RailAmerica, Inc. Reports Third Quarter 2012 Results

             RailAmerica, Inc. Reports Third Quarter 2012 Results

PR Newswire

JACKSONVILLE, Fla., Nov. 5, 2012

JACKSONVILLE, Fla., Nov. 5, 2012 /PRNewswire/ --

Third Quarter Highlights

  oRevenue increased 11% versus third quarter 2011.
  oOperating income down 31%; (up 25% excluding 45G benefit, asset sales,
    impairments and strategic alternatives expense[1]).
  oNet income of $0.12 per share.
  oAdjusted net income per share[1] of $0.40.

On October 1, 2012, RailAmerica, Inc. (RailAmerica) was acquired by Genesee &
Wyoming Inc. (GWI) (NYSE:GWR) and deregistered its common stock and delisted
from the New York Stock Exchange. Immediately following the closing of the
acquisition, control of RailAmerica was placed into a voting trust with R.
Lawrence McCaffrey appointed as trustee. The trust will remain in effect until
the U.S. Surface Transportation Board (STB) issues its decision on GWI's
application to control RailAmerica and its railroads, which decision could be
as early as the fourth quarter of 2012 or as late as the first quarter of
2013.

For the pendency of the trust, GWI will account for its ownership of
RailAmerica under the equity method of accounting. RailAmerica financial
results for the third quarter of 2012 are for periods prior to GWI's ownership
of RailAmerica and will not be included in GWI's financial results for such
periods. This press release and a presentation containing supplemental
information for the third quarter and year to date results will be posted on
RailAmerica's website www.railamerica.com.

RailAmerica today reported financial results for the quarter ended September
30, 2012. Third quarter 2012 revenue increased 11% to $155.4 million from
$139.7 million in the third quarter of 2011. Freight revenue increased 8% to
$113.0 million with carloads up 4% and average revenue per car up 4%.
Non-freight revenue increased 21% to $42.4 million.

The Company reported third quarter 2012 net income of $5.9 million, or $0.12
per diluted share. This compares to net income of $9.1 million, or $0.17 per
diluted share in the third quarter of 2011. Noteworthy items impacting the
third quarters of 2012 and 2011 include:

  oAcquisition / Transaction costs: In the third quarter of 2012 the Company
    incurred $17.0 million of transaction related expenses. $16.6 million was
    due to the Company's previously announced exploration of strategic
    alternatives, which resulted in the sale of RailAmerica to Genesee &
    Wyoming Inc. The remainder of the expenses were due to acquisition and
    industrial development related activity.
  oRestricted stock amortization: Third quarter 2012 restricted stock
    amortization (included in labor and benefits) included $2.4 million
    related to retirement eligibility vesting for certain participants. The
    vesting was associated with grants made during the third quarter of 2012
    under terms of the agreement to sell the Company. Otherwise these expenses
    would have been incurred in the first quarter of 2013.
  oAmortization of swap termination costs: Non-cash charges of $1.3 million
    and $2.7 million were recorded in interest expense during the third
    quarters of 2012 and 2011, respectively, due to the June 2009 termination
    of an interest rate swap agreement.
  o45G tax credits: A $3.9 million income statement benefit was recorded in
    the third quarter of 2011, but no benefit was recognized in the third
    quarter of 2012 since the credit is currently not in effect for 2012.
  oAsset impairment: Third quarter of 2011 includes a $1.9 million non-cash
    impairment charge resulting from an evaluation of our locomotive fleet.
  oCredit facility replacement: Third quarter of 2011 includes a $0.7 million
    non-cash charge related to the replacement of our asset backed loan
    facility with a new revolving credit facility.

