RAILAMERICA INC /DE - FORM 10-Q

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2011, or


o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number 001-32579

RAILAMERICA, INC.

(Exact name of registrant as specified in its charter)


Delaware		65-0328006

(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

7411 Fullerton Street, Suite 300, Jacksonville, Florida 32256
(Address of Principal Executive Offices) (Zip Code)

(800) 342-1131

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No þ

As of July 27, 2011 there were 52,165,159 shares of the registrant’s common stock outstanding.

RAILAMERICA, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

QUARTER ENDED JUNE 30, 2011


	Page
Part I. Financial Information		3
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3. Quantitative and Qualitative Disclosures about Market Risk		33
Item 4. Controls and Procedures		34

Part II. Other Information		35
Item 1A. Risk Factors		35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		35
Item 6. Exhibits		36

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Unaudited)


	June 30,		December 31,
	2011		2010
	(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents	$	116,482	$	152,968
Accounts and notes receivable, net of allowance of $8,270 and $6,767, respectively		98,743		74,668
Current deferred tax assets		27,499		12,769
Other current assets		25,311		15,200

Total current assets		268,035		255,605
Property, plant and equipment, net		998,957		981,622
Intangible assets		140,032		140,546
Goodwill		212,772		212,495
Other assets		12,410		13,385

Total assets	$	1,632,206	$	1,603,653


LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt	$	290	$	403
Accounts payable		81,114		66,258
Accrued expenses		56,618		36,913

Total current liabilities		138,022		103,574
Long-term debt, less current maturities		1,996		2,147
Senior secured notes		572,338		571,161
Deferred income taxes		222,718		202,985
Other liabilities		18,629		19,037

Total liabilities		953,703		898,904

Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value, 400,000,000 shares authorized; 52,167,610 shares issued and outstanding at June 30, 2011; and 54,859,261 shares issued and outstanding at December 31, 2010		522		549
Additional paid in capital and other		589,005		636,757
Retained earnings		78,288		65,503
Accumulated other comprehensive income		10,688		1,940

Total stockholders’ equity		678,503		704,749

Total liabilities and stockholders’ equity	$	1,632,206	$	1,603,653

The accompanying Notes are an integral part of the Consolidated Financial Statements.

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)


	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
	(In thousands, except per share data)
Operating revenue	$	139,215		$	119,457		$	264,152		$	234,398
Operating expenses:
Labor and benefits		41,859			37,885			83,476			75,636
Equipment rents		8,889			8,637			17,555			17,136
Purchased services		11,327			9,673			20,433			18,228
Diesel fuel		14,578			10,518			28,745			21,762
Casualties and insurance		4,955			4,806			7,089			8,439
Materials		5,928			3,874			11,013			7,799
Joint facilities		2,550			1,945			4,755			4,091
Other expenses		10,672			8,279			20,605			17,377
Track maintenance expense reimbursement		(5,133	)		—			(9,283	)		—
Net (gain) loss on sale of assets		(64	)		25			143			(9	)
Impairment of assets		3,220			—			3,220			—
Depreciation and amortization		11,736			10,755			23,500			21,678

Total operating expenses		110,517			96,397			211,251			192,137

Operating income		28,698			23,060			52,901			42,261
Interest expense (including amortization costs of $4,384, $6,870, $9,242 and $14,174, respectively)		(18,143	)		(22,153	)		(36,734	)		(44,857	)
Other income (loss)		495			(7,900	)		1,035			(7,441	)

Income (loss) from continuing operations before income taxes		11,050			(6,993	)		17,202			(10,037	)
Provision for (benefit from) income taxes		2,350			(2,772	)		4,417			(3,302	)

Net income (loss)	$	8,700		$	(4,221	)	$	12,785		$	(6,735	)


Basic earnings (loss) per common share:
Net income (loss)	$	0.17		$	(0.08	)	$	0.24		$	(0.12	)

Diluted earnings (loss) per common share:
Net income (loss)	$	0.17		$	(0.08	)	$	0.24		$	(0.12	)

Weighted Average common shares outstanding:
Basic		52,282			54,869			53,467			54,718
Diluted		52,282			54,869			53,467			54,718

The accompanying Notes are an integral part of the Consolidated Financial Statements.

RAILAMERICA, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	For the Six Months Ended
	June 30,
	2011			2010
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	12,785		$	(6,735	)
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		25,864			24,139
Amortization of swap termination costs		6,878			11,708
Net loss (gain) on sale or disposal of properties		143			(9	)
Impairment of assets		3,220			—
Loss on extinguishment of debt		—			8,357
Equity compensation costs		4,979			3,490
Deferred income taxes and other		1,533			(5,994	)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		(23,767	)		(12,399	)
Other current assets		(10,031	)		7,421
Accounts payable		11,914			6,677
Accrued expenses		19,691			21,884
Other assets and liabilities		(481	)		191

Net cash provided by operating activities		52,728			58,730


CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(36,185	)		(30,582	)
NECR government grant reimbursements		6,954			—
Proceeds from sale of assets		2,788			652
Acquisitions, net of cash acquired		(12,706	)		—
Deferred costs and other		(45	)		—

Net cash used in investing activities		(39,194	)		(29,930	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt		(263	)		(380	)
Repurchase of senior secured notes		—			(76,220	)
Repurchase of common stock		(50,091	)		—
Costs associated with sale of common stock		—			(106	)
Deferred financing costs paid		(119	)		(224	)

Net cash used in financing activities		(50,473	)		(76,930	)


Effect of exchange rates on cash		453			(234	)


Net decrease in cash		(36,486	)		(48,364	)
Cash, beginning of period		152,968			190,218

Cash, end of period	$	116,482		$	141,854

The accompanying Notes are an integral part of the Consolidated Financial Statements.

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The interim consolidated financial statements presented herein include the accounts of RailAmerica, Inc. and all of its subsidiaries (“RailAmerica” or the “Company”). All of RailAmerica’s consolidated subsidiaries are wholly-owned. All significant intercompany transactions and accounts have been eliminated in consolidation. These interim consolidated financial statements have been prepared by the Company, without audit, and accordingly do not contain all disclosures which would be required in a full set of financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). In the opinion of management, the unaudited financial statements for the three and six months ended June 30, 2011 and 2010, are presented on a basis consistent with the audited financial statements and contain all adjustments, consisting only of normal recurring adjustments, necessary to provide a fair statement of the results for interim periods. The results of operations for interim periods are not necessarily indicative of results of operations for the full year. The consolidated balance sheet data for 2010 was derived from the Company’s audited financial statements for the year ended December 31, 2010, but does not include all disclosures required by GAAP.

In October 2010, the Company entered into a new agreement with Canadian Pacific Railway Company (“CP”) to operate portions of the Ottawa Valley Railway (“OVRR”) line, a previously discontinued operation. As a result of this new operating agreement, this railroad is no longer considered discontinued for financial statement presentation purposes and thus, the results of operations of the OVRR have been reclassified to continuing operations on our statement of operations for all periods presented.

