant that, to Sellers' knowledge, Sellers are in substantial compliance with all material federal, state and local laws and regulations applicable to its business, including without limitation, those respecting the health and safety of its employees, the benefit or welfare plans provided for its employees, the hiring, firing and conditions of employment of its employees and the protection of the environment. Except in compliance with then applicable Environmental Laws (as defined below) and in the ordinary course of business, Sellers further represent and
warrant that (i) no Seller has stored, dumped or deposited nor participated in the storing, dumping or depositing of any Hazardous Substance upon any of its properties or elsewhere in violation of then applicable law, and (ii) no Seller has at any time received, nor does it have any knowledge of any facts or circumstances that would cause it to reasonably believe that it is likely to receive, notice of an alleged violation of any then applicable Environmental Law, rule or regulation from any governmental authority or any notice from any federal, state or local governmental agency, or any other person, that any Seller may have liability arising from or related to the discharge, disposal, release, or threatened release, of any Hazardous Substance at or from a "facility" (as defined in (S)101(9) of CERCLA), which liability would have a Material Adverse Effect.
(a) "ENVIRONMENTAL LAWS" shall mean the Federal Water Pollution Control Act, the Clean Air Act, the Resource Conservation Recovery Act ("RCRA"), the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the Superfund Amendment and Reauthorization Act, the Toxic Substances Control Act ("TSCA"), the Hazardous Materials Transportation Act ("HMTA"), and any other applicable federal, state or local statute, rule, ordinance, law or regulation that pertains to the protection of the environment or human health as enacted and in effect on the date hereof and all licenses, orders, permits, certificates or like authorizations promulgated under any Environmental Law.
(b) "HAZARDOUS SUBSTANCE" means, without limitation, any flammable explosives, radon, radioactive materials, friable asbestos, polychlorinated biphenyls, petroleum and petroleum products, hazardous materials, hazardous wastes, hazardous or toxic substances, as defined in CERCLA, HMTA, RCRA, TSCA, or any other federal, state or local environmental statute, rule, ordinance, law or regulation as enacted and in effect as of the Closing Date.
SECTION 3.15 CONTRACTS. Except for the leases and contracts set forth on the Disclosure Statement and contracts set forth on Schedule 2.1 to this Agreement (true copies of which have been delivered or made available to Buyer by Sellers), no Seller is bound by any written or oral:
(a) Agreement or understanding not made in the ordinary course of its business;
(b) Employment contract or contract for personal services not terminable at will;
(c) Continuing contract for the future purchase of material, supplies, machinery, or other equipment in excess of the requirements of its business now booked or of normal operating requirements;
(d) Sales agency agreement or advertising contracts;
(e) Contract or commitment for capital expenditures, in excess of One Thousand Dollars ($1,000.00) in the aggregate;
(f) Contract or agreement containing covenants by Seller not to compete in any lines or business or with any person; or
(g) Lease for premises pursuant to which any Seller makes or receives payments in excess of Five Thousand Dollars ($5,000) per year and which is not cancelable upon not greater than forty (40) days notice.
SECTION 3.16 LITIGATION. There are no actions, suits, proceedings or investigations pending or, to the knowledge of Seller, threatened in any court or before any governmental agency or instrumentality against any Seller or its properties or assets which if adversely decided would have a Material Adverse Effect, or which would prevent the carrying out of this Agreement or any of the transactions contemplated hereby or declare the same unlawful or cause the recision thereof.
SECTION 3.17 ABSENCE OF ADVERSE CHANGES OR OTHER EVENTS. Except as set forth on the Disclosure Statement and except as contemplated by this Agreement, since December 31, 1995 no Seller has:
(a) Created or incurred any liability (absolute or contingent) except for trade debt and similar unsecured current liabilities, under oral or written contracts other than debts, liabilities or obligations incurred in the ordinary course of business or which would not have a Material Adverse Effect;
(b) Other than in the ordinary course of business, loaned any money or otherwise pledged the credit of Seller or mortgaged, pledged, or subjected its assets to any tangible or intangible lien or encumbrance;
(c) Sold or otherwise disposed of, or contracted to sell or dispose of, any of Purchased Assets, tangible or intangible; or canceled any debts owed it or claims held by it against a third party other than in the ordinary course of business;
(d) Terminated or amended or suffered the termination or amendment of any material contract, lease, agreement or license or other instrument to which it is or was a party;
(e) Made or become a party to any contract or commitment or renewed, extended, amended, or modified any contract or commitment which in any one case involves an amount in excess of Five Thousand Dollars ($5,000.00) and a term in excess of forty (40) days (other than automatic extensions or renewals);
(f) Except as otherwise provided in Schedule 2.1 with respect to the ongoing agreements of any Seller and except as done in the ordinary course of business, paid or agreed to pay, conditionally or otherwise, any bonus, extra compensation, or severance
pay to any employee listed on Schedule 3.17(f) not required under any existing agreement disclosed to Buyer prior to the date of this Agreement, or increased the compensation, including salaries, fees, commissions, bonuses, profit sharing, incentive, pension, retirement, or other similar payments paid to any of its employees listed on Schedule 3.17(f);
(g) Made any change in its business or operations or the manner of conducting its business or operations, other than minor changes in the lawful and ordinary course of business, which in the aggregate have not had a Material Adverse Effect;
(h) Suffered any damage, destruction or loss having a Material Adverse Effect; or
(i) Entered into any contract, agreement or arrangement to do or perform any of the foregoing actions.
SECTION 3.18 UNION, EMPLOYEE COLLECTIVE BARGAINING UNIT OR ORGANIZING ACTIVITY. No Seller is signatory to any collective bargaining agreement and is not currently subject to any labor collective bargaining process or organizing efforts by any union or other collective bargaining representative; and no Seller has knowledge that any Seller employee, union or collective bargaining representative is considering or threatening to organize any Seller's employees to form a union or collective bargaining unit.
SECTION 3.19 EMPLOYEE BENEFITS. No Seller maintains or contributes to any "employee pension benefit plans" or "employee welfare benefit plans" (as described in Section 3(2) and (1), respectively, of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA")) or any "multi-employer plan" (as defined in Section 414(f) of the Internal Revenue Code ("CODE")), nor does it have any form of plan or agreement with any of its current employees providing for present or future employee benefits or deferred compensation of any nature whatsoever, stock options, stock purchase or any other material employee benefits. The Disclosure Statement contains a summary of all documents creating or evidencing any such plan or agreement. At the request of Buyer, true, correct and complete copies of any such documents creating or evidencing any such plan or agreement will be delivered to Buyer within five (5) days after such request.
SECTION 3.20 EMPLOYEES AND COMPENSATION. The Disclosure Statement includes
(i) a true and complete list of all employees of each Seller as of December 31,
1995 and (ii) the job titles, salary rate or other compensation basis, and all
other types of compensation for each employee listed on Schedule 3.17(f). There
has been no material change in this list since December 31, 1995.
SECTION 3.21 CUSTOMERS. No current customer of any Seller which, during the twelve-month period ended December 31, 1995, purchased goods or services from the Seller in an amount in excess of $250,000 has furnished written notice to terminate or intent to terminate transacting business with such Seller; no Seller has knowledge which would
indicate that any such current customer presently intends to terminate transacting business with such Seller.
SECTION 3.22 BOOKS AND RECORDS. The books and records of each Seller are true, complete and correct in all material respects and have been prepared in the usual and customary manner. No changes or additions to the books and records of any Seller have been made from the date such books and records were first examined by Arthur Andersen LLP and nothing which should be set forth in said books and records, if prepared in the usual and customary manner of such Seller, has occurred from the date such books were first examined by Arthur Andersen LLP, except for such changes, additions or events which have been made or have occurred, as the case may be, in the ordinary course of the business of such Seller consistent with the prior practice of such Seller or in connection with the 1995 audit conducted by Arthur Andersen LLP.
SECTION 3.23 BROKERS AND FINDERS. Neither Sellers nor ATWEC nor any of their respective officers, directors, employees or agents has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders' fees in connection with the transactions contemplated hereby; provided, however, ATWEC and Sellers have engaged the services of The Meridian Group and ATWEC and Sellers shall be solely responsible for any compensation due and payable, or to become due and payable, to The Meridian Group as a result of the closing or negotiations of the transactions contemplated herein.
SECTION 3.24 KELC REPRESENTATIONS.