Summary of Noteworthy Items Impacting Third Quarter 2011 and 2012
                            For the Three Months Ended September 30,
($ in thousands except EPS) 2011                     2012
                            Pre Tax     EPS          Pre Tax     EPS
Strategic alternatives      $0          $0.00        ($16,587)   ($0.26)
Acquisition / Transaction
costs                       (203)       (0.00)       (393)       (0.00)
Restricted stock
amortization increase       -           -            (2,366)     (0.03)
Amortization of swap
termination costs           (2,747)     (0.03)       (1,283)     (0.02)
45G credits                 3,879       0.05         -           -
Impairment of assets        (1,949)     (0.02)       -           -
Loss on extinguishment of
credit agreement            (719)       (0.01)       -           -
Gain / (loss) on sale of
assets                      (8)         (0.00)       1,337       0.02
Note: Effective tax rate of 39% for 2011 and 37% for all 2012 items other
than strategic alternatives, which are tax effected at 21%.

The Company reported operating income of $21.7 million in the third quarter of
2012 compared to $31.5 million in the third quarter of 2011. In addition to
the items mentioned above impacting operating income, third quarter 2012
expenses were up primarily due to the inclusion of operating expenses from
acquisitions (Marquette Railroad, Wellsboro & Corning Railroad and TransRail
North America (TNA)). Also, incentive compensation increased $4.5 million.
Operating income excluding the impact of 45G credits, asset sales, impairments
and strategic alternatives expense is shown below.

                                                  For the Three Months Ended
                                                  September 30,
                                                  2011             2012
($ in thousands)
Operating revenue                                 $139,665         $155,418
Operating expense                                 108,177          133,670
Operating income, reported                        31,488           21,748
Less: Benefit from 45G credits                    (3,879)          -
Operating income excluding 45G Benefit^1          27,609           21,748
Net (gain) loss on sale of assets                 8                (1,337)
Impairment of assets                              1,949            -
Strategic alternatives expense                    -                16,587
Operating income excluding 45G Benefit, Asset
Sales, Impairments and Strategic Alternatives
expense^1                                         29,566           36,998
^1See schedule at the end of press release for a reconciliation of non-GAAP
financial measure

A more detailed discussion of financial results for the third quarter of 2012
compared to the third quarter of 2011 follows.

Operating Revenue

Operating revenue increased by $15.8 million, or 11%, to $155.4 million in the
three months ended September 30, 2012 from $139.7 million in the three months
ended September 30, 2011. The net increase in operating revenue was due to
higher non-freight revenue, rate increases, change in commodity mix, and
increased carloads.

Total carloads during the three months ended September 30, 2012 increased 4%
to 214,357 from 206,975 in the three months ended September 30, 2011. The
increase in the average revenue per carload to $527 in the three months ended
September 30, 2012, from $506 in the comparable period in 2011 was primarily
due to rate increases, commodity mix, and fuel surcharge.

Freight revenue was $113.0 million in the three months ended September 30,
2012 compared to $104.7 million in the three months ended September 30, 2011,
an increase of $8.3 million or 8%. This increase was primarily due to the net
effect of the following:

  oIndustrial products (includes chemicals, pulp, paper & allied products,
    metallic ores and metals, waste and scrap materials, other, petroleum, and
    motor vehicles) revenue increased $5.9 million, or 11%, primarily due to
    motor vehicle carload growth of 84%, which was driven by increased
    production at multiple automobile manufacturing plants we serve in
    Indiana, Michigan, California and Washington, chemicals and other which
    were driven by rates and commodity mix. The increase in the motor vehicles
    category was partially offset by an 11% decrease in metallic ores and
    metals carloads and an 8% decrease in pulp, paper and allied products
    traffic;
  oAgricultural Products (includes agricultural products and food or kindred
    products) revenue increased $0.5 million, or 2%, primarily due to
    agricultural products carload increases of 4% as a result of increased
    shipments in export traffic destined for Asia. This increase in
    agricultural products was partially offset by a 9% decrease in carloads
    for food and kindred products driven by soft demand for dried grain
    products;
  oConstruction Products (includes non-metallic minerals and products and
    forest products) revenue increased $2.0 million, or 11%, primarily due to
    increased forest products carloads of 12% which was driven by an increase
    in lumber traffic in the Northeast and Northwest; and
  oCoal revenue decreased $0.1 million, or 1%, although coal volumes
    increased by 6%. The volume increase was primarily due to several lower
    rated Class I detour trains routed over one of our lines due to
    maintenance on the Class I mainline.