Organization

RailAmerica is a leading owner and operator of short line and regional freight railroads in North America, operating a portfolio of 43 individual railroads with approximately 7,400 miles of track in 27 states and three Canadian provinces. The Company’s principal operations consist of rail freight transportation and ancillary rail services.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

2. EARNINGS PER SHARE

For the three and six months ended June 30, 2011 and 2010, basic and diluted earnings (loss) per share are calculated using the weighted average number of common shares outstanding during the period. The basic earnings (loss) per share calculation includes all vested and unvested restricted shares as a result of their dividend participation rights.

The following is a summary of the income (loss) from continuing operations available for common stockholders and weighted average shares outstanding (in thousands):


	For the Three Months					For the Six Months
	Ended					Ended
	June 30,					June 30,
	2011		2010			2011		2010
Net income (loss) (basic and diluted)	$	8,700	$	(4,221	)	$	12,785	$	(6,735	)

Weighted average shares outstanding (basic and diluted)		52,282		54,869			53,467		54,718

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

3. STOCK-BASED COMPENSATION

The Company has the ability to issue restricted shares under its incentive compensation plan. Restricted shares granted to employees are scheduled to vest over three to five year periods. The grant date fair values of the restricted shares are based upon the fair market value of the Company at the time of grant.

Stock-based compensation expense related to restricted stock grants for the three months ended June 30, 2011 and 2010 was $2.4 million and $2.0 million, respectively. Stock-based compensation expense related to restricted stock grants for the six months ended June 30, 2011 and 2010 was $5.0 million and $3.5 million, respectively.

A summary of the status of restricted shares as of June 30, 2011, and the changes during the six months then ended and the weighted average grant date fair values are presented below:


	Time Based
Balance at December 31, 2010		1,476,225		$	12.59
Granted		545,393		$	13.71
Vested		(598,982	)	$	12.60
Cancelled		(18,528	)	$	14.07

Balance at June 30, 2011		1,404,108		$	13.00

4. ACQUISITIONS

On May 11, 2011, the Company acquired three short-line freight railroads in the state of Alabama for a total purchase price of $12.7 million. The acquisition was funded from existing cash on hand. The three railroads, known individually as the Three Notch Railroad (TNHR), the Wiregrass Central Railroad (WGCR), and the Conecuh Valley Railroad (COEH), comprise approximately 70 miles and primarily haul agricultural and chemical products. The railroads were acquired from affiliates of Gulf and Ohio Railways, Inc. The results of operations of the three railroads have been included in the Company’s consolidated financial statements since May 11, 2011, the acquisition date.

In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations Topic, the acquisition was accounted for under the acquisition method of accounting. Assets acquired and liabilities assumed were recorded at their estimated fair value.

The preliminary allocation of purchase price is as follows (in thousands):


Intangible assets	$	1,212
Property, plant and equipment		11,645

Total assets acquired		12,857

Environmental remediation liabilities		(151	)

Total liabilities assumed		(151	)

Purchase price	$	12,706

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Definite-lived intangible assets were assigned the following amounts and weighted average amortization periods (dollars in thousands):


			Weighted
	Value		Average Life
	Assigned		(Years)
Customer relationships	$	620		10.0
Lease right of way	$	592		15.0

On July 1, 2010, the Company acquired Atlas Railroad Construction Company (“Atlas”) and related assets for $23.9 million in cash including closing adjustments for working capital, which were approximately $2.4 million, net of cash acquired. The acquisition was funded from existing cash on hand. Founded in 1954, Atlas is a railroad engineering, construction, maintenance and repair company operating primarily in the U.S. Midwest and Northeast. Atlas provides railroad construction services principally to short line and regional railroads, public-transit agencies and industrial customers. The results of operations of Atlas have been included in the Company’s consolidated financial statements since July 1, 2010, the acquisition date.

5. LONG-TERM DEBT

$740 Million 9.25% Senior Secured Notes

On June 23, 2009, the Company sold $740.0 million of 9.25% senior secured notes due July 1, 2017 in a private offering, for gross proceeds of $709.8 million after deducting the initial purchaser’s fees and original issue discount. The notes are secured by first-priority liens on substantially all of the Company’s and the guarantors’ assets. The guarantors are defined essentially as the Company’s existing and future wholly-owned domestic restricted subsidiaries.

On November 2, 2009, the Company commenced an exchange offer of the privately placed senior secured notes for senior secured notes which have been registered under the Securities Act of 1933, as amended. The registered notes have terms that are substantially identical to the privately placed notes. The exchange offer expired on December 2, 2009.

On November 16, 2009, the Company redeemed $74 million aggregate principal amount of the notes at a cash redemption price of 103%, plus accrued interest thereon to, but not including, the redemption date. On June 24, 2010, the Company redeemed an additional $74 million aggregate principal amount of the notes at a cash redemption price of 103%, plus accrued interest thereon to, but not including, the redemption date.

$40 Million ABL Facility

In connection with the issuance of the senior secured notes on June 23, 2009, the Company also entered into a $40 million Asset Backed Loan Facility (“ABL Facility”). The ABL Facility matures on June 23, 2013 and bears interest at LIBOR plus 4.0%. Obligations under the ABL Facility are secured by a first-priority lien on the ABL collateral. ABL collateral includes accounts receivable, deposit accounts, securities accounts and cash. As of June 30, 2011, the Company had no outstanding balance under the Facility and approximately $24.5 million of undrawn availability, taking into account borrowing base limitations.

The ABL Facility and indenture governing the senior secured notes contain various covenants and restrictions that will limit the ability of the Company and its restricted subsidiaries to incur additional indebtedness, pay dividends, make certain investments, sell or transfer certain assets, create liens, designate subsidiaries as unrestricted subsidiaries, consolidate, merge or sell substantially all the assets, and enter into certain transactions with affiliates. It is anticipated that proceeds from any future borrowings would be used for general corporate purposes.

On June 10, 2010, the Company entered into Amendment No. 1 to its ABL Facility improving certain terms of the ABL Facility. Among other things, Amendment No. 1 eliminated the LIBOR-based interest rate floor of 2.5%, modified the borrowing base calculation and reporting requirements to require less frequent financial reporting in certain circumstances, adjusted the limitations on permitted acquisitions and restricted payments and amended the financial covenants to incorporate cash balances in certain definitions.

On February 23, 2011, the Company entered into Amendment No. 2 to its ABL Facility. This amendment adjusted certain terms of the ABL Facility and increased the threshold for Restricted Payments, as defined in the ABL Facility, to allow share repurchases of the Company’s common stock in an amount not to exceed $75 million without affecting other Restricted Payment baskets.