(a) The authorized capital stock of KELC and the number of shares issued and outstanding are as set forth in the Disclosure Statement. All of the issued and outstanding shares of KELC's capital stock are owned by P&S.
(b) Other than the permits listed on Schedule 3.24(b) (the "Permits"), KELC has neither assets nor liabilities in excess of Ten Thousand Dollars ($10,000).
(c) KELC has good title to the Permits and the Permits were duly issued to KELC.
(d) KELC has never had any employees.
(e) The Disclosure Statement lists all officers and directors of KELC.
(f) Sellers have delivered to Buyer true copies of KELC's certificate of incorporation, by-laws and minute book as presently in effect.
SECTION 3.25 MATERIAL MISSTATEMENTS OR OMISSIONS. No representation or warranty of any Seller or of ATWEC made in this Agreement (including any Schedule or Exhibit hereto), nor any document or statement required to be delivered to Buyer by any Seller and/or ATWEC in connection with the Closing, contains (or will when furnished
contain) any untrue statement of a material fact, or omits (or will then omit) to state a material fact necessary in order to make the statement of facts made therein not misleading.
For purposes of this Article 3, "KNOWLEDGE", with respect to any Seller shall mean the actual knowledge after reasonable due inquiry, as of the date of this Agreement or any certificate delivered pursuant hereto, of the following employees and/or officers of Seller: Gealy Wallwork, Dennis Hinderliter, Kevin Bowser, or Jack Hubbard.
ARTICLE 4. BUYER'S AND GWI'S REPRESENTATIONS AND WARRANTIES
Buyer, with respect to its affairs, and GWI, with respect to its affairs, hereby represents and warrants to Sellers and to ATWEC as follows:
SECTION 4.1 BUYER ORGANIZATION, STANDING AND POWER. Buyer is a duly organized, validly existing corporation, chartered and in good standing under the laws of the State of Delaware. Buyer has all necessary corporate power and authority to execute and deliver this Agreement, to comply with the provisions hereof and to consummate the transactions contemplated hereby.
SECTION 4.2 GWI ORGANIZATION, STANDING AND POWER. GWI is a duly organized, validly existing corporation, chartered and in good standing under the laws of the State of Delaware. GWI has all necessary corporate power and authority to execute and deliver this Agreement, to comply with the provisions hereof and to consummate the transactions contemplated hereby. GWI will be the beneficial owner of all of the outstanding stock of Buyer through a trust arrangement.
SECTION 4.3 AUTHORIZATION. Buyer's and GWI's execution and delivery of this Agreement, its compliance with the provisions hereof and the consummation of all of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Buyer and GWI, and this Agreement is valid and binding upon Buyer and GWI in accordance with its terms.
SECTION 4.4 NO CONFLICT. Neither the execution and delivery of this Agreement by Buyer or GWI, nor compliance by Buyer or GWI with any of the provisions hereof, nor the consummation of the transactions contemplated hereby will:
(a) conflict with or result in a breach of any provision of Buyer's or GWI's respective Certificate of Incorporation or By-laws;
(b) result in a default, or give rise to any right of termination, cancellation or acceleration, under any term, condition or provision of any Contract, Encumbrance or other instrument or obligation to which Buyer or GWI is a party or by which it or any of its properties or assets may be bound; or
(c) violate any order, writ, injunction, decree, statute, rule or regulation applicable to Buyer or GWI, or any of its respective properties or assets.
SECTION 4.5 LITIGATION. There are no actions, suits, proceedings or investigations pending or, to the knowledge of Buyer or GWI threatened, in any court or before any governmental agency or instrumentality against, by or affecting Buyer or GWI or their respective business, financial condition or any of the properties or assets of either, or which would prevent the carrying out of this Agreement or any of the transactions contemplated hereby or declare the same unlawful or cause the recision thereof.
SECTION 4.6 COMPLIANCE WITH LAWS. Buyer is currently in compliance and has heretofore complied in all respects with all material applicable statutes, ordinances, orders, writs, injunctions, decrees, rules and regulations promulgated by any federal, state, municipal or other governmental authority, and Buyer has not received any notice of a violation of any such statute, ordinance, order writ, injunction, decree, rule or regulation.
SECTION 4.7 GOVERNMENT APPROVALS AND CONSENTS. No consent, waiver, approval, or authorization of, or registration, qualification, designation, declaration or filing with, or notification to, any federal, state or local governmental authority or administrative agency or any other third party is required in connection with the execution, delivery and performance of this Agreement or any agreement, instrument or document to be executed, delivered and performed in connection herewith or the consummation of any of the transaction contemplated hereby or thereby, by Buyer or GWI, except for such consents, waivers, approvals, or authorizations which will be obtained by Buyer prior to the Closing.
SECTION 4.8 FINANCING. GWI and/or Buyer has obtained a loan agreement which provides a commitment to lend funds sufficient to enable GWI and/or Buyer to fulfill its obligations to pay the Purchase Price, which commitment expires on April 30, 1996.
ARTICLE 5. SELLERS' AND ATWEC'S COVENANTS
SECTION 5.2 AFFIRMATIVE COVENANTS OF SELLERS PRIOR TO CLOSING. During the period from the date hereof to the Closing Date, each Seller shall:
(a) conduct such Seller's business and its operations in all material respects in the same manner in which the same have heretofore been conducted, and maintain its books of account in the same manner as heretofore maintained;
(b) use reasonable efforts to maintain and preserve such Seller's business and preserve such Seller's relationships with its customers, employees and others having business relations with such Seller so that such Seller's business shall be unimpaired in all material respects on the Closing Date; and
(c) use reasonable efforts to maintain each Contract of such Seller listed in Schedule 2.1 in full force and effect in accordance with its terms.
SECTION 5.3 NEGATIVE COVENANTS OF SELLERS PRIOR TO CLOSING. During the period from the date hereof to the Closing Date, no Seller shall, unless Buyer shall have given its consent thereto in writing:
(a) create, assume or permit to exist any material Encumbrance attaching to the Purchased Assets after the date of this Agreement, other than a Permitted Encumbrance, on any of the Purchased Assets;
(b) sell, lease or otherwise transfer any of the Purchased Assets, or cancel any of such Seller's material rights or claims, other than in the ordinary course of business;
(c) enter into any material Contract not in the ordinary course of business, or cancel, modify adversely, assign, encumber or in any way discharge or terminate (other than by performance) any material Contract;
(d) allow to occur or exist any event of default by Seller under any material Contract to which such Seller is a party unless such event of default shall be cured or waived prior to the Closing Date; or
(e) make any material commitment (through negotiations or otherwise) or incur any liability to any labor organization other than pursuant to any agreement existing as of the date hereof and disclosed to Buyer or the matters described in Schedule 5.3 hereof.
SECTION 5.4 NOTICES TO AND CONSENTS OF THIRD PARTIES. Each Seller shall in a timely fashion give all notices to and make all filings with all governmental authorities and other Persons (as hereafter defined) required to be given or made by such Seller under any significant license, authorization, Contract or other instrument in connection with the transactions contemplated by this Agreement, including but not limited to those items set forth on Schedule 5.4. Each Seller shall use its reasonable efforts to obtain, as soon as practicable after the date hereof but in any event prior to the Closing Date, all written consents or waivers of all governmental authorities and other Persons required to be obtained by such Seller under any significant license, authorization, Contract or other instrument or otherwise in connection with the transactions contemplated by this Agreement. For purposes
of this Section 5.4, "significant" means, as to any Contract or other instrument, a Contract or instrument which will involve the payment to or by Buyer of more than $250,000 annually or a Contract the absence of which would have a Material Adverse Effect on the operation of the railroad lines purchased hereunder. For purposes of this Agreement, a "PERSON" means and includes any individual, partnership, corporation, trust, unincorporated organization or other entity, and any government or governmental authority, agency or political subdivision thereof.
SECTION 5.5 ATWEC'S CONTINUING EXISTENCE. For a period commencing on the Closing Date and ending thirty-six (36) months after the Closing Date (the "Maintenance Period"), ATWEC hereby covenants and agrees to maintain, in full force and effect, and in compliance with all applicable corporate law, its corporate status, and books and records.
SECTION 5.6 REMOVAL OF ITEMS NOT TRANSFERRED. Within one hundred eighty
(180) days following the Closing, each Seller shall remove from any of Real
Property all of such Seller's inventory and other items not purchased by Buyer
pursuant to this Agreement.