Operating Expenses

Operating expenses increased to $133.7 million in the three months ended
September 30, 2012 from $108.2 million in the three months ended September 30,
2011. The operating ratio was 86.0% in 2012 compared to 77.5% in 2011. The
increase in the operating ratio was primarily due to professional service fees
related to the sale of the Company and the absence of track maintenance
credits in the third quarter of 2012.

The net increase in operating expenses was due to the following:

  oLabor and benefits expense increased $6.2 million, or 15%, primarily due
    to higher profit sharing ($4.5 million), restricted stock amortization
    ($1.9 million) and increased wages as a result of acquisitions ($1.2
    million), partially offset by lower health insurance costs ($0.7 million);
  oEquipment rents expense increased $0.3 million, or 3%, primarily due to
    higher railcar lease expense ($0.5 million) and acquisitions ($0.5
    million), partially offset by lower locomotive lease expense ($0.3
    million) and car hire ($0.3 million);
  oPurchased services expense increased $18.0 million, or 164%, primarily due
    to professional services in connection with our sale of the Company ($16.6
    million), increased transport services related to the acquisition of TNA
    ($1.0 million) and write off of project costs ($0.3 million);
  oDiesel fuel expense approximated prior year expense;
  oCasualties and insurance expense decreased $0.4 million, or 9%, primarily
    due to a decrease in derailment costs ($1.1 million), partially offset by
    increased reserves related to crossing accidents ($0.5 million);
  oMaterials expense increased $1.4 million, or 17%, primarily due to an
    increase in car repair material purchases resulting from increased car
    repair activities;
  oJoint facilities expense decreased $0.3 million, or 13% due to a reduction
    in maintenance charges;
  oOther expenses increased $0.5 million, or less than 5%, primarily due to
    an increase in railroad lease expense ($0.4 million) and other fees
    associated with the sale of the Company ($0.2 million), partially offset
    by lower taxes ($0.2 million);
  oThe execution of the track maintenance agreement in 2011 resulted in a
    shipper paying for $4.0 million of maintenance expenditures, partially
    offset by $0.1 million of related consulting fees;
  oAsset sales resulted in a net gain of $1.3 million in the three months
    ended September 30, 2012, related to the sale of land;
  oImpairment of assets was $1.9 million in the three months ended September
    30, 2011, related to a tentative sale agreement for various locomotives
    and further evaluation of the market value of the remaining units
    identified for potential fleet reductions; and
  oDepreciation and amortization expense decreased $0.7 million, or 6%,
    including $1.7 million in lower depreciation expense resulting from a road
    and track asset life study completed during the first quarter of 2012,
    offset by increased depreciation and amortization associated with
    acquisitions.

Other Income (Expense) Items

Interest Expense. Interest expense, including amortization of deferred
financing costs, decreased $9.0 million to $8.8 million for the three months
ended September 30, 2012, from $17.8 million in the three months ended
September 30, 2011. This decrease is primarily due to the redemption of $74.0
million of our 9.25% senior notes each in January and June 2012 and $444
million in March 2012 which were replaced with lower cost debt. Interest
expense includes $1.9 million and $4.0 million of amortization costs for the
three months ended September 30, 2012 and 2011, respectively.

Swap termination cost amortization decreased to $1.3 million during the three
months ended September 30, 2012 from $2.7 million during the three months
ended September 30, 2011.

Other (Loss) Income. Other loss decreased $0.7 million during the three months
ended September 30, 2012 as a result of the write-off of deferred loan costs
of $0.6 million during the three months ended September 30, 2011. These costs
were partially offset by management fee income that is recorded in connection
with transactions where employees receive restricted stock awards from related
parties. As part of the restricted stock transactions, the Company recorded an
offsetting expense in labor and benefits.

Income Taxes. The effective tax rate for the three months ended September 30,
2012 and 2011 from continuing operations was a provision of 57.8% and 32.7%,
respectively. The effective tax rate is affected by recurring items such as
tax rates in foreign jurisdictions and the relative amount of income earned in
jurisdictions. It is also affected by discrete items that may occur in any
given quarter, but are not consistent from quarter to quarter. The effective
tax rate for the three months ended September 30, 2012 was adversely impacted
by non-deductible professional fees related to the sale of the Company ($2.9
million), partially offset by the reduction of tax reserves due to the lapse
of the statute of limitations ($0.5 million). The effective tax rate for the
three months ended September 30, 2011 was favorably impacted by the reduction
of tax reserves due to the lapse of the statute of limitations ($0.3 million).