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

Effective beginning second quarter 2009, ASC 825, Financial Instruments, requires disclosures about fair value of financial instruments in quarterly reports as well as in annual reports. For RailAmerica, this statement applies to certain investments, such as cash equivalents, and long-term debt. Also, ASC 820, Fair Value Measurement, clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.

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 senior secured notes is based on secondary market indicators. The carrying amount of the Company’s other long term debt approximates its fair value.

The carrying amounts and estimated fair values of the Company’s financial instruments were as follows (in thousands):


	June 30, 2011
	Carrying		Fair
	Amount		Value
Cash and cash equivalents	$	116,482	$	116,482
9.25% Senior secured notes	$	572,338	$	649,720

7. DERIVATIVE FINANCIAL INSTRUMENTS

The Company adopted Derivatives and Hedging Topic, ASC 815-10-65, on January 1, 2009, which enhances the disclosure requirements about an entity’s derivative instruments and hedging activities.

On February 14, 2007, the Company entered into an interest rate swap with a termination date of February 15, 2014. The total notional amount of the swap started at $425 million for the period from February 14, 2007 through November 14, 2007, increased to a total notional amount of $525 million for the period from November 15, 2007 through November 14, 2008, and ultimately increased to $625 million for the period from November 15, 2008 through February 15, 2014. Under the terms of the interest rate swap, the Company was required to pay a fixed interest rate of 4.9485% on the notional amount while receiving a variable interest rate equal to the 90 day LIBOR. This swap qualified, was designated and was accounted for as a cash flow hedge under ASC 815. This interest rate swap agreement was terminated in June 2009, in connection with the repayment of the bridge credit facility, and thus had no fair value at June 30, 2011 or December 31, 2010. Pursuant to ASC 815, the fair value balance of the swap at termination remains in accumulated other comprehensive loss, net of tax, and is amortized to interest expense over the remaining life of the original swap (through February 14, 2014). Interest expense for the quarters ended June 30, 2011 and 2010, included $3.2 million and $5.6 million of amortization expense related to the terminated swap, respectively. Interest expense for the six months ended June 30, 2011 and 2010, included $6.9 million and $11.7 million of amortization expense related to the terminated swap, respectively. As a result of the $74 million redemption of the notes during June 2010, an additional $1.7 million of unamortized expense was recognized during the six months ended June 30, 2010. This was the result of the face value of outstanding senior secured notes dropping below the notional amount of the swap. As of June 30, 2011, accumulated other comprehensive income included $8.6 million, net of tax, of unamortized loss relating to the terminated swap. Reclassifications from accumulated other comprehensive income to interest expense in the next twelve months will be approximately $8.4 million, or $5.1 million, net of tax.

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

8. COMMON STOCK TRANSACTIONS

During the three months ended June 30, 2011 and 2010, the Company accepted 32,324 and 24,114 shares in lieu of cash payments by employees for payroll tax withholdings relating to stock based compensation. During the six months ended June 30, 2011 and 2010, the Company accepted 181,747 and 104,784 shares in lieu of cash payments by employees for payroll tax withholdings relating to stock based compensation.

Stock Repurchase Program

On February 23, 2011, the Company announced that its Board of Directors had approved a stock repurchase program. Under the program, the Company was authorized to repurchase up to $50.0 million of its outstanding shares of common stock from time to time at prevailing prices in the open market or in privately negotiated transactions. The timing and actual number of shares repurchased depended on a variety of factors including the price and availability of the Company’s shares, trading volume and general market conditions.

During the three months ended June 30, 2011, the Company repurchased 970,852 shares in open market transactions at a weighted average price of $16.92 per share. During the six months ended June 30, 2011 the Company completed the stock repurchase program, repurchasing a total of 3,036,769 shares at a weighted average price of $16.46 per share.

9. TRACK MAINTENANCE AGREEMENT

In the first quarter of 2011, the Company entered into a track maintenance agreement with an unrelated third-party customer (“Shipper”). Under the agreement, the Shipper pays for qualified railroad track maintenance expenditures during 2011 in exchange for the assignment of railroad track miles which permits the Shipper to claim certain tax credits pursuant to Section 45G of the Internal Revenue Code. For the three and six months ended June 30, 2011, the Shipper paid for $5.3 million and $9.5 million of maintenance expenditures, respectively, and $4.1 million of capital expenditures during the three months ended June 30, 2011. The Company incurred $0.2 million and $0.3 million of consulting fees related to the agreement during the three and six months ended June 30, 2011, respectively. The track maintenance tax credit was not renewed by Congress for 2010 until December 2010. This resulted in no Shipper reimbursements in the three or six months ended June 30, 2010.

10. INCOME TAX PROVISION

The overall income tax rate for the three months ended June 30, 2011 and 2010 for continuing operations was a provision of 21.3% and a benefit of 39.7%, respectively. The overall tax rate for the three months ended June 30, 2011 was favorably impacted by an adjustment of our deferred tax balances resulting from a change in tax law ($1.5 million). The Company’s overall tax rate for the three months ended June 30, 2010 was impacted by the jurisdictional mix of operating income, non-deductible permanent items and an expense relating to stock-based compensation plans ($0.2 million).

The overall income tax rate for the six months ended June 30, 2011 and 2010 for continuing operations was a provision of 25.7% and a benefit of 32.9%, respectively. The overall tax rate for the six months ended June 30, 2011 was favorably impacted by an adjustment of our deferred tax balances resulting from a change in tax law ($1.6 million). The Company’s overall tax rate for the six months ended June 30, 2010 was impacted by the jurisdictional mix of operating income, non-deductible permanent items and an expense relating to stock-based compensation plans ($1.1 million).

A reconciliation of the beginning and ending amount of unrecognized tax positions is as follows (in thousands):


Balance at January 1, 2011	$	5,170
Additions for tax positions of prior years		10
Lapse of statute of limitations		—

Balance at June 30, 2011	$	5,180

11. COMPREHENSIVE INCOME (LOSS)

Other comprehensive income (loss) consists of foreign currency translation adjustments, unrealized gains and losses on derivative instruments designated as hedges and unrealized actuarial gains and losses related to pension benefits. As of June 30, 2011,

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

accumulated other comprehensive income consisted of $8.6 million of unrealized losses, net of tax, related to hedging transactions, $0.7 million of unrealized actuarial gains, net of tax, associated with pension benefits and $18.5 million of cumulative translation adjustment gains. The following table reconciles net income (loss) to comprehensive income (loss) for the three and six months ended June 30, 2011 and 2010 (in thousands):


	For the Three Months					For the Six Months
	Ended June 30,					Ended June 30,
	2011		2010			2011		2010
Net income (loss)	$	8,700	$	(4,221	)	$	12,785	$	(6,735	)
Other comprehensive income:
Amortization of terminated swap costs, net of taxes of $1,269, $2,141, $2,728 and $4,449, respectively		1,931		3,494			4,149		7,259
Write-off of terminated swap costs, net of taxes of $0, $642, $0, and $642, respectively		—		1,047			—		1,047
Change in cumulative translation adjustments		692		(4,984	)		4,599		(2,054	)