ARTICLE 6. BUYER'S AND GWI'S COVENANTS
SECTION 6.1 NOTICES TO AND CONSENTS OF THIRD PARTIES. Buyer and GWI shall in a timely fashion give all notices to and make all filings with all governmental authorities and other Persons required to be given or made by Buyer or GWI under any license, authorization, Contract or other instrument, statute, regulation or otherwise in connection with consummation of the transactions contemplated by this Agreement. Buyer and GWI shall use its reasonable efforts to obtain, as soon as practicable after the date hereof but in any event prior to the Closing Date, all written approvals, consents or waivers of all governmental authorities and other Persons required to be obtained by Buyer or GWI under any license, authorization, Contract or other instrument, statute, regulation or otherwise in connection with consummation of the transactions contemplated by this Agreement. The authority which Buyer shall seek to obtain in such manner from the Surface Transportation Board shall include the right to operate the railroad lines operated by all three Sellers and shall be that available under 49 U.S.C. Section 10901. Buyer shall provide to Seller prior to filing a draft of materials to be filed with the Surface Transportation Board.
SECTION 6.2 SELLER ACCESS POST-CLOSING. For a period of one hundred eighty
(180) days following the Closing, to enable Sellers to remove inventory or other
items not being purchased hereunder, Buyer will permit each Seller, upon
reasonable advance notice to Buyer and in compliance with reasonable conditions
imposed by Buyer, to enter onto the Real Property and remove such inventory or
other items.
SECTION 6.3 EMPLOYEES.
(a) Buyer will give preference, both at the time of Closing, and for one year thereafter, to hiring individuals who immediately prior to the Closing were employees of any Seller. Buyer agrees to offer employment to an aggregate of at least twenty-six
(26) hourly employees of Seller to commence on the date of Closing (the "DESIGNATED EMPLOYEES"). Any offer of employment to a Designated Employee will involve a total compensation package, including wages and benefits, substantially similar to those then being paid to similarly situated employees employed on railroads operated by existing affiliates of Buyer. Upon termination of employment by the Sellers, Sellers agree to pay the Designated Employees for all previously earned but unused vacation time.
(b) If the Closing occurs on or after May 1, 1996, then Buyer shall reimburse Seller for vacation time earned in 1996 for use in 1997 and for which Seller has paid the Designated Employees, an amount for each such Designated Employee equal to that paid for such 1997 unused vacation multiplied by a fraction the numerator of which is the number of days actually worked for Buyer in 1996 and the denominator of which is all days actually worked in 1996 for either Seller or Buyer.
(c) Buyer agrees to permit the Designated Employees to use (subject to Buyer's then current vacation policy) all such previously earned vacation time, but shall have no obligation to pay the Designated Employees for such vacation time.
(d) Buyer will give Designated Employees full credit for their prior service with Seller with respect to Buyer's vacation benefit programs and, within each applicable unit, certain applicable bumping rights.
ARTICLE 7. CONDITIONS TO PARTIES' OBLIGATIONS
SECTION 7.1 CONDITIONS TO BUYER'S AND GWI'S OBLIGATIONS. The obligations of Buyer and GWI to complete the transactions provided for herein shall be subject, at its election, to satisfaction on or before the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES: All representations and warranties of each Seller contained in this Agreement shall be true and correct in all respects as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (except as may be otherwise provided in this Agreement), and Buyer shall have received a certificate to that effect, dated the Closing Date, signed by the acting Executive Vice President or Treasurer of each Seller and ATWEC to such effect;
(b) PRE-CLOSING OBLIGATIONS: Each Seller shall have performed all obligations required to be performed by it hereunder, the performance of which has not been waived by Buyer, and Buyer shall have received a certificate to that effect, dated the Closing Date, signed by the Executive Vice President and the Treasurer of each Seller;
(c) SELLER'S DUE AUTHORIZATION: Each Seller's execution and delivery of this Agreement, its compliance with the provisions hereof and the consummation of all of the transactions contemplated hereby shall have been duly and validly authorized by all necessary corporate action on the part of such Seller, and Buyer
shall have received a duly certified copy of all actions taken by such Seller's Board of Directors and by its shareholder effecting the same;
(d) ATWEC'S DUE AUTHORIZATION: ATWEC's execution and delivery of this Agreement, its compliance with the provisions hereof and the consummation of all of the transactions contemplated hereby shall have been duly and validly authorized by all necessary corporate action on the part of ATWEC, and Buyer shall have received a duly certified copy of all actions taken by ATWEC's Board of Directors effecting the same;
(e) SELLERS' CONSENTS, ETC.: All notices, filings, consents, waivers and approvals set forth in Schedule 7.1(e) shall have been given, made or obtained, as the case may be, by the appropriate Seller, and Buyer shall have received a true copy of each thereof;
(f) BUYER'S CONSENTS, ETC.: All notices, filings, consents, waivers and approvals set forth in Section 6.1 or in Schedule 7.1(f) shall have been given, made or obtained, as the case may be, by Buyer; and
(g) NO BAR: There shall not be in effect any judgment, decree or order of, or position taken by, any court or administrative body of competent jurisdiction, nor shall there have been any action, suit, proceeding or known investigation instituted or threatened, nor shall any law or regulation have been enacted or any action taken thereunder, which would restrain or prohibit, make illegal, or subject Buyer to material damage as a result of, the consummation of the transactions contemplated hereby.
(h) FURTHER CLOSING DOCUMENTS: Each Seller shall have delivered, or caused to be delivered, to Buyer the following documents and instruments in form reasonably satisfactory to counsel to Buyer:
(1) A copy of the Certificate of Incorporation of such Seller and of all amendments thereto, certified as of a date reasonably proximate to the Closing Date by the Secretary of the Commonwealth of Pennsylvania;
(2) Certificates of the Secretary of the Commonwealth of Pennsylvania attesting to the good standing of such Seller in such jurisdiction as of a date reasonably proximate to the Closing Date;
(3) A copy of the Certificate of Incorporation of ATWEC and of all amendments thereto, certified as of a date reasonably proximate to the Closing Date by the Secretary of the State of Delaware;
(4) Certificates of the Secretary of the State of Delaware attesting to the good standing of ATWEC in such jurisdiction as of a date reasonably proximate to the Closing Date;
(5) A copy of the Certificate of Incorporation of KELC and of all amendments thereto, certified as of a date reasonably proximate to the Closing Date by the Secretary of the Commonwealth of Pennsylvania;
(6) Certificates of the Secretary of the Commonwealth of Pennsylvania attesting to the good standing of KELC in such jurisdiction as of a date reasonably proximate to the Closing Date;
(7) One or more quit claim deeds in the form attached hereto as Exhibit C and other appropriate instruments of conveyance sufficient to convey all of such Seller's interest in the Real Property, which shall be duly executed by such Seller, acknowledged and in recordable form;
(8) The affidavits described in Section 5.1, redated to the Closing Date;
(9) Bills of sale, assignments and other instruments of transfer and conveyance, each duly executed by such Seller, transferring to Buyer title or other interest to the Purchased Assets being transferred by such Seller other than the Real Property;
(10) An assignment, duly executed by such Seller, of each Contract listed in Schedule 2.1 to which such Seller is a party; and
(11) Stock certificate(s) representing all of the Kittanning Stock, duly endorsed in blank.
(12) Resignations of all the officers and directors of KELC.
(i) REAL ESTATE TAXES, ETC.: except as otherwise expressly provided herein, all taxes, assessments, utilities, insurance and water charges on the Real Property shall be prorated between Buyer and Sellers to the Closing Date;
(j) OPINION OF COUNSEL: Buyer shall have received an opinion addressed to Buyer, dated the Closing Date, of counsel to Sellers and to ATWEC, in the form of Exhibit A;
(k) CLOSING OF RELATED TRANSACTIONS: The sale of the coal business of certain subsidiaries of ATWEC to Stanford Energy Company (the "Stanford/ATWEC Transaction") shall be closing contemporaneously with the Closing;
(l) CRC AGREEMENT:
(m) TITLE REPORT: Buyer shall have received a title report covering the railroad operating property portion of the Real Property being conveyed by such Sellers, marked up by a representative of the title insurance company referred to in Section 5.1 to evidence that all matters to be disposed of prior to the issuance of a title policy insuring the absence of liens other than Permitted Encumbrances and the state of title sufficient to allow Buyer to operate such operating portion of the Real Property as a continuous line of railroad; and
(n) OTHER MATTERS: Buyer shall have received such other instruments and documents as shall have been reasonably requested by counsel to Buyer on or before the Closing Date.