The Company will post a presentation containing supplemental information for
the third quarter and year to date results on RailAmerica's website
(www.railamerica.com).

RailAmerica, Inc. owns and operates short-line and regional freight railroads
in North America, operating a portfolio of 45 individual railroads with
approximately 7,500 miles of track in 28 U.S. states and three Canadian
provinces.

Cautionary Note Regarding Forward-Looking Statements

Certain items in this press release and other information we provide from time
to time may constitute forward-looking statements including, but not
necessarily limited to, statements relating to future events and financial
performance. Words such as "anticipates," "expects," "intends," "plans,"
"projects," "believes," "appears," "may," "will," "would," "could," "should,"
"seeks," "estimates" and variations on these words and similar expressions are
intended to identify such forward-looking statements. These statements are
based on management's current expectations and beliefs and are subject to a
number of factors that could lead to actual results materially different from
those described in the forward-looking statements. RailAmerica, Inc. can give
no assurance that its expectations will be attained. Accordingly, you should
not place undue reliance on any forward-looking statements contained in this
press release. Factors that could have a material adverse effect on our
operations and future prospects or that could cause actual results to differ
materially from RailAmerica, Inc.'s expectations include, but are not limited
to, prolonged capital markets disruption and volatility, general economic
conditions and business conditions, our relationships with Class I railroads
and other connecting carriers, our ability to obtain railcars and locomotives
from other providers on which we are currently dependent, legislative and
regulatory developments including rulings by the Surface Transportation Board
or the Railroad Retirement Board, strikes or work stoppages by our employees,
our transportation of hazardous materials by rail, rising fuel costs, goodwill
assessment risks, acquisition risks, competitive pressures within the
industry, risks related to the geographic markets in which we operate and
other risks related to our business detailed in RailAmerica's previous filings
with the Securities and Exchange Commission, including our Annual Report on
Form 10-K and our Quarterly Reports on Form 10-Q. In addition, new risks and
uncertainties emerge from time to time, and it is not possible for
RailAmerica, Inc. to predict or assess the impact of every factor that may
cause its actual results to differ from those contained in any forward-looking
statements. Such forward-looking statements speak only as of the date of this
press release. RailAmerica, Inc. expressly disclaims any obligation to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in its expectations with regard thereto or change
in events, conditions or circumstances on which any statement is based.

[1] See schedule at end of press release for a reconciliation of non-GAAP
financial measure.

RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
                        FortheThreeMonthsEnded  FortheNineMonthsEnded
                        September 30,               September 30,
                        2011           2012         2011          2012
                        (In thousands, except per share data)
Operating revenue       $ 139,665      $ 155,418    $ 403,817     $ 454,956
Operating expenses:
Labor and benefits      41,379         47,536       124,855       136,316
Equipment rents         9,046          9,320        26,601        27,655
Purchased services      10,996         28,984       31,429        55,504
Diesel fuel             13,142         13,170       41,887        39,805
Casualties and
insurance               4,006          3,627        11,095        11,812
Materials               7,879          9,238        18,892        25,393
Joint facilities        2,459          2,132        7,214         7,478
Other expenses          9,271          9,736        29,876        31,425
Track maintenance
expense reimbursement   (3,879)        -            (13,162)      -
Net loss (gain) on sale
of assets               8              (1,337)      151           (1,495)
Impairment of assets    1,949          -            5,169         -
Depreciation and
amortization            11,921         11,264       35,421        33,264
Total operating
expenses                108,177        133,670      319,428       367,157
Operating income        31,488         21,748       84,389        87,799
Interest expense
(including amortization
costs of $3,973,
$1,948, $13,215 and
$6,727, respectively)   (17,792)       (8,764)      (54,526)      (32,442)
Other (loss) income     (231)          426          804           (86,992)
Income (loss) before
income taxes            13,465         13,410       30,667        (31,635)
Provision for (benefit
from) income taxes      4,407          7,752        8,824         (8,271)
Net income (loss)       9,058          5,658        21,843        (23,364)
Less: Net loss
attributable to
noncontrolling interest -              (287)        -             (489)
Net income (loss)
attributable to the
Company                 $ 9,058        $ 5,945      $ 21,843      $ (22,875)
Basic earnings per
common share:
Net income (loss)
attributable to the
Company                 $ 0.17         $ 0.12       $ 0.41        $ (0.45)
Diluted earnings per
common share:
Net income (loss)
attributable to the
Company                 $ 0.17         $ 0.12       $ 0.41        $ (0.45)
Weighted Average common
shares outstanding:
Basic                   52,083         50,395       53,006        50,440
Diluted                 52,083         50,603       53,006        50,440

RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                                            December31,      September30,
                                            2011              2012
                                            (In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents                   $ 90,999          $ 85,807
Restricted cash                                               300
Accounts and notes receivable, net of
allowance of $7,291 and $8,874 respectively 96,813            106,225
Current deferred tax assets                 9,886             8,347
Other current assets                        17,967            26,112
Total current assets                        215,665           226,791
Property, plant and equipment, net          1,021,545         1,069,543
Intangible assets                           134,851           172,981
Goodwill                                    211,841           235,042
Other assets                                13,478            11,855
Total assets                                $ 1,597,380       $ 1,716,212
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt        $ 71,991          $ 82,435
Accounts payable                            78,844            92,483
Accrued expenses                            28,616            52,966
Total current liabilities                   179,451           227,884
Long-term debt, less current maturities     1,827             584,118
Senior secured notes                        501,876           -
Deferred income taxes                       213,421           203,717
Other liabilities                           20,680            21,432
Total liabilities                           917,255           1,037,151
Commitments and contingencies
Stockholders' equity:
Common stock, $0.01 par value, 400,000,000
shares authorized; 50,605,440 shares issued
and outstanding at December 31, 2011; and
50,394,421 shares issued and outstanding at
September 30, 2012                          506               504
Additional paid in capital and other        591,341           599,174
Retained earnings                           84,272            61,282
Accumulated other comprehensive income      4,006             10,915
Total stockholders' equity                  680,125           671,875
Noncontrolling interest                     -                 7,186
Total equity                                680,125           679,061
Total liabilities and equity                $ 1,597,380       $ 1,716,212

RAILAMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                    For the Nine Months Ended
                                                    September 30,
                                                    2011          2012
                                                    (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                   $ 21,843      $ (23,364)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization, including
amortization of debt issuance costs classified in
interest expense                                    39,012        35,752
Amortization of swap termination costs              9,625         4,237
Net (gain) loss on sale or disposal of properties   151           (1,495)
Impairment of assets                                5,169         -
Loss on extinguishment of debt                      -             88,107
Deferred financing costs expensed                   719           -
Equity compensation costs                           7,381         11,946
Deferred income taxes and other                     4,453         (10,257)
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable                                 (33,167)      (5,594)
Other current assets                                (7,209)       (7,919)
Accounts payable                                    17,048        (1,368)
Accrued expenses                                    7,967         23,833
Other assets and liabilities                        (1,253)       (125)
Net cash provided by operating activities           71,739        113,753
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment           (93,518)      (72,147)
NECR government grant reimbursements                31,329        7,129
Proceeds from sale of assets                        7,598         6,511
Acquisitions, net of cash acquired                  (12,716)      (53,107)
Change in restricted cash                           -             (300)
Other                                               (65)          16
Net cash used in investing activities               (67,372)      (111,898)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt                (263)         (3,051)
Proceeds from issuance of long-term debt            -             582,075
Repurchase of senior secured notes                  -             (649,720)
Repayment of revolving credit facility              -             (60,000)
Proceeds from revolving credit facility             -             135,000
Repurchase of common stock                          (57,664)      (520)
Financing costs paid                                (2,891)       (11,196)
Net cash used in financing activities               (60,818)      (7,412)
Effect of exchange rates on cash                    (743)         365
Net decrease in cash                                (57,194)      (5,192)
Cash, beginning of period                           152,968       90,999
Cash, end of period                                 $ 95,774      $ 85,807