Total comprehensive income (loss)	$	11,323	$	(4,664	)	$	21,533	$	(483	)

12. PENSION DISCLOSURES

Components of the net periodic pension and benefit cost for the three and six months ended June 30, 2011 and 2010 were as follows (in thousands):


	Pension Benefits
	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2011			2010			2011			2010
Service cost	$	57		$	32		$	110		$	94
Interest cost		163			170			324			336
Expected return on plan assets		(173	)		(135	)		(345	)		(268	)
Amortization of net actuarial loss		14			13			29			27
Amortization of prior service costs		25			27			50			54

Net cost recognized	$	86		$	107		$	168		$	243


	Health and Welfare
	Benefits
	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2011			2010			2011			2010
Service cost	$	10		$	11		$	19		$	21
Interest cost		30			32			60			65
Amortization of net actuarial gain		(21	)		(15	)		(41	)		(30	)

Net cost recognized	$	19		$	28		$	38		$	56

13. COMMITMENTS AND CONTINGENCIES

In the ordinary course of conducting its business, the Company becomes involved in various legal actions and other claims. Litigation is subject to many uncertainties, the outcome of individual litigated matters is not predictable with assurance, and it is reasonably possible that some of these matters may be decided unfavorably to the Company. It is the opinion of management that the ultimate liability, if any, with respect to these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Settlement costs associated with litigation are included in Casualties and insurance on the Consolidated Statements of Operations.

The Company’s operations are subject to extensive environmental regulation. The Company records liabilities for remediation and restoration costs related to past activities when the Company’s obligation is probable and the costs can be reasonably estimated. Costs of ongoing compliance activities to current operations are expensed as incurred. The Company’s recorded liabilities for these issues represent its best estimate (on an undiscounted basis) of remediation and restoration costs that may be required to comply with present

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

laws and regulations. It is the opinion of management that the ultimate liability, if any, with respect to these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company is subject to claims for employee work-related and third-party injuries. Work-related injuries for employees are primarily subject to the Federal Employers’ Liability Act (“FELA”). The Company retains an independent actuarial firm to assist management in assessing the value of personal injury claims and cases. An analysis has been performed by an independent actuarial firm and is reviewed by management. The methodology used by the actuary includes a development factor to reflect growth or reduction in the value of these personal injury claims. It is based largely on the Company’s historical claims and settlement experience. Actual results may vary from estimates due to the type and severity of the injury, costs of medical treatments and uncertainties in litigation.

On August 28, 2005, a railcar containing styrene located on the Company’s Indiana & Ohio Railway (“IORY”) property in Cincinnati, Ohio, began venting, due to a chemical reaction. Styrene is a potentially hazardous chemical used to make plastics, rubber and resin. In response to the incident, local public officials temporarily evacuated residents and businesses from the immediate area until public authorities confirmed that the tank car no longer posed a threat. As a result of the incident, several civil lawsuits were filed, and claims submitted, against the Company and others connected to the tank car. Motions for class action certification were filed. Settlements were achieved with what the Company believes to be all potential individual claimants. In cooperation with the Company’s insurer, the Company paid settlements to a substantial number of affected businesses, as well. All business interruption claims were resolved. Total payments exceeded the self insured retention, so the IORY’s liability for civil matters was exhausted. The incident also triggered inquiries from the Federal Railroad Administration (“FRA”) and other federal, state and local authorities charged with investigating such incidents. A settlement was reached with the FRA, requiring payment of a $50,000 fine but no admission of liability by the IORY. Because of the chemical release, the U.S. Environmental Protection Agency (“U.S. EPA”) investigated whether criminal negligence contributed to the incident, and whether charges should be pressed. A series of conferences with the Company’s attorneys and the U.S. EPA attorneys took place through 2009 and into 2011, at which times legal theories and evidence were discussed in an effort to influence the U.S. EPA’s charging decision. The IORY submitted a proffer addendum in May 2009 analyzing its compliance under the Clean Air Act. The statute of limitations was extended by a tolling agreement as to the IORY only (the Company had been dropped from this violation) through February 27, 2011. The U.S. EPA attorneys decided not to press charges and allowed the statute of limitations to lapse resolving this matter. As a result, the Company released approximately $1.2 million previously accrued for this incident, in Casualties and insurance on the Consolidated Statements of Operations, in February 2011.

Government grants

In August 2010, the Company’s New England Central Railroad (“NECR”) was awarded a federal government grant of $50 million through the State of Vermont to improve and upgrade the track on its property. As part of the agreement, the NECR has committed to contribute up to approximately $19 million of capital funds and materials to the project. The project is expected to be completed within two years from the grant date. The Company accounts for grant liabilities as contra-assets within property, plant and equipment and they are amortized over the life of the related asset.

14. RELATED PARTY TRANSACTIONS

Investment funds managed by Fortress Investment Group LLC (“Fortress”) own a majority of the Company’s stock. As of January 1, 2010, the Company was party to five short-term operating lease agreements with Florida East Coast Railway LLC, (“FECR”) an entity also owned by investment funds managed by affiliates of Fortress. During 2009, the Company entered into five additional lease agreements with the same entity. All but one of these agreements relate to the leasing of locomotives between the companies for ordinary business operations, which are based on current market rates for similar assets. With respect to such agreements, during the quarters ended June 30, 2011 and 2010, on a net basis the Company paid FECR $0.3 million and $0.5 million, respectively. During the six months ended June 30, 2011 and 2010, on a net basis the Company paid FECR $0.6 million and $1.0 million, respectively.

The remaining lease relates to the sub-leasing of office space by FECR to the Company. During the quarters ended June 30, 2011 and 2010, FECR billed the Company $0.2 million and $0.2 million, respectively, under the sub-lease agreement. During the six months ended June 30, 2011 and 2010, FECR billed the Company $0.4 million and $0.6 million, respectively, under the sub-lease agreement. As of June 30, 2011 the Company had no amounts due to FECR under these lease agreements.

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Effective January 1, 2010, the Company entered into a Shared Services Agreement with FECR and its affiliates which provides for services to be provided from time to time by certain of our senior executives and other employees and for certain reciprocal administrative services, including finance, accounting, human resources, purchasing and legal. The agreements are generally consistent with arms-length arrangements with third parties providing similar services. The net amount of payments to be made by us under these agreements is expected to be less than $1 million in the aggregate on an annual basis. As of June 30, 2011, the Company had a receivable of $0.1 million due from FECR under this agreement.