SECTION 7.2 CONDITIONS TO SELLERS' OBLIGATIONS. The obligations of Sellers to complete the transactions provided for herein shall be subject, at their election, to satisfaction on or before the Closing Date of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES: all representations and warranties of Buyer and GWI contained in this Agreement shall be true and correct in all respects as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (except as may be otherwise provided in this Agreement), and Sellers
shall have received a certificate to that effect, dated the Closing Date, signed by the Chief Executive Officer or Treasurer of Buyer and GWI;
(b) PRE-CLOSING OBLIGATIONS: Buyer shall have performed all obligations required to be performed by it hereunder, the performance of which has not been waived by Sellers, and Sellers shall have received a certificate to that effect, dated the Closing Date, signed by the Chief Executive Officer of Buyer;
(c) BUYER'S DUE AUTHORIZATION: Buyer's execution and delivery of this Agreement, its compliance with the provisions hereof and the consummation of all of the transactions contemplated hereby shall have been duly and validly authorized by all necessary corporate action on the part of Buyer, and Sellers shall have received a duly certified copy of all actions taken by Buyer's Board of Directors effecting the same;
(d) GWI'S DUE AUTHORIZATION: GWI's execution and delivery of this Agreement, its compliance with the provisions hereof and the consummation of all of the transactions contemplated hereby shall have been duly and validly authorized by all necessary corporate action on the part of GWI, and Sellers shall have received a duly certified copy of all actions taken by GWI's Board of Directors effecting the same;
(e) SELLER'S CONSENTS, ETC.: all notices, filings, consents, waivers and approvals set forth in Schedule 7.1(e) shall have been given, made or obtained, as the case may be, by the appropriate Seller;
(f) BUYER'S CONSENTS, ETC.: all notices, filings, consents, waivers and approvals set forth in Section 6.1 or in Schedule 7.1(f) shall have been given, made or obtained, as the case may be, by Buyer, and Sellers shall have received a true copy of each thereof;
(g) NO BAR: there shall not be in effect any judgment, decree or order of, or position taken by, any court or administrative body of competent jurisdiction, nor shall there have been any action, suit, proceeding or known investigation instituted or threatened, nor shall any law or regulation have been enacted or any action taken thereunder, which would, in Sellers' reasonable judgment, restrain or prohibit, make illegal, or subject Sellers to material damage as a result of, the consummation of the transactions contemplated hereby;
(h) FURTHER CLOSING DOCUMENTS: Buyer shall have delivered to Sellers the following documents and instruments in form reasonably satisfactory to counsel to Sellers:
(1) A copy of the Certificate of Incorporation of Buyer and of all amendments thereto, certified as of a date reasonably proximate to the Closing Date by the Secretary of State of Delaware;
(2) A copy of the Certificate of Incorporation of GWI and of all amendments thereto, certified as of a date reasonably proximate to the Closing Date by the Secretary of State of Delaware;
(3) The amount provided by Section 1.4, in immediately available funds; and
(4) Assumption of the Contracts referred to in Section 2.1, duly executed by Buyer, in form and substance reasonably satisfactory to Sellers.
(i) REAL ESTATE TAXES, ETC.: except as otherwise expressly provided herein, all taxes, assessments, utilities, insurance and water charges on the Real Property shall have been prorated between Buyer and Sellers to the Closing Date;
(j) CLOSING OF RELATED TRANSACTIONS: All transactions contemplated by Stanford/ATWEC Transaction shall be closing contemporaneously with the Closing;
(k) OPINION OF COUNSEL: Sellers shall have received an opinion addressed to Sellers, dated the Closing Date, of counsel to Buyer and GWI, in the form of Exhibit B; and
(l) OTHER MATTERS: Sellers shall have received such other instruments and documents as shall have been reasonably requested by counsel to Sellers on or before the Closing Date.
ARTICLE 8. CLOSING
SECTION 8.1 CLOSING. The Closing shall take place at the offices of Goodwin, Procter & Hoar LLP at 10:00 a.m. on April 25, 1996, or at such other time and place as the parties may agree (the "CLOSING DATE"). The parties agree that they shall take such actions, including the delivery of documents in escrow, in order to facilitate completion on the Closing Date of all of the transactions contemplated hereby.
SECTION 8.2 FAILURE TO CLOSE; TERMINATION. This Agreement may be terminated at any time prior to the Closing Date, as follows:
(a) By the mutual consent of Buyer and each Seller; or
(b) By Buyer, upon notice to each Seller, if events occur which, without any breach by Buyer of its obligations hereunder, render impossible compliance with one or more of the conditions set forth in Section 7.1 (and such compliance is not waived by Buyer); or
(c) By any Seller, upon notice to Buyer, if events occur which, without breach by any Seller of its obligations hereunder, render impossible compliance with
one or more of the conditions set forth in Section 7.2 (and such compliance is not waived by Sellers); or
(d) By Buyer or by any Seller, upon notice to all other parties hereto, at any time after April 29, 1996.
In the event of any termination as provided by this Section 8.2, this Agreement shall thereupon become void and of no effect, without any liability on the part of any party; provided, however, that the obligations of the parties contained in Section 9.2 and Section 9.3 shall survive.
ARTICLE 9. FURTHER COVENANTS
SECTION 9.1 TAXES ON TRANSACTION. All sales or use taxes and all transfer taxes payable by reason of the sale and transfer of any of the Purchased Assets hereunder, and any tax due under any applicable gains tax law, shall be paid 50% by Buyer and 50% by Sellers.
SECTION 9.2 EXPENSES OF THE PARTIES. Except as otherwise expressly provided in this Agreement, all expenses involved in the preparation, negotiation, authorization and consummation of this Agreement and the transactions contemplated hereby, including all fees and expenses of agents, representatives, counsel and accountants, shall be borne solely by the party who shall have incurred the same, and no other party shall have any responsibility with respect thereto.
SECTION 9.3 CONFIDENTIALITY. Except for necessary disclosure to such party's directors, officers, employees, counsel, accountants, bankers and other agents, and except for the disclosure contemplated by Sections 5.4 and 6.1, each party shall keep the provisions of this Agreement confidential both prior and subsequent to the Closing Date. Without limiting the generality of the foregoing, no party shall make any press release or advertisement with respect to the transactions contemplated hereby without the prior consent of Buyer and Sellers, unless such party determines, upon the advice of counsel, that such action is required by law. Anything to the contrary herein notwithstanding, Sellers and ATWEC recognize that in the event GWI intends to offer its securities for sale information concerning Sellers and the transactions contemplated by this Agreement may be included in a registration statement or offering circular or memorandum used in connection with any such offer. Prior to the first filing of such registration statement or offering circular or memorandum with the Securities and Exchange Commission ("SEC"), GWI shall deliver a copy of such registration statement (without exhibits) to ATWEC. If GWI thereafter proposes to change any information therein with respect to the Sellers or the transactions contemplated by this Agreement, it will provide ATWEC with a copy of such proposed changes before filing them with the SEC. ATWEC agrees to keep confidential the information contained in such document and the fact that GWI is contemplating such offering until such first filing.
SECTION 9.4 FURTHER ASSURANCES. Each party shall cooperate with the others, take such further action, and execute and deliver such further documents, as may be reasonably
requested by any other party in order to carry out the terms and purposes of this Agreement. Without limiting the generality of the foregoing, from and after the Closing Date:
(a) Each party shall file all tax returns consistent with the allocation of the Purchase Price set forth in Schedule 1.3, and no party shall take any position on audit or in litigation which is inconsistent with such allocation if such position would result in the payment of any additional tax by, or the disallowance of any deduction or credit to, any other party; and
(b) On the request of Buyer, Sellers and ATWEC shall take such action and deliver to Buyer such powers of attorney and further instruments of assignment, conveyance or transfer and other similar documents of further assurance as in the opinion of counsel to Buyer may be reasonably necessary to assure, complete and evidence the full and effective transfer, conveyance and assignment of the Purchased Assets and possession thereof to Buyer, its successors and assigns, and the performance of this Agreement by Sellers and ATWEC in all respects.