RAILAMERICA, INC. AND SUBSIDIARIES
SELECTED FINANCIAL INFORMATION
(Dollars in thousands)
(Unaudited)
                                        Three Months Ended September 30,
                                        2011               2012
Operating revenue                       $ 139,665  100.0%  $ 155,418  100.0%
Operating expenses:
Labor and benefits                      41,379     29.7%   47,536     30.6%
Equipment rents                         9,046      6.5%    9,320      6.0%
Purchased services                      10,996     7.9%    28,984     18.7%
Diesel fuel                             13,142     9.4%    13,170     8.5%
Casualties and insurance                4,006      2.9%    3,627      2.3%
Materials                               7,879      5.6%    9,238      5.9%
Joint facilities                        2,459      1.8%    2,132      1.4%
Other expenses                          9,271      6.6%    9,736      6.3%
Track maintenance expense reimbursement (3,879)    (2.8%)  -          0.0%
Net loss (gain) on sale of assets       8          0.0%    (1,337)    (0.9%)
Impairment of assets                    1,949      1.4%    -          0.0%
Depreciation and amortization           11,921     8.5%    11,264     7.2%
Total operating expenses                108,177    77.5%   133,670    86.0%
Operating income                        $ 31,488   22.5%   $ 21,748   14.0%
                                        Nine Months Ended September 30,
                                        2011               2012
Operating revenue                       $ 403,817  100.0%  $ 454,956  100.0%
Operating expenses:
Labor and benefits                      124,855    30.9%   136,316    30.0%
Equipment rents                         26,601     6.6%    27,655     6.1%
Purchased services                      31,429     7.8%    55,504     12.2%
Diesel fuel                             41,887     10.4%   39,805     8.7%
Casualties and insurance                11,095     2.7%    11,812     2.6%
Materials                               18,892     4.7%    25,393     5.6%
Joint facilities                        7,214      1.8%    7,478      1.6%
Other expenses                          29,876     7.4%    31,425     6.9%
Track maintenance expense reimbursement (13,162)   (3.3%)  -          0.0%
Net loss (gain) on sale of assets       151        0.0%    (1,495)    (0.3%)
Impairment of assets                    5,169      1.3%    -          0.0%
Depreciation and amortization           35,421     8.8%    33,264     7.3%
Total operating expenses                319,428    79.1%   367,157    80.7%
Operating income                        $ 84,389   20.9%   $ 87,799   19.3%

