The Greenwich, Conn.-based company said North American freight-related revenues in the fourth quarter of 2016 included $10 million from a multi-year take-or-pay volume shortfall under a crude-by-rail contract. Operating income from G&W’s North American operations decreased 10.5% to $74.6 million; adjusted operating income was off 13.6% to $75.5 million on-year.
The operating ratio for North America was 76.7% in the fourth quarter of 2017, up from 74.1% in previous-year quarter. The adjusted operating ratio rose to 76.4% from 72.9%.
Overall, fourth-quarter operating revenues in North America increased 10.7% to $571.6 million from $516.5 million. Operating income increased 101.9% to $108.2 million; adjusted operating income increased 2.2% to $105.7 million. Earnings per share were $6.81 compared with $0.15 a year ago. Net income and earnings included a $371.9 million, or $5.94 per share, benefit from U.S. tax reform legislation passed in December.
North American traffic weakened in the fourth quarter by 1.9% to 395,422 carloads. Excluding 5,246 carloads from new operations, carloads fell 3.2% to 12,763 from the 2016 quarter, including 9,444 fewer carloads of coal and coke traffic in the Midwest, Western and Northeast regions, and 6,239 fewer carloads of agricultural products traffic, primarily in the Midwest and Central regions, partially offset by increases of 3,481 carloads of minerals and stone traffic in the Central and Western regions. All remaining traffic declined by a net 561 carloads.
In the fourth quarter, “revenues in each of our geographic segments, North America, Australia and the United Kingdom/Europe, finished the year in-line with our expectations,” said Jack Hellmann, President and Chief Executive of G&W. “In 2017, we generated adjusted free cash flow attributable to G&W of $250 million, a 3.6% increase over 2016, as we effectively managed both expenses and capital expenditures to more than offset flat revenue. In 2018, with an improving business outlook in each of our operating regions, we expect double-digit growth in both adjusted earnings per share and adjusted free cash flow.
“At the same time, we continue to evaluate acquisition and investment opportunities across G&W’s global footprint and have approximately $400 million of borrowing capacity under our revolving credit facility.”
Operating revenues from G&W’s Australian operations increased 23.1% to $75.5 million from $61.4 million, primarily due to new operations. Operating income increased from $2.8 million to $17.6 million. Adjusted operating income increased 66.1% to $22.5 million. Traffic increased 61.4%, to 132,999 carloads. Excluding 56,366 carloads from new operations, traffic declined 7% on lower coal, coke and agricultural volume.
New operations helped operating revenues from G&W’s U.K./European operations increase 32.3% to $175.8 million from $133 million. Revenues also included a $10.5-million favorable impact from foreign currency appreciation. Operating income was $16 million, compared with a loss of $32.6 million in 2016; adjusted operating income increased from $2.4 million to $7.6 million.
Same railroad revenues in Europe were off 3.8% on lower Continental Europe intermodal revenues following the discontinuation of some services as part of the restructuring of subsidiary ERS, partially offset by stronger U.K. intermodal, and aggregates in Poland and the U.K. Traffic weakened by 2.6%, to 274,007 carloads in the fourth quarter, on 9,458 fewer carloads of coal and coke from those countries, and 4,209 fewer intermodal carloads in Continental Europe, partially offset by an increase of 6,453 carloads of minerals and stone traffic in the U.K. and Poland.
Net income in the fourth quarter totaled $426.6 million, compared with $8.9 million in the fourth quarter of 2016. Stripping out the U.S. tax benefit and other items, adjusted net income was $48.6 million, off from $49.3 million a year ago.
For the full year, North American operating revenues increased 3% to $1.27 billion from $1.24 billion. Operating income was off 4.9% to $303.9 million from $319.6 million; adjusted operating income was 4.6% lower at $312.6 million from $327.6 million.
Operating revenues from G&W’s Australian unit increased 38.2% to $307.5 million from $222.6 million. Operating income increased to $77.3 million from $4.8 million; adjusted operating income increased to $82.2 million from $41.4 million, on contributions from the GRail acquisition.
Operating revenues from G&W’s U.K./European businesses increased 15.5% to $626.2 million from $542.2 million, due to the Pentalver acquisition. Operating revenues included a $13.4 million benefit from foreign currency appreciation. Operating income increased to $17.3 million from a loss of $34.7 million in 2016; adjusted operating income increased to $20.7 million from $5.2 million.
Overall, full-year net income was $549.1 million, compared with $141.1 million. Adjusted net income was $182 million, from $182.4 million in 2016.
Earnings were $8.79 compared with $2.42 a year ago. Adjusted earnings were $2.91, down from $3.13.