SECTION 9.5 COLLECTION OF RECEIVABLES AND PAYMENT OF PAYABLES . Sellers may, at their option, request that Buyer, as paying agent of Sellers, beginning ninety (90) days after the Closing hereunder, (i) collect Sellers' accounts receivables which are (a) interline settlements, (b) freight receivables from shippers and (c) carhire receivables, and (ii) pay any payables of Sellers' which are (x) interline payables or (y) carhire payables. Upon such request, which request shall be (1) received prior to the end of such 90 day period, (2) accompanied by originals or copies of all necessary records with respect to any such receivables and payables and (3) accompanied by authorization necessary to permit Buyer to negotiate checks or other instruments payable to any Seller in connection with such service, Buyer shall perform such service for a period of one hundred eighty (180) days from the end of such 90 day period. Buyer shall collect receivables and pay payables with its own funds, and within thirty (30) days of the end of each month shall deliver to Sellers (I) a report indicating its paying agent activity for such month, including by account all accounts paid and all revenue received, and (II) either a bill or a check for the net amount of such activity, as the case may be. If Buyer renders to Sellers a bill for such month, Sellers shall pay any amount due hereunder to Buyer within five (5) business days of the receipt of such bill.
ARTICLE 10. ALLOCATION OF LIABILITY
SECTION 10.1 DEFINITION OF "OBLIGATIONS". As used in this section, the term "Obligations" shall be broadly construed and shall include, without limitation, legal obligations, responsibilities, and liabilities to any Person, and the legal responsibility to assume losses, damages, and costs, that arise out of, by virtue of, or pursuant to:
(a) any federal or state statute, principle of common law, or municipal ordinance;
(b) any rule, regulation, order, decision, judgment, decree, mandate or directive of any court or other tribunal, or of any governmental agency, body, instrumentality, or political subdivision; or
(c) any deed, contract or other legal instrument.
"OBLIGATIONS," as defined herein, shall also include, without limitation,
and whether accrued before or after Closing, all obligations, responsibilities,
losses, and liabilities in connection with, in respect to, or arising out of,
(i) damage to or the loss of any property, or personal injury or wrongful death,
of any Person, (ii) costs and expenses incurred for any purpose whatsoever
(including reasonable attorneys' fees and expenses and costs incurred for
remedial or corrective action, containment, clean-up, repair work and response
to claims and actions) in order to discharge or satisfy the Obligations, and
(iii) assessments, fees, fines, penalties, judgments, awards, orders and
decrees.
SECTION 10.2 ALLOCATION OF SPECIFIC OBLIGATIONS. Except as otherwise
agreed by the parties in any other document and to the extent stated in such
other documents, the parties shall, as between themselves, allocate Obligations
pertaining to the Purchased Assets in accordance with this Section, without
regard to consideration of fault or negligence. With respect to any Obligation
allocated to ATWEC and/or the Sellers, subject to the limitations set forth in
Section 10.2(f) below, ATWEC and the Sellers shall indemnify, defend and hold
harmless Buyer and GWI and their respective officers, directors, employees,
shareholders and affiliates. With respect to any Obligation allocated to GWI
and/or Buyer, subject to the limitations set forth in Section 10.2(g) below, GWI
and Buyer shall indemnify, defend and hold harmless ATWEC and the Sellers and
their respective officers, directors, employees, shareholders and affiliates,
including without limitation, any trustee of any affiliate of ATWEC or Seller.
(a) LICENSES AND AGREEMENTS: Buyer and GWI shall be jointly and severally responsible for all Obligations arising after Closing or allocable to the period after Closing under the Contracts. Sellers and ATWEC shall each be jointly and severally responsible for any such Obligations arising before or allocable to the period before Closing.
(b) PERSONAL INJURY AND PROPERTY DAMAGE: Buyer and GWI shall be jointly and severally responsible for all Obligations arising out of personal injury to or the death of Persons or loss of, or damage to, property (including the employees and property of the parties hereto) occurring on or about the Real Property after Closing. Sellers and ATWEC will each be jointly and severally responsible for all such Obligations occurring on or about the Real Property on or prior to Closing.
(c) HAZARDOUS SUBSTANCES:
(1) Buyer and GWI shall be jointly and severally responsible for Obligations which arise from the existence or presence of Hazardous
Substances in, on or about the Real Property (hereinafter "TOXIC CONTAMINATION") after Closing.
(2) ATWEC and each Seller shall be jointly and severally responsible for Obligations arising from Toxic Contamination, provided that such Toxic Contamination resulted from a condition created by ATWEC or any Seller during the time the Real Property was owned and occupied by ATWEC or any Seller and further provided that such Toxic Contamination was a violation of common law duty or exceeded allowable limits or was otherwise in violation of applicable Environmental Laws during such time. Neither ATWEC nor any Seller shall be liable for any Obligation resulting from any condition created prior to the acquisition of ownership of the Real Property by ATWEC or any Seller even if such Obligations arise from ongoing, continuous, migrating contamination that occurred during the ownership and control of the Real Property by ATWEC or any Seller. Subject to the further limitations set forth at Paragraph 10.2(f) below, ATWEC's and each Seller's liability for any Obligation for which it is otherwise responsible hereunder shall be no greater than that resulting from the condition of the Real Property at Closing. Buyer and GWI shall be jointly and severally responsible for all other Obligations arising from Toxic Contamination which occurred prior to or after the Closing including responsibility for any Obligation arising from Toxic Contamination resulting from a condition created by Buyer's possession of, or operations on, the Real Property, or from any ongoing, continuing, migrating or subsequent release or contamination, or from any increases in remediation or containment costs or liability, created by or resulting from events occurring after Closing, including the passage of time.
(3) If at any time after Closing any Toxic Contamination is discovered which is or may be the responsibility of ATWEC or any Seller pursuant to subsection (2) above, ATWEC and each Seller shall be notified of such Toxic Contamination by Buyer and shall have the opportunity and right to investigate, determine its responsibility therefor, determine in connection with appropriate governmental or regulatory bodies the appropriate response or remedy for such Toxic Contamination, and remedy, with its own forces or contractors and at its own expense, such Toxic Contamination to the satisfaction of appropriate regulatory bodies or to the additional extent deemed appropriate by ATWEC and Sellers. Buyer shall grant such rights of entry or other rights to ATWEC and Sellers, upon reasonable terms and without compensation, as may be necessary to allow ATWEC and Sellers to perform the inspections, remediations or other actions necessary to comply with this subsection. In the event of dispute concerning ATWEC's and Sellers' responsibility for any obligation hereunder, the parties shall cooperate to resolve such dispute as quickly as possible, and Buyer, unless required by valid judicial or regulatory order to take action to remedy a specific condition, shall during the resolution of such dispute take no actions inconsistent with ATWEC's and Sellers' right to seek a determination from the appropriate
regulatory or judicial body of the remedy required by law and to remedy the Toxic Contamination with its own forces or contractors. ATWEC and Sellers shall not be liable to Buyer for any damages, costs or expenses incurred as a result of such Obligation, except that if Buyer is required by valid judicial or administrative order as provided above to take action to remedy any Obligation which is later determined to be the responsibility of ATWEC or any Seller hereunder, Buyer shall be able to recover its actual and reasonable costs from ATWEC and Sellers.
(d) OTHER PHYSICAL CONDITION OF THE REAL PROPERTY: Except as otherwise provided in this Article 10, Buyer and GWI shall be jointly and severally responsible for:
(1) all Obligations that arise out of, in respect to, or in
connection with, the physical condition, safety, utility, adequacy,
marketability, value, suitability or fitness of the Real Property, or
any portion thereof, or any defects therein, including without
limitation, Obligations relating to (a) public or private street,
bridge, underpass or others crossings, (b) the removal or remediation
of contaminating materials or substances (other than Hazardous
Substances) (c) the demolition of structures or abatement of
nuisances, (d) the flow or obstruction of surface waters, (e) the
stability of the soil on, above, over, or adjacent to the property,
(f) support for or by, adjacent property or the collapse of soil or
other materials or buildings onto adjacent property, and (g) the
construction, repair, rehabilitation, alteration, maintenance, or use
of the Real Property;
(2) Obligations imposed by the regulations or orders of any regulatory or licensing agency or by agencies or governmental bodies responsible for preserving the public health or safety, the environment, natural resources, wildlife, historic sites, vegetation, public parks or forests, or wetlands; and
(3) Obligations imposed by buildings or construction codes, or licensing, subdivision or zoning requirements, including Obligations relating to licensing, permits, notices, and fees.
