From: Courtney Gaskins <CGaskins@mercuryinsurance
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RailAmerica (RA) IPO due to price October 12 for trading October 13 |
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RA re-enters the public market after being taken private by Fortress Investment ( FIG), on February 15, 2007 |
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Revenue dropped 19% for the first six months of 2009, but profit increased, suggesting that any available fat was eliminated prior to the IPO |
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See ‘compare & contrast’ with Genesee & Wy (GWR) below. Favorable comparison but hard to believe FIG (or any buyout firm for that matter, such as Blackstone (BX) would leave much money on the table for investors |
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RailAmerica |
RA, C+, 7 |
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Post-IPO shares: 54.3mm |
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Short haul Roads |
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Jacksonville, FL |
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2007 |
2008 |
'08 six mos |
'09 six mos |
IPO Mkt |
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Rev ($mm) |
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$480 |
$508 |
$255 |
$206 |
Cap (mm) |
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Operating income % |
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14% |
17% |
16% |
22% |
$923 |
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Net aftertax income |
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$28 |
$17 |
$5 |
$19 |
@$17 |
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Net income % |
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6% |
3% |
2% |
9% |
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VALUATION RATIOS |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
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RailAmerica (RA) |
$923 |
2.2 |
24.3 |
1.4 |
2.3 |
39% |
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SCORECARD |
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Mgt |
Market |
Market Do- |
Proprie- |
Total |
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1-5, 5 is high |
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Growth |
mination |
tary |
rating |
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20 is perfect |
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2 |
2 |
2 |
1 |
7 |
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VALUATION RATIOS |
IPO Mrkt |
Price / |
Price / |
Price / |
Price / |
% offered |
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annualized June 6 mos |
Cap (mm) |
Sales |
Earnings |
BookValue |
TangibleBV |
in IPO |
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Compare & contrast |
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RailAmerica (RA) |
$923 |
2.2 |
24.3 |
1.4 |
2.3 |
@$17 |
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. 40 individual RailRds, 7500 track miles |
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Genesee & Wy (GWR) |
$1,333 |
2.5 |
31.3 |
2.8 |
12.9 |
@$32.52 |
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. 63 individual RailRds, 6800 track miles |
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BUSINESS |
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. Largest owner and operator of short line and regional freight railroads in North America, measured in terms of total track-miles, operating a portfolio of 40 individual railroads with approximately 7,500 miles of track in 27 states and three Canadian provinces.
. In addition, provides non-freight services such as railcar storage, demurrage, leases of equipment and real estate leases and use fees. |
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OPERATING RATIO |
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. Decreased to 78.1% in the six months ended June 30, 2009, from an operating ratio of 83.8% in the six months ended June 30, 2008
. Primarily due to a decrease in diesel fuel prices, reductions in labor expenses, maintenance expenditures for right of way improvements as a result of our cost savings initiatives
. Defined as total operating expenses divided by total operating revenue |
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AVERAGE CARLOAD REVENUE INCREASED |
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. Increase in the average revenue per carload to $409 in the six months ended June 30, 2009, from $404 in the comparable period in 2008
. Primarily due to rate growth and commodity mix. |
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EACH RAILROAD OPERATES INDEPENDENTLY |
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. Each of the 40 railroads operates independently with its own customer base. Railroads are spread out geographically and carry diverse commodities.
. Carloads: for the six months ended June 30, 2009, coal, agricultural products and chemicals accounted for 22%, 14% and 10%, respectively, of carloads.
. Freight revenue: as a percentage of freight revenue, which is impacted by several factors including the length of the haul, agricultural products, chemicals and coal generated 14%, 14% and 11%, respectively, for the six months ended June 30, 2009. |
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SELLING SHAREHOLDER |
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100% owned pre-IPO by Fortress Investment Fund
which took RA private on February 15, 2007 |
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USE OF $163mm IN IPO PROCEEDS |
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from sale of 10.5mm shares
(shareholders intend to also sell 10.5mm shares)
. $74mm to repay debt |
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. Also for working capital and general corporate purposes |
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