In October 2009, certain of the Company’s executives entered into consulting agreements with FECR. Under the terms of these agreements, the executives are to provide assistance to the FECR with strategic initiatives designed to grow FECR’s revenue and enhance the value of the franchise. Consideration for the executive’s performance is in the form of restricted stock units of FECR common stock that vest 25% over four years. Since the consulting agreements are with a related-party, the Company is required to recognize compensation expense over the vesting period in labor and benefits expense with a corresponding credit in other income (loss) for management fee income. During the three and six months ended June 30, 2011, the Company recognized $0.2 million and $0.4 million of compensation expense and $0.2 million and $0.4 million of management fee income related to these consulting agreements, respectively.

In October 2009, certain of the Company’s executives entered into consulting agreements with Florida East Coast Industries, Inc., (“FECI”) an entity also owned by investment funds managed by affiliates of Fortress. Under the terms of these agreements, the executives are to provide assistance to FECI with strategic initiatives designed to enhance the value of FECI’s rail-related assets. Consideration for the executive’s performance is in the form of restricted stock units of FECI common stock that vest 50%, 25%, and 25% over three years. Since the consulting agreements are with a related-party, the Company is required to recognize compensation expense over the vesting period in labor and benefits expense with a corresponding credit in other income (loss) for management fee income. During the three and six months ended June 30, 2011, the Company recognized $0.3 million and $0.5 million of compensation expense and $0.3 million and $0.5 million of management fee income related to these consulting agreements, respectively.

Effective June 1, 2011, the Company’s wholly-owned subsidiary, Atlas, entered into an agreement to provide engineering and construction services to the FECR. As of June 30, 2011, Atlas had recorded a nominal amount of revenue related to this project.

15. IMPAIRMENT OF ASSETS

During the second quarter of 2011 the Company evaluated its locomotive usage and determined that certain of its surplus locomotives were not expected to be placed back into service. As a result of this determination, the Company engaged a locomotive and railcar market advisor to assist management in evaluating the market value of the identified locomotives, based on recent sales and current market conditions. The evaluation resulted in the Company recording an impairment of $3.2 million in accordance with ASC 360, Property, Plant, and Equipment.

16. OTHER CURRENT ASSETS

Other current assets include $ 14.5 million and $ 4.8 million of materials and supplies as of June 30, 2011 and December 31, 2010, respectively.

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

17. GUARANTOR FINANCIAL STATEMENT INFORMATION

In June 2009, the Company sold in a private offering $740.0 million aggregate principal amount of 9.25% senior secured notes which mature on July 1, 2017. In October 2009, the Company filed with the SEC a Form S-4 registration statement to exchange the privately placed notes with registered notes. The terms of the registered notes are substantially identical to those of the privately placed notes. The notes are jointly and severally guaranteed on a senior secured basis by all of the Company’s existing and future wholly-owned domestic restricted subsidiaries, with certain exceptions. All guarantor subsidiaries are 100% owned by the Company. All amounts in the following tables are in thousands.

RailAmerica, Inc.

Consolidating Balance Sheet
June 30, 2011


					Non
	Company		Guarantor		Guarantor
	(Parent)		Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—	$	111,470	$	5,012	$	—		$	116,482
Accounts and notes receivable, net of allowance		3,502		80,249		14,992		—			98,743
Current deferred tax assets		27,499		—		—		—			27,499
Other current assets		317		21,786		3,208		—			25,311

Total current assets		31,318		213,505		23,212		—			268,035

Property, plant and equipment, net		725		912,836		85,396		—			998,957
Intangible Assets		—		102,120		37,912		—			140,032
Goodwill		—		204,679		8,093					212,772
Other assets		11,479		931		—		—			12,410
Investment in and advances to affiliates		1,267,114		1,120,542		46,999		(2,434,655	)		—

Total assets	$	1,310,636	$	2,554,613	$	201,612	$	(2,434,655	)	$	1,632,206


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Current maturities of long-term debt	$	—	$	290	$	—	$	—		$	290
Accounts payable		5,382		63,254		12,478		—			81,114
Accrued expenses		29,327		23,730		3,561		—			56,618

Total current liabilities		34,709		87,274		16,039		—			138,022

Long-term debt, less current maturities		—		1,996		—		—			1,996
Senior secured notes		572,338		—		—		—			572,338
Deferred income taxes		19,573		181,058		22,087		—			222,718
Other liabilities		5,513		12,640		476		—			18,629
Stockholders’ equity:
Common stock		522		1,493		—		(1,493	)		522
Additional paid-in capital		589,005		2,231,044		127,263		(2,358,307	)		589,005
Retained earnings		78,288		38,974		15,603		(54,577	)		78,288
Accumulated other comprehensive income		10,688		134		20,144		(20,278	)		10,688

Total stockholders’ equity		678,503		2,271,645		163,010		(2,434,655	)		678,503

Total liabilities and stockholders’ equity	$	1,310,636	$	2,554,613	$	201,612	$	(2,434,655	)	$	1,632,206

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

RailAmerica, Inc.

Consolidating Statement of Operations
For the three months ended June 30, 2011


							Non
	Company			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating revenue	$	61		$	122,567		$	16,587		$	—		$	139,215

Operating expenses:
Labor and benefits		6,130			31,331			4,398			—			41,859
Equipment rents		27			8,343			519			—			8,889
Purchased services		1,478			9,233			616			—			11,327
Diesel fuel		—			12,301			2,277			—			14,578
Casualties and insurance		221			4,384			350			—			4,955
Materials		33			5,462			433			—			5,928
Joint facilities		—			2,543			7			—			2,550
Other expenses		913			8,650			1,109			—			10,672
Track maintenance expense reimbursement		(5,133	)		—			—			—			(5,133	)
Net gain on sale of assets		—			(58	)		(6	)		—			(64	)
Impairment of assets		—			3,193			27			—			3,220
Depreciation and amortization		5			10,791			940			—			11,736

Total operating expenses		3,674			96,173			10,670			—			110,517

Operating (loss) income		(3,613	)		26,394			5,917			—			28,698
Interest expense		(3,624	)		(13,509	)		(1,010	)		—			(18,143	)
Equity in earnings of subsidiaries		11,112			—			—			(11,112	)		—
Other income (loss)		7,175			(4,557	)		(2,123	)		—			495

Income from continuing operations before income taxes		11,050			8,328			2,784			(11,112	)		11,050
Provision for income taxes		2,350			—			—			—			2,350

Net income	$	8,700		$	8,328		$	2,784		$	(11,112	)	$	8,700

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

RailAmerica, Inc.