(e) BREACHES OF REPRESENTATIONS, WARRANTIES AND COVENANTS:
(1) ATWEC and Sellers shall each be jointly and severally liable and responsible to Buyer for all Obligations that arise out of, in respect to, or in connection with, the failure or breach by ATWEC or any Seller of any representation or warranty made in this Agreement, or any breach or nonfulfillment by ATWEC or any Seller of any covenant or agreement made in this Agreement.
(2) Buyer and GWI shall each be jointly and severally liable and responsible to Sellers and ATWEC for all Obligations that arise out of, in respect to, or in connection with any failure or breach by Buyer or GWI of any representation or warranty, or any breach or nonfulfillment of any covenant or agreement, of Buyer or GWI in this Agreement.
(f) LIMITATIONS ON OBLIGATIONS ALLOCATED TO ATWEC AND SELLERS:
Notwithstanding any other provision of this Agreement, the obligation of
ATWEC and the Sellers, in the aggregate, to indemnify Buyer and GWI or
their respective officers, directors or affiliates, and the responsibility
or liability of ATWEC and the Sellers, in the aggregate, with respect to
all Obligations allocated to ATWEC or any Seller hereunder shall be subject
to the following limitations:
(1) Any claim relating to an Obligation must be made in accordance with Section 10.3 below prior to the second anniversary of the Closing Date, except that any claim with respect to any Federal Employers Liability Act claim asserted by any person employed by ATWEC or any Seller on the date hereof must be made prior to the third anniversary of the date hereof.
(2) The indemnification obligations of ATWEC and the Sellers and the responsibility or liability of ATWEC and the Sellers relating to Obligations pursuant to Paragraph 10.2(c) above (the "Environmental Obligations") shall be limited to, and in no event shall exceed, an aggregate amount of $1,000,000 and the indemnification obligations of ATWEC and the Sellers and the responsibility or liability of ATWEC and the Sellers relating to all Obligations shall be limited to, and in no event shall exceed, and in no circumstance shall ATWEC and the Sellers be required to pay more than, an aggregate amount of $5,000,000.
(3) The indemnification obligations of ATWEC and the Sellers and the responsibility or liability of ATWEC and the Sellers with respect to Environmental Obligations hereunder shall be limited solely to Environmental Obligations arising out of or resulting from: (1) a post-closing investigation or remedial action required by Environmental Laws, conducted by a government agency or pursuant to an order issued by a governmental agency with authority to administer the Environmental Laws and having jurisdiction over the property or the matter in question; (2) a third party claim or (3) the discovery of the presence or release of Hazardous Substances as the result of a facility expansion or renovation (excluding any losses, liabilities, damages, or costs relating to or resulting from the removal of non- friable or non-damaged asbestos containing material during such activities which shall not constitute or be deemed or constitute an Obligation or an Environmental Obligation hereunder), it being understood that neither Buyer nor any affiliate thereof will, prior to the second anniversary of the Closing, commence any plan to, or conduct any studies or investigation with respect to, any such expansion or renovation without the prior written approval of ATWEC.
(4) No claim for indemnification by ATWEC or any Seller or for the payment of any Obligation shall be payable by ATWEC or any Seller with respect to any Obligation allocated to any such party for the first $150,000 in the aggregate of such Obligations.
(g) LIMITATIONS ON OBLIGATIONS ALLOCATED TO BUYER AND GWI:
Notwithstanding any other provision of this Agreement, the obligation of
GWI and Buyer, in the aggregate, to indemnify ATWEC, each Seller or any of
their respective officers, directors, affiliates or shareholders or
trustees of any affiliate, and the responsibility or liability of GWI and
Buyer with respect to any Obligation allocated to GWI or Buyer hereunder
shall be subject to the following limitations: any claim relating to an
Obligation must be made in accordance with Section 10.3 below prior to the
second anniversary of the Closing Date, except that any claim with respect
to any Environmental Obligation must be prior to the fifth anniversary of
the date hereof.
(h) REGISTRATION STATEMENT FOR GWI SECURITIES: Buyer and GWI shall be responsible to ATWEC and Sellers for all Obligations that arise out of, in respect to, or in connection with, the use by GWI of financial information obtained from Seller and of any other information relating to the transactions contemplated by this Agreement or relating to Seller's business in a registration statement filed with the Securities and Exchange Commission or in a private placement memorandum circulated in connection with the issuance by GWI of its securities, except when there has been a finding by a court of competent jurisdiction that any such information which caused the Obligation contains any untrue statement of a material fact, or omits to state a material fact necessary in order to make such information not misleading and any such untrue statement or omission was made by Sellers or ATWEC.
SECTION 10.3 PROCEDURE FOR ENFORCEMENT OF OBLIGATIONS. Any party (the
"Demanding Party") seeking to hold any other party to this Agreement (the
"Receiving Party") responsible for any Obligation in accordance with this
Article 10 shall give to such Receiving Party notice of such demand, stating in
reasonable detail the nature thereof. If any demand relates to an Obligation
arising out of a claim made by any Person not a party to or affiliated with a
party to this Agreement, the notice shall also state whether the Demanding Party
(a) has made payment in full of the claim, (b) has compromised and made payment
of the compromised claim, or (c) disputes the claim and intends to defend
against it. The Receiving Party shall have the right to defend the claim. If
the Receiving Party shall defend against such claim, the Demanding Party shall
cooperate with the Receiving Party in such defense, shall make available to the
Receiving Party all records and other materials reasonably required by the
Receiving Party in such defense, and shall have the right to participate in such
defense, but the Receiving Party shall at all times control such defense. If
the Receiving Party does not intend to defend against the claim then the
Demanding Party may defend. If the Demanding Party shall defend against the
claim, the Receiving Party shall cooperate with it in such defense, shall make
available to the Demanding Party all records and other materials reasonably
required by it in such defense, and shall have the right to participate in such
defense, but the Demanding Party shall at all times control such
defense. Upon the giving of any written notice in accordance with this Section 10.3 of any claim by any Demanding Party against any Receiving Party with respect to any Obligation within the time periods described in Paragraphs 10.2(f)(1) and Section 10.2(g) above, the right to indemnification with respect to such claim shall remain in effect until such matter shall have been finally determined and disposed of, and indemnification due in respect thereof shall have been paid.
SECTION 10.4 REMEDIES. This Article 10 sets forth the exclusive remedies of ATWEC, each Seller, Buyer and GWI with respect to any Obligation as a result of the breach of, or the failure to perform or satisfy, any of the representations, warranties, covenants and agreements of any party under this Agreement or any other claim with respect to this Agreement or the transactions contemplated hereby (other than intentional fraud); provided that the foregoing shall not limit the availability prior to or (with the exception of any such remedies as may be available under any Environmental Law or with respect to environmental matters) after the Closing of any equitable remedy, including, without limitation, any equitable remedy which may result in a monetary recovery by Buyer or GWI (but in no case shall Buyer or GWI be entitled to any monetary recovery or rescission or a similar remedy after the Closing).
ARTICLE 11. GENERAL PROVISIONS
SECTION 11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Subject to the provisions of Section 10.4 hereof, the several representations, warranties and covenants of the parties herein contained, and the provisions hereof which by their terms are to be performed after the Closing Date, shall survive the Closing Date and shall be effective regardless of any investigation which may have been or may be made at the time by or on behalf of the party to whom such representations, warranties, covenants and agreements are made.
SECTION 11.2 AMENDMENT AND WAIVER. This Agreement may be amended only by a writing executed by each of the parties hereto. No waiver of compliance with any provision or condition hereof, and no consent provided for herein, shall be effective unless evidenced by an instrument in writing duly executed by the party sought to be charged therewith. No failure on the part of any party to exercise, and no delay in exercising, any of its rights hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by any party of any right preclude any other or future exercise thereof or the exercise of any other right.
SECTION 11.3 ASSIGNMENT. The Agreement may be freely assigned without notice to, or consent by, Sellers or ATWEC to a corporation or other business entity wholly owned by Buyer, but no such assignment shall relieve Buyer or GWI of its obligations and liabilities hereunder. Sellers (other than to ATWEC or a wholly owned subsidiary of ATWEC after notice to Buyer and GWI) and ATWEC may not assign this Agreement for a period of thirty-six (36) months following the Closing Date, after which period Sellers and ATWEC shall be free to assign this Agreement without notice to, or consent by, Buyer. This Agreement shall
be binding upon and inure to the benefit of Sellers, ATWEC, GWI and Buyer, and their respective successors and assigns.