RAILAMERICA, INC. AND SUBSIDIARIES
Railroad Freight Revenue, Carloads and Average Freight Revenue
Per Carload
Comparison by Commodity Group (Unaudited)
                    Three Months Ended            Three Months Ended
                    September 30, 2011            September 30, 2012
                                         Average                      Average
                                         Freight                      Freight
                                         Revenue                      Revenue
                    Freight              per      Freight             per
                    Revenue    Carloads  Carload  Revenue   Carloads  Carload
                    (Dollars in thousands, except average freight revenue per
                    carload)
Chemicals           $ 16,220   24,037    $ 675    $ 18,149  24,858    $ 730
Agricultural
Products            15,911     29,044    548      16,419    30,179    544
Metallic Ores and
Metals              10,744     17,828    603      10,819    15,778    686
Non-Metallic
Minerals and
Products            10,144     21,508    472      10,734    21,718    494
Pulp, Paper and
Allied Products     11,043     18,639    592      10,143    17,207    589
Forest Products     7,937      12,647    628      9,356     14,112    663
Coal                8,738      35,335    247      8,646     37,495    231
Food or Kindred
Products            7,479      14,032    533      7,520     12,826    586
Waste and Scrap
Materials           6,435      14,965    430      6,728     14,130    476
Petroleum           3,746      8,274     453      5,267     10,059    524
Other               4,547      7,906     575      5,872     10,916    538
Motor Vehicles      1,715      2,760     621      3,395     5,079     668
                                                  $
Total               $ 104,659  206,975   $ 506    113,048   214,357   $ 527
                    Nine Months Ended             Nine Months Ended
                    September 30, 2011            September 30, 2012
                                         Average                      Average
                                         Freight                      Freight
                                         Revenue                      Revenue
                    Freight              per      Freight             per
                    Revenue    Carloads  Carload  Revenue   Carloads  Carload
                    (Dollars in thousands, except average freight revenue per
                    carload)
Chemicals           $ 48,708   73,435    $ 663    $ 52,335  72,914    $ 718
Agricultural
Products            48,888     93,900    521      52,033    99,076    525
Metallic Ores and
Metals              32,276     52,815    611      34,214    51,447    665
Non-Metallic
Minerals and
Products            29,633     64,132    462      31,541    63,907    494
Pulp, Paper and
Allied Products     31,256     52,800    592      29,028    50,920    570
Forest Products     22,695     36,735    618      28,155    42,658    660
Coal                25,127     110,762   227      24,276    108,813   223
Food or Kindred
Products            22,148     41,921    528      22,692    40,494    560
Waste and Scrap
Materials           18,105     43,575    415      19,506    42,682    457
Petroleum           13,698     27,936    490      16,249    30,833    527
Other               10,530     21,980    479      13,947    29,988    465
Motor Vehicles      4,797      8,121     591      10,446    16,132    648
                                                  $
Total               $ 307,861  628,112   $ 490    334,422   649,864   $ 515

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

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

Adjusted net income (loss) assists us in measuring our performance and
profitability of our operations without the impact of transaction costs
related to debt and credit facility extinguishment, exploration of strategic
alternatives, acquisitions, industrial development, impairment of assets and
swap termination. The following table sets forth the reconciliation of
Adjusted net income (loss).

                2011
(In thousands,
except per
share data)     Q1                  Q2                  Q3                  Q3 YTD
                AfterTax PerShare AfterTax PerShare AfterTax PerShare AfterTax PerShare
Net income      $4,085    $0.07     $8,700    $0.17     $9,058    $0.17     $21,843   $0.41
Add:
Amortization
of swap
termination
costs           2,243     0.04      1,953     0.04      1,675     0.03      5,871     0.11
Impairment of
assets          -         -         1,964     0.04      1,189     0.02      3,153     0.06
Loss on
extinguishment
of credit
facility        -         -         -         -         439       0.01      439       0.01
Acquisition
expense         44        0.00      148       0.00      124       0.00      316       0.01
Adjusted net
income          $6,372    $0.12     $12,765   $0.24     $12,485   $0.24     $31,622   $0.60
Weighted
Average common
shares
outstanding
(diluted)       54,651              52,282              52,083              53,006
                2012
(In thousands,
except per
share data)     Q1                  Q2                  Q3                  Q3 YTD
                AfterTax PerShare AfterTax PerShare AfterTax PerShare AfterTax PerShare
Net income
(loss)          ($40,219) ($0.80)   $11,399   $0.23     $5,945    $0.12     ($22,875) ($0.45)
Add:
Amortization
of swap
termination
costs           1,002     0.02      859       0.02      808       0.02      2,669     0.05
Loss on
extinguishment
of debt         51,938    1.03      3,570     0.07      -         -         55,507    1.10
Acquisition /
industrial
development /
strategic
alternatives
expense         239       0.00      1,376     0.03      13,351    0.26      14,967    0.30
Adjusted net
income          $12,961   $0.26     $17,203   $0.34     $20,105   $0.40     $50,268   $0.99
Weighted
Average common
shares
outstanding
(diluted)       50,518              50,578              50,603              50,440