Consolidating Statement of Operations
For the six months ended June 30, 2011


							Non
	Company			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating revenue	$	115		$	229,755		$	34,282		$	—		$	264,152

Operating expenses:
Labor and benefits		13,261			61,522			8,693			—			83,476
Equipment rents		50			16,345			1,160			—			17,555
Purchased services		3,618			15,551			1,264			—			20,433
Diesel fuel		—			23,883			4,862			—			28,745
Casualties and insurance		442			5,898			749			—			7,089
Materials		75			10,074			864			—			11,013
Joint facilities		—			4,740			15			—			4,755
Other expenses		1,694			16,306			2,605			—			20,605
Track maintenance expense reimbursement		(9,283	)		—			—			—			(9,283	)
Net loss (gain) on sale of assets		—			160			(17	)		—			143
Impairment of assets		—			3,193			27			—			3,220
Depreciation and amortization		9			21,629			1,862			—			23,500

Total operating expenses		9,866			179,301			22,084			—			211,251

Operating (loss) income		(9,751	)		50,454			12,198			—			52,901
Interest expense		(7,732	)		(26,999	)		(2,003	)		—			(36,734	)
Equity in earnings of subsidiaries		20,286			—			—			(20,286	)		—
Other income (loss)		14,399			(9,118	)		(4,246	)		—			1,035

Income from continuing operations before income taxes		17,202			14,337			5,949			(20,286	)		17,202
Provision for income taxes		4,417			—			—			—			4,417

Net income	$	12,785		$	14,337		$	5,949		$	(20,286	)	$	12,785

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

RailAmerica, Inc.

Consolidating Statement of Cash Flows
For the six months ended June 30, 2011


							Non
	Company			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income	$	12,785		$	14,337		$	5,949		$	(20,286	)	$	12,785
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including amortization costs classified in interest expense		2,152			21,861			1,851			—			25,864
Equity in earnings of subsidiaries		(20,286	)		—			—			20,286			—
Amortization of swap termination costs		6,878			—			—			—			6,878
Net loss (gain) on sale or disposal of properties		—			160			(17	)		—			143
Impairment of assets		—			3,193			27			—			3,220
Equity compensation costs		4,979			—			—			—			4,979
Deferred income taxes and other		1,532			—			1			—			1,533
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		(3,386	)		(14,329	)		(6,052	)		—			(23,767	)
Other current assets		(112	)		(7,844	)		(2,075	)		—			(10,031	)
Accounts payable		(4,588	)		9,096			7,406			—			11,914
Accrued expenses		25,388			(5,885	)		188			—			19,691
Other assets and liabilities		20			(456	)		(45	)		—			(481	)

Net cash provided by operating activities		25,362			20,133			7,233			—			52,728


Cash flows from investing activities:
Purchase of property, plant and equipment		(249	)		(34,405	)		(1,531	)		—			(36,185	)
NECR government grant reimbursements		—			6,954			—			—			6,954
Proceeds from sale of assets		—			2,552			236			—			2,788
Acquisitions, net of cash acquired		—			(12,706	)		—			—			(12,706	)
Deferred costs and other		(45	)		—			—			—			(45	)

Net cash used in investing activities		(294	)		(37,605	)		(1,295	)		—			(39,194	)


Cash flows from financing activities:
Principal payments on long-term debt		—			(263	)		—			—			(263	)
Receipts / (disbursements) on intercompany debt		25,023			(8,011	)		(17,012	)		—			—
Repurchase of common stock		(50,091	)		—			—			—			(50,091	)
Deferred financing costs paid		—			(119	)		—			—			(119	)

Net cash used in financing activities		(25,068	)		(8,393	)		(17,012	)		—			(50,473	)


Effect of exchange rates on cash		—			—			453			—			453


Net decrease in cash		—			(25,865	)		(10,621	)		—			(36,486	)
Cash, beginning of period		—			137,335			15,633			—			152,968

Cash, end of period	$	—		$	111,470		$	5,012		$	—		$	116,482

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

RailAmerica, Inc.

Consolidating Balance Sheet
December 31, 2010


						Non
	Company			Guarantor		Guarantor
	(Parent)			Subsidiaries		Subsidiaries		Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—		$	137,335	$	15,633	$	—		$	152,968
Accounts and notes receivable, net of allowance		116			65,920		8,632		—			74,668
Current deferred tax assets		12,769			—		—		—			12,769
Other current assets		205			13,976		1,019		—			15,200

Total current assets		13,090			217,231		25,284		—			255,605

Property, plant and equipment, net		485			898,155		82,982		—			981,622
Intangible assets		—			103,935		36,611		—			140,546
Goodwill		—			204,679		7,816		—			212,495
Other assets		12,401			984		—		—			13,385
Investment in and advances to affiliates		1,265,556			1,119,507		33,534		(2,418,597	)		—

Total assets	$	1,291,532		$	2,544,491	$	186,227	$	(2,418,597	)	$	1,603,653


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Current maturities of long-term debt	$	—		$	403	$	—	$	—		$	403
Accounts payable		7,311			54,150		4,797		—			66,258
Accrued expenses		3,939			29,362		3,612		—			36,913

Total current liabilities		11,250			83,915		8,409		—			103,574

Long-term debt, less current maturities		—			2,147		—		—			2,147
Senior secured notes		571,161			—		—		—			571,161
Deferred income taxes		(1,087	)		182,747		21,325		—			202,985
Other liabilities		5,459			13,113		465		—			19,037
Stockholders’ equity:
Common stock		549			1,493		—		(1,493	)		549
Additional paid-in capital		636,757			2,218,338		130,816		(2,349,154	)		636,757
Retained earnings		65,503			42,633		9,653		(52,286	)		65,503
Accumulated other comprehensive income		1,940			105		15,559		(15,664	)		1,940

Total stockholders’ equity		704,749			2,262,569		156,028		(2,418,597	)		704,749

Total liabilities and stockholders’ equity	$	1,291,532		$	2,544,491	$	186,227	$	(2,418,597	)	$	1,603,653

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

RailAmerica, Inc.

Consolidating Statement of Operations
For the three months ended June 30, 2010


							Non
	Company			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating revenue	$	51		$	103,647		$	15,759		$	—		$	119,457

Operating expenses:
Labor and benefits		5,514			28,393			3,978			—			37,885
Equipment rents		28			8,144			465			—			8,637
Purchased services		1,907			7,041			725			—			9,673
Diesel fuel		—			8,859			1,659			—			10,518
Casualties and insurance		264			3,558			984			—			4,806
Materials		32			3,435			407			—			3,874
Joint facilities		—			1,938			7			—			1,945
Other expenses		816			6,714			749			—			8,279
Track maintenance expense reimbursement		—			—			—			—			—
Net loss (gain) on sale of assets		1			(34	)		58			—			25
Depreciation and amortization		2			9,975			778			—			10,755

Total operating expenses		8,564			78,023			9,810			—			96,397

Operating (loss) income		(8,513	)		25,624			5,949			—			23,060
Interest expense		(5,759	)		(15,276	)		(1,118	)		—			(22,153	)
Equity in earnings of subsidiaries		9,448			—			—			(9,448	)		—
Other loss		(2,003	)		(4,813	)		(1,084	)		—			(7,900	)

(Loss) income from continuing operations before income taxes		(6,827	)		5,535			3,747			(9,448	)		(6,993	)
Benefit from income taxes		(2,606	)		(28	)		(138	)		—			(2,772	)

Net (loss) income	$	(4,221	)	$	5,563		$	3,885		$	(9,448	)	$	(4,221	)

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

RailAmerica, Inc.