SECTION 11.4 NOTICES, ETC. Each notice, report, demand, waiver, consent and other communication required or permitted to be given hereunder shall be in writing and shall be sent either by registered or certified first-class mail, postage prepaid and return receipt requested, or by telex or telecopier, addressed as follows:
If to Buyer or to GWI: Pittsburg & Shawmut Railroad, Inc.
201 N. Penn Street
Punxsutawney, PA 15767
Attention: President
Genesee & Wyoming Inc.
71 Lewis Street
Greenwich, CT 06830
Attention: Mortimer B. Fuller III
with a copy to: Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14604-2070
Attention: James B. Gray, Jr. Esq.
If to any Seller or to ATWEC: Arthur T. Walker Estate Corporation
One Glade Park, East R.D. 8, Box 46
Kittanning, PA 16201
Attention: President
with a copy to: Dumaines
201 Devonshire Street
Fourth Floor
Boston, MA 02110
Attention: Gerard J. Sarnie
Goodwin, Procter & Hoar LLP
Exchange Place
53 State Street
Boston, MA 02109
Attention: Stephen W. Carr, P.C.
|
Each such notice and other communication given by mail shall be deemed to have
been given when it is deposited in the United States mail in the manner
specified herein, and each such notice and other communication given by telex or
telecopier shall be deemed to have been given when it is so transmitted and the
appropriate answer back is received. Any party may change its address for the
purpose hereof by giving notice in accordance with the provisions of this
Section 11.4.
SECTION 11.5 BINDING EFFECT. Subject to the provisions of Section 11.3, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. This Agreement creates no rights of any nature in any Person not a party hereto.
SECTION 11.6 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania applicable to agreements made and to be performed entirely within the Commonwealth of Pennsylvania.
SECTION 11.7 EFFECT OF AGREEMENT. This Agreement sets forth the entire understanding of the parties, and supersedes any and all prior agreements, arrangements and understandings, written or oral, relating to the subject matter hereof.
SECTION 11.8 HEADINGS; COUNTERPARTS. The Article and Section headings of this Agreement are for convenience of reference only and do not form a part hereof and do not in any way modify, interpret or construe the intention of the parties. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the date first written above.
SELLERS:
THE PITTSBURG & SHAWMUT RAILROAD
COMPANY
By:/s/ Walter E. Travis --------------------- Its [ ] Director |
RED BANK RAILROAD COMPANY
By:/s/ Walter E. Travis --------------------- Its [ ] Director |
MOUNTAIN LAUREL RAILROAD COMPANY
By:/s/ Walter E. Travis --------------------- Its [ ] Director |
BUYER:
PITTSBURG & SHAWMUT RAILROAD, INC.
ATWEC:
ARTHUR T. WALKER ESTATE CORPORATION
By:/s/ Walter E. Travis --------------------- Its [ ] Chairman |
GWI:
GENESEE & WYOMING INC.
BUYER:
PITTSBURG & SHAWMUT RAILROAD, INC.
By:/s/ Mark W. Hastings --------------------- Its [ ] Treasurer |
ATWEC:
ARTHUR T. WALKER ESTATE CORPORATION
GWI:
GENESEE & WYOMING INC.
By: /s/ Mortimer B. Fuller ----------------------- Its [ ] President |
TABLE OF EXHIBITS AND SCHEDULES
* Exhibit A Form of Opinion of Sellers' and ATWEC's
Counsel
* Exhibit B Form of Opinion of Buyer's and GWI's Counsel
* Exhibit C Form of Deed
* Schedule 1.1(a) Real Property
* Schedule 1.1(b) Tangible Personal Property
* Schedule 1.1(c) Inventories
* Schedule 1.1(e) Intangible Assets
* Schedule 1.3 Allocation of Purchase Price
* Schedule 2.1 Contracts Assumed
* Schedule 2.4(b) KELC Permits
* Schedule 3 Disclosure Statement
* Schedule 3.17(f) Employees
* Schedule 5.1 Form of Seller's Real Property Affidavit
* Schedule 5.3 Continuing Health Care Benefits
* Schedule 5.4 Consents
* Schedule 7.1(e) Seller's Consents
* Schedule 7.1(f) Buyer's Consents
* Schedule 7.1(l)(3) Coal Destinations
* OMITTED EXHIBITS AND SCHEDULES
UPON WRITTEN REQUEST, THE REGISTRANT WILL PROVIDE COPIES OF ANY OF THE REFERENCED OMITTED EXHIBITS AND SCHEDULES, SUBJECT TO REQUESTS FOR CONFIDENTIAL TREATMENT.
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
THIS AMENDMENT No. 1 to Asset Purchase Agreement, dated April 19, 1996, among Pittsburg & Shawmut Railroad, Inc., a Delaware corporation, Genesee & Wyoming Inc., a Delaware corporation, The Pittsburg & Shawmut Railroad Company, a Pennsylvania corporation, Red Bank Railroad Company, a Pennsylvania corporation, Mountain Laurel Railroad Company, a Pennsylvania corporation, and Arthur T. Walker Estate Corporation, a Delaware corporation.
1. Section 11.5 of the Asset Purchase Agreement, is hereby amended by deleting the last sentence thereof and substituting in its place:
"Except as specifically provided in Section 10.2 hereof, this Agreement creates no rights of any nature in any Person not a party hereto."
2. Except as set forth above, all other terms and conditions of the Asset Purchase Agreement remain the same.
3. This Consent may be executed in various counterpart copies, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 on the date first written above.
THE PITTSBURG & SHAWMUT RAILROAD
COMPANY
By:/s/ Walter E. Travis --------------------- Its: Director |
RED BANK RAILROAD COMPANY
By:/s/ Walter E. Travis --------------------- Its: Director |
MOUNTAIN LAUREL RAILROAD COMPANY
By:/s/ Walter E. Travis --------------------- Its: Director |
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
[signatures continued]
PITTSBURG & SHAWMUT RAILROAD, INC.
ARTHUR T. WALKER ESTATE CORPORATION
By:/s/ Walter E. Travis --------------------- Its: Chairman |
GENESEE & WYOMING INC.
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
[signatures continued]
PITTSBURG & SHAWMUT RAILROAD, INC.
By: /s/ Mark W. Hastings ------------------------ Its: Treasurer |
ARTHUR T. WALKER ESTATE CORPORATION
GENESEE & WYOMING INC.
By:/s/ Mortimer B. Fuller ----------------------- Its: President |
AMENDMENT NO. 1 TO
WARRANT PURCHASE AGREEMENT
This AMENDMENT NO. 1 (this "Amendment") to Warrant Purchase Agreement, dated as of May 31, 1996, between Genesee & Wyoming Inc. (the "Company") and FSC Corp. (successor by assignment to The First National Bank of Boston and the sole Investor, as defined in the Warrant Purchase Agreement as hereinafter defined) ("FSC").
WHEREAS, the Company and FSC are parties to that certain Warrant Purchase Agreement dated as of February 8, 1996 (as amended and in effect from time to time, the "Warrant Purchase Agreement"), pursuant to which the Company, upon certain terms and conditions, has granted FSC a warrant to purchase stock of the Company; and
WHEREAS, in connection with the Company's Initial Public Offering, the Company has requested that FSC waive its Piggyback Registration rights with respect to such offering;
WHEREAS, FSC has agreed to waive its Piggyback Registration rights with respect to the Initial Public Offering provided that the Company agree, and the Company has agreed, on the terms and subject to the conditions set forth herein, to make certain changes to the Warrant Purchase Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
(a) Section 1.1 of the Warrant Purchase Agreement is amended by inserting the following new definitions in the appropriate places in the alphabetical sequence thereof:
(b) Article I of the Warrant Purchase Agreement is amended by inserting after the preamble of such article a new (S)8.1A as follows:
(ii) Subject to the limitations contained in the following paragraphs of this (S)8.1A, after the receipt of each such written request for a Demand Registration, (A) the Company will be obligated and required to include in such Demand Registration all Registrable Securities with respect to which the Company shall receive from Holders of Registrable Securities, within thirty (30) days after the date on which the Company shall have given to all Holders a written notice of registration request pursuant to (S)8.1(a)(i) hereof, the written requests of such Holders for inclusion in such Demand Registration, and (B) the Company will use its best efforts in good faith to effect promptly the registration of all such Registrable Securities. All written requests made by Holders of Registrable Securities pursuant to this clause (ii) will specify the number of shares of Registrable Securities to be registered and will also specify the intended method of disposition thereof. Such method of disposition shall not, in any case, be an underwritten offering unless the Company so requests.