Note: Numbers may not add due to rounding

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES

Operating Income Excluding 45G Benefit, Operating Ratio Excluding 45G Benefit,
Operating Income Excluding 45G Benefit, Asset Sales, Impairments & Strategic
Alternatives Expense and Operating Ratio Excluding 45G Benefit, Asset Sales,
Impairments & Strategic Alternatives Expense are supplemental measures of
profitability that are not calculated or presented in accordance with U.S.
generally accepted accounting principles ("GAAP"). We use non-GAAP financial
measures as a supplement to our GAAP results in order to provide a more
complete understanding of the factors and trends affecting our business.
However, Operating Income Excluding 45G Benefit, Operating Ratio Excluding 45G
Benefit, Operating Income Excluding 45G Benefit, Asset Sales, Impairments, &
Strategic Alternatives Expense and Operating Ratio Excluding 45G Benefit,
Asset Sales, Impairments & Strategic Alternatives Expense have limitations as
analytical tools. They are not measurements of our profitability under GAAP
and should not be considered as alternatives to Operating Income or Operating
Ratio as measures of profitability.

Operating Income Excluding 45G Benefit and Operating Ratio Excluding 45G
Benefit assist us in measuring our performance and profitability of our
operations without the impact of monetizing the 45G tax benefit. Operating
Income Excluding 45G Benefit, Asset Sales, Impairments & Strategic
Alternatives Expense and Operating Ratio Excluding 45G Benefit, Asset Sales,
Impairments & Strategic Alternatives Expense assist us in measuring our
performance and profitability of our operations without the impact of
monetizing the 45G tax benefit, Asset Sales, Impairments & Strategic
Alternatives Expense. The following table sets forth the reconciliation of
Operating Income Excluding 45G Benefit from our Operating Income, Operating
Ratio Excluding 45G Benefit from our Operating Ratio, Operating Income
Excluding 45G Benefit, Asset Sales, Impairments & Strategic Alternatives
Expense from our Operating Income and Operating Ratio Excluding 45G Benefit,
Asset Sales, Impairments & Strategic Alternatives Expense from our Operating
Ratio.

                                2011
($ in thousands)                Q1             Q2             Q3
Operating revenue               $124,937       $139,215       $139,665
Operating expense               100,734        110,517        108,177
Operating Income, reported      24,203         28,698         31,488
Operating ratio Reported                 80.6%          79.4%          77.5%
Less: Benefit from 45G credits  (4,150)  3.3%  (5,133)  3.7%  (3,879)  2.8%
Operating income excluding 45G
Benefit                         20,053         23,565         27,609
Operating ratio excluding 45G
Benefit                                  83.9%          83.1%          80.3%
Net (gain) loss on sale of
assets                          207      -0.2% (64)     0.0%  8        0.0%
Strategic Alternatives Expense  -        0.0%  -        0.0%  -        0.0%
Impairment of assets            -        0.0%  3,220    -2.3% 1,949    -1.4%
Operating income excluding 45G
Benefit, Asset Sales,
Impairments & Strategic
Alternatives Expense            20,260         26,721         29,566
Operating ratio, excluding 45G
Benefit, Asset Sales,
Impairments & Strategic
Alternatives Expense                     83.8%          80.8%          78.9%
                                2012
($ in thousands)                Q1             Q2             Q3
Operating revenue               $143,442       $156,096       $155,418
Operating expense               111,566        121,921        133,670
Operating Income, reported      31,876         34,175         21,748
Operating ratio Reported                 77.8%          78.1%          86.0%
Less: Benefit from 45G credits  -        0.0%  -        0.0%  -        0.0%
Operating income excluding 45G
Benefit                         31,876         34,175         21,748
Operating ratio excluding 45G
Benefit                                  77.8%          78.1%          86.0%
Strategic Alternatives Expense  -        0.0%  1,740    -1.1% 16,587   -10.7%
Net (gain) loss on sale of
assets                          (163)    0.1%  5        0.0%  (1,337)  0.9%
Operating income excluding 45G
Benefit, Asset Sales,
Impairments & Strategic
Alternatives Expense            31,713         35,920         36,998
Operating ratio, excluding 45G
Benefit, Asset Sales,
Impairments & Strategic
Alternatives Expense                     77.9%          77.0%          76.2%

Note: Numbers may not add due to rounding

SOURCE RailAmerica, Inc.

Website: http://www.railamerica.com
Contact: Donia Crime, +1-904-645-6200, Cell +1-404-271-1437
 
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