Consolidating Statement of Operations
For the six months ended June 30, 2010


							Non
	Company			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Operating revenue	$	101		$	203,212		$	31,085		$	—		$	234,398

Operating expenses:
Labor and benefits		11,734			55,971			7,931			—			75,636
Equipment rents		62			16,279			795			—			17,136
Purchased services		3,675			13,287			1,266			—			18,228
Diesel fuel		—			18,152			3,610			—			21,762
Casualties and insurance		528			6,668			1,243			—			8,439
Materials		73			6,941			785			—			7,799
Joint facilities		—			4,071			20			—			4,091
Other expenses		1,646			14,143			1,588			—			17,377
Track maintenance expense reimbursement		—			—			—			—			—
Net loss (gain) on sale of assets		1			(65	)		55			—			(9	)
Depreciation and amortization		53			20,102			1,523			—			21,678

Total operating expenses		17,772			155,549			18,816			—			192,137

Operating (loss) income		(17,671	)		47,663			12,269			—			42,261
Interest expense		(12,030	)		(30,581	)		(2,246	)		—			(44,857	)
Equity in earnings of subsidiaries		15,104			—			—			(15,104	)		—
Other income (loss)		4,338			(9,612	)		(2,167	)		—			(7,441	)

(Loss) income from continuing operations before income taxes		(10,259	)		7,470			7,856			(15,104	)		(10,037	)
(Benefit from) provision for income taxes		(3,524	)		360			(138	)		—			(3,302	)

Net (loss) income	$	(6,735	)	$	7,110		$	7,994		$	(15,104	)	$	(6,735	)

RAILAMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

RailAmerica, Inc.

Consolidating Statement of Cash Flows
For the six months ended June 30, 2010


							Non
	Company			Guarantor			Guarantor
	(Parent)			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	(6,735	)	$	7,110		$	7,994		$	(15,104	)	$	(6,735	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization, including amortization costs classified in interest expense		2,330			20,285			1,524			—			24,139
Equity in earnings of subsidiaries		(15,104	)		—			—			15,104			—
Amortization of swap termination costs		11,708			—			—			—			11,708
Net (gain) loss on sale or disposal of properties		—			(67	)		58			—			(9	)
Loss on extinguishment of debt		8,357			—			—			—			8,357
Equity compensation costs		3,490			—			—			—			3,490
Deferred income taxes and other		(6,335	)		360			(19	)		—			(5,994	)
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Accounts receivable		(62	)		(11,087	)		(1,250	)		—			(12,399	)
Other current assets		(245	)		6,380			1,286			—			7,421
Accounts payable		1,600			8,152			(3,075	)		—			6,677
Accrued expenses		27,137			(4,470	)		(783	)		—			21,884
Other assets and liabilities		13			21			157			—			191

Net cash provided by operating activities		26,154			26,684			5,892			—			58,730

Cash flows from investing activities:
Purchase of property, plant and equipment		(74	)		(28,008	)		(2,500	)		—			(30,582	)
Proceeds from sale of assets		—			546			106			—			652

Net cash used in investing activities		(74	)		(27,462	)		(2,394	)		—			(29,930	)


Cash flows from financing activities:
Principal payments on long-term debt		—			(380	)		—			—			(380	)
Repurchase of senior secured notes		(76,220	)		—			—			—			(76,220	)
(Disbursements)/receipts on intercompany debt		(71,700	)		77,107			(5,407	)		—			—
Costs associated with sale of common stock		(106	)		—			—			—			(106	)
Deferred financing costs paid		(95	)		(129	)		—			—			(224	)

Net cash (used in) provided by financing activities		(148,121	)		76,598			(5,407	)		—			(76,930	)


Effect of exchange rates on cash		—			—			(234	)		—			(234	)


Net (decrease) increase in cash		(122,041	)		75,820			(2,143	)		—			(48,364	)
Cash, beginning of period		122,041			54,828			13,349			—			190,218

Cash, end of period	$	—		$	130,648		$	11,206		$	—		$	141,854

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks, uncertainties and assumptions. You should read the following discussion in conjunction with our historical consolidated financial statements and the notes thereto. The results of operations for the periods reflected herein are not necessarily indicative of results that may be expected for future periods. Except where the context otherwise requires, the terms “we,” “us,” or “our” refer to the business of RailAmerica, Inc. and its consolidated subsidiaries.

Certain statements in this Quarterly Report on Form 10-Q and other information we provide from time to time may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, but not necessarily limited to, statements relating to future events and financial performance. Words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “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. We 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 report. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from our 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 detailed in our filings with the Securities and Exchange Commission (“Commission”), including our Annual Report on Form 10-K filed with the Commission on March 4, 2011. In addition, new risks and uncertainties emerge from time to time, and it is not possible for us to predict or assess the impact of every factor that may cause actual results to differ from those contained in any forward-looking statements. Such forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.

In October 2010, we entered into a new agreement with Canadian Pacific Railway Company to operate portions of the Ottawa Valley Railway (“OVRR”) line, a previously discontinued operation. As a result of this new operating agreement, this railroad is no longer considered discontinued for financial statement presentation purposes and thus, the results of operations of the OVRR have been reclassified to continuing operations on our statement of operations for all periods presented.

General

Our Business

We are a leading owner and operator of short line and regional freight railroads in North America, operating a portfolio of 43 individual railroads with approximately 7,400 miles of track in 27 states and three Canadian provinces. In addition, we provide non-freight services such as railcar storage, demurrage, leases of equipment and real estate leases and use fees.

Recent Acquisitions and Business Development

On July 1, 2010, we acquired Atlas Railroad Construction Company (“Atlas”) and related assets for $23.9 million in cash including closing adjustments for working capital, which were approximately $2.4 million, net of cash acquired. The acquisition was funded from existing cash on hand. Founded in 1954, Atlas is a railroad engineering, construction, maintenance and repair company operating primarily in the U.S. Midwest and Northeast. Atlas provides railroad construction services principally to short line and regional railroads, public-transit agencies and industrial customers. The results of operations of Atlas have been included in our consolidated financial statements since July 1, 2010, the acquisition date.

In August 2010, our New England Central Railroad, (“NECR”) was awarded a federal government grant of $50 million through the State of Vermont to improve and upgrade the track on its property. As part of the agreement, the NECR has committed to contribute up to

approximately $19 million of capital funds and materials to the project. The project is expected to be completed within two years from the grant date.

Managing Business Performance

We manage our business performance by (i) growing our freight and non-freight revenue, (ii) driving financial improvements through a variety of cost savings and productivity initiatives, and (iii) continuing to focus on safety to lower the costs and risks associated with operating our business.