(i) The Holders of Registrable Securities will only be entitled to require the Company to effect four Demand Registrations on Form S-3 (or other comparable forms adopted by the Commission) and will not be entitled to require Demand Registrations on any other form.
(ii) The Company shall not be obligated or required to effect any Demand Registration of any Registrable Securities pursuant to (S)8.1A(a) hereof unless and until the Holders shall have requested, pursuant to (S)8.1A(a)(ii) hereof, the inclusion in such Demand Registration of not less than the Minimum Number of Registrable Securities applicable to such Demand Registration.
(iii) Any registration initiated by Holders of Registrable Securities as a Demand Registration pursuant to (S)8.1A(a) hereof shall not, for purposes of this (S)8.1A, count as a Demand Registration unless and until such registration shall have become effective and all Registrable Securities included in such registration, and which were actually offered for sale by the holder thereof, shall have been actually sold.
(i) Neither the Company nor any of its securityholders (other than Holders of Registrable Securities in their capacity as Holders) shall have the right or otherwise be entitled to include any of the Company's securities in any registration initiated by Holders of Registrable Securities as a Demand Registration pursuant to (S)8.1A(a) hereof, unless (A) such securities are of the same class as the Registrable Securities to be included in such Demand Registration, and (B) if such Demand Registration is an underwritten offering, the Company or (as the case may be) such securityholders shall have duly and properly agreed in writing to sell their securities on the same terms and conditions as shall apply to the Registrable Securities to be included in such Demand Registration.
(ii) The Company will not grant or agree to grant to any Persons any registration rights which will conflict or be inconsistent in any respect with any of
the provisions of clause (i) of this (S)8.1A(d). In the event of any such conflict or inconsistency, the provisions of such clause (i) shall in any case prevail and be controlling.
(c) Section 8.1(a)(i) of the Warrant Purchase Agreement is amended by inserting after the words "Securities Act" in such section, the parenthetical "(other than pursuant to a Demand Registration)".
(d) Section 8.1(a)(ii) of the Warrant Purchase Agreement is amended by inserting at the end of such section the following sentence: "Any registration of Registrable Securities pursuant to this (S)8.1 shall not be counted as a Demand Registration pursuant to (S)8.1A hereof."
(e) Section 8.5(a) of the Warrant Purchase Agreement is amended by inserting after the section reference "(S)8.1" in the first sentence thereof, the words "or (S)8.1A (subject to the dollar limitation contained in (S)8.1A(c) hereof)".
(a) Except as otherwise expressly provided by this Amendment, all of the terms, conditions and provisions of the Warrant Purchase Agreement shall remain the same. It is declared and agreed by each of the parties hereto that the Warrant Purchase Agreement, as amended hereby, shall continue in full force and effect, and that this Amendment and the Warrant Purchase Agreement shall be read and construed as one instrument.
(b) THIS AMENDMENT IS INTENDED TO TAKE EFFECT AS AN AGREEMENT UNDER SEAL AND SHALL BE CONSTRUED ACCORDING TO AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
(c) This Amendment may be executed in any number of counterparts, but all such counterparts shall together constitute but one instrument. In making proof of this Amendment it shall not be necessary to produce or account for more than one counterpart signed by each party hereto.
(d) The Company hereby agree to pay to the Agent, on demand by the Agent, all reasonable out-of-pocket costs and expenses incurred or sustained by the Agent in connection with the preparation of this Amendment (including reasonable legal fees).
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above.
GENESEE & WYOMING INC.
By: /s/ Mark W. Hastings
--------------------------------
Mark W. Hastings, Treasurer
|
FSC CORP., as sole Investor
By: /s/ Mary Josephs Reily
--------------------------------
Name:
Title: Vice President
|
EXHIBIT 11.1
GENESEE & WYOMING INC. AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
THREE MONTHS
YEARS ENDED DECEMBER ENDED
31, MARCH 31,
-------------------- -------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(UNAUDITED)
BASIC EARNINGS PER SHARE:
Net Income................................. $1,624 $3,011 $1,657 $ 502 $ 965
Weighted average number of shares of Com-
mon Stock outstanding................... 2,304 2,304 2,348 2,348 2,348
====== ====== ====== ====== ======
Earnings per share--basic................ $ 0.70 $ 1.31 $ 0.71 $ 0.21 $ 0.41
====== ====== ====== ====== ======
PRIMARY AND FULLY DILUTED EARNINGS PER
SHARE:
Net Income................................. $1,624 $3,011 $1,657 $ 502 $ 965
Weighted average number of Common Stock
shares and common stock equivalents out-
standing:
Weighted average number of shares of Com-
mon Stock outstanding................... 2,304 2,304 2,348 2,348 2,348
Weighted average number of Common Stock
equivalents applicable to stock war-
rants................................... 42 42 42 42 42
Weighted average number of Common Stock
equivalents applicable to stock options. 24 24 -- -- --
------ ------ ------ ------ ------
Common Stock and Common Stock equiva-
lents................................... 2,370 2,370 2,390 2,390 2,390
====== ====== ====== ====== ======
Earnings per share--primary and fully di-
luted (1)............................... $ 0.69 $ 1.27 $ 0.69 $ 0.21 $ 0.40
====== ====== ====== ====== ======
|
(1) This calculation is submitted in accordance with item 601(b)11 of regulation S-K although it is not required by APB Opinion No. 15 because
it results in dilution of less than 3%.
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
SUBSIDIARY STATE OF FORMATION
---------- ------------------
CORPORATIONS:
- -------------
Allegheny & Eastern Railroad, Inc. Delaware
Bradford Industrial Railroad, Inc. Delaware
Buffalo & Pittsburgh Railroad, Inc. Delaware
The Dansville & Mount Morris Railroad Company New York
Genesee & Wyoming Investors, Inc. Delaware
Genesee and Wyoming Railroad Company New York
GWI Dayton, Inc. Delaware
GWI Leasing Corporation Delaware
GWI Rail Management Corporation Delaware
Illinois & Midland Railroad, Inc. Delaware
Louisiana & Delta Railroad, Inc. Delaware
Pittsburg & Shawmut Railroad, Inc. Delaware
Portland & Western Railroad, Inc. New York
Railroad Services, Inc. Delaware
Rochester & Southern Railroad, Inc. New York
Willamette & Pacific Railroad, Inc. New York
LIMITED PARTNERSHIP:
- -------------------
GWI Switching Services, L.P. Texas
|
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made part of this Registration Statement on Amendment No. 1 to Form S-1.
Arthur Andersen LLP
Chicago, Illinois
June 7, 1996
| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR | 3 MOS |
| FISCAL YEAR END | DEC 31 1995 | DEC 31 1996 |
| PERIOD START | JAN 01 1995 | JAN 01 1996 |
| PERIOD END | DEC 31 1995 | MAR 31 1996 |
| CASH | 2,115 | 6,588 |
| SECURITIES | 0 | 0 |
| RECEIVABLES | 9,441 | 14,764 |
| ALLOWANCES | 0 | 0 |
| INVENTORY | 1,512 | 2,295 |
| CURRENT ASSETS | 15,801 | 25,758 |
| PP&E | 79,231 | 89,526 |
| DEPRECIATION | 17,659 | 18,917 |
| TOTAL ASSETS | 78,429 | 115,859 |
| CURRENT LIABILITIES | 13,051 | 24,428 |
| BONDS | 38,702 | 63,313 |
| PREFERRED MANDATORY | 0 | 0 |
| PREFERRED | 0 | 0 |
| COMMON | 23 | 23 |
| OTHER SE | 10,525 | 11,929 |
| TOTAL LIABILITY AND EQUITY | 78,429 | 115,859 |
| SALES | 53,387 | 16,608 |
| TOTAL REVENUES | 53,387 | 16,608 |
| CGS | 46,815 | 13,794 |
| TOTAL COSTS | 46,815 | 13,794 |
| OTHER EXPENSES | 0 | 0 |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | 3,405 | 1,274 |
| INCOME PRETAX | 3,623 | 1,621 |
| INCOME TAX | 1,472 | 656 |
| INCOME CONTINUING | 2,151 | 965 |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | (494) | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | 1,657 | 965 |
| EPS PRIMARY | .69 | .40 |
| EPS DILUTED | .69 | .40 |