Changes in carloads and revenue per carload have a direct impact on freight revenue. Carloads increased in 2010 as the economy improved, but have declined during the first six months of 2011, due to challenging weather conditions and lower coal shipments. The diversity in our customer base helps mitigate our exposure to severe downturns in local economies. We continue to implement more effective pricing by carefully analyzing pricing decisions to improve our freight revenue per carload.

Non-freight services offered to our customers include switching (or managing and positioning railcars within a customer’s facility), storing customers’ excess or idle railcars on inactive portions of our rail lines, engineering infrastructure services, third party railcar repair, and car hire and demurrage (allowing our customers and other railroads to use our railcars for storage or transportation in exchange for a daily fee). Each of these services leverages our existing business relationships and generates additional revenue with minimal capital investment. Management also intends to grow non-freight revenue from users of our land holdings.

Our operating costs include labor, equipment rents (locomotives and railcars), purchased services (contract labor and professional services), diesel fuel, casualties and insurance, materials, joint facilities and other expenses.

Management is focused on improving operating efficiency and lowering costs. Many functions such as pricing, purchasing, capital spending, finance, insurance, real estate and other administrative functions are centralized, which enables us to achieve cost efficiencies and leverage the experience of senior management in commercial, operational and strategic decisions. A number of cost savings initiatives have been broadly implemented at all of our railroads targeting lower fuel consumption, safer operations, more efficient locomotive utilization and lower costs for third party services, among others.

Commodity Mix

Each of our 43 railroads operates independently with its own customer base. Our railroads are spread out geographically and carry diverse commodities. For the three months ended June 30, 2011, coal, agricultural products and, chemicals accounted for 16%, 16% and 12%, respectively, of our carloads. As a percentage of our freight revenue, agricultural products, chemicals and, metallic ores and metals generated 17%, 15% and 11%, respectively, for the three months ended June 30, 2011. Freight revenue per carload is impacted by several factors including the length of haul.

Overview

Three months ended June 30, 2011

Operating revenue in the three months ended June 30, 2011, was $139.2 million, compared with $119.5 million in the three months ended June 30, 2010. The 17% increase in our operating revenue was primarily due to rate increases, change in commodity mix, higher fuel surcharge and non-freight revenue, partially offset by a 3% decrease in carloads.

Freight revenue increased $7.3 million, or 7%, in the three months ended June 30, 2011, compared with the three months ended June 30, 2010, primarily due to rate increases, change in commodity mix and fuel surcharge, partially offset by a slight decrease in carloads. Non-freight revenue increased $12.5 million, or 59%, in the three months ended June 30, 2010, compared with the three months ended June 30, 2010, primarily due to an increase in engineering services revenue as a result of the acquisition of Atlas, an increase in other revenue related to the October 2010 OVRR operating agreement, as well as increases in demurrage and car repair income.

Our operating ratio, defined as total operating expenses divided by total operating revenue, was 79.4% in the three months ended June 30, 2011, compared with an operating ratio of 80.7% in the three months ended June 30, 2010. This decrease was primarily due to the lack of track maintenance credits in 2010, partially offset by impairment of assets and increased diesel fuel expenses. Operating expenses were $110.5 million in the three months ended June 30, 2011, compared with $96.4 million in the three months ended June 30, 2010, an increase of $14.1 million, or 15%.

In 2011, we entered into a track maintenance agreement with an unrelated third-party customer (“Shipper”). Under the agreement, the Shipper pays for qualified railroad track maintenance expenditures during 2011 in exchange for the assignment of railroad track miles which permits the Shipper to claim certain tax credits pursuant to Section 45G of the Internal Revenue Code. For the quarter ended June

30, 2011, the Shipper paid for $5.3 million of maintenance expenditures and $4.1 million of capital expenditures and we incurred $0.2 million of consulting fees related to the agreement. The track maintenance tax credit was not renewed by Congress for 2010 until December 2010. This resulted in no Shipper reimbursements in the three months or six months ended June 30, 2010.

Net income in the three months ended June 30, 2011, was $8.7 million, compared with a net loss of $4.2 million in the three months ended June 30, 2010. Net loss in the three months ended June 30, 2010 included $8.4 million of costs incurred in connection with the repurchase of senior secured notes.

Six months ended June 30, 2011

Operating revenue in the six months ended June 30, 2011, was $264.2 million, compared with $234.4 million in the six months ended June 30, 2010. The 13% increase in our operating revenue was primarily due to rate increases, change in commodity mix, higher fuel surcharge and non-freight revenue, partially offset by a 2% decrease in carloads.

Freight revenue increased $10.1 million, or 5%, in the six months ended June 30, 2011, compared with the six months ended June 30, 2010, primarily due to rate increases, changes in commodity mix and an increase in fuel surcharge. Non-freight revenue increased $19.6 million, or 48%, in the six months ended June 30, 2011, compared with the six months ended June 30, 2010, primarily due to an increase in engineering services revenue as a result of the acquisition of Atlas, an increase in other revenue related to the October 2010 OVRR operating agreement, as well as increases in demurrage and car repair income.

Our operating ratio, defined as total operating expenses divided by total operating revenue, was 80.0% in the six months ended June 30, 2011, compared with an operating ratio of 82.0% in the six months ended June 30, 2010. This increase was primarily due to the lack of track maintenance credits in 2010, partially offset by increased diesel fuel expenses and impairment of assets. Operating expenses were $211.3 million in the six months ended June 30, 2011, compared with $192.1 million in the six months ended June 30, 2010, an increase of $19.1 million, or 10%.

For the six months ended June 30, 2011, the Shipper paid for $9.5 million of maintenance expenditures and $4.1 million of capital expenditures and we incurred $0.3 million of consulting fees related to the agreement.

Net income in the six months ended June 30, 2011, was $12.8 million, compared with a net loss of $6.7 million in the six months ended June 30, 2010. Net loss for the six months ended June 30, 2010 included $8.4 million of charges related to the extinguishment of $74 million of senior secured notes.

Results of Operations

Comparison of Operating Results for the Three Months Ended June 30, 2011 and 2010

The following table sets forth the results of operations for the three months ended June 30, 2011 and 2010 (in thousands):


	Three Months Ended June 30,
	2011					2010
Operating revenue	$	139,215		100.0	%	$	119,457		100.0	%
Operating expenses:
Labor and benefits		41,859		30.1	%		37,885		31.7	%
Equipment rents		8,889		6.4	%		8,637		7.2	%
Purchased services		11,327		8.1	%		9,673		8.1	%
Diesel fuel		14,578		10.5	%		10,518		8.8	%
Casualties and insurance		4,955		3.5	%		4,806		4.0	%
Materials		5,928		4.3	%		3,874		3.3	%
Joint facilities		2,550		1.8	%		1,945		1.7	%
Other expenses		10,672		7.7	%		8,279		6.9	%
Track maintenance expense reimbursement		(5,133	)	(3.7	)%		—		0.0	%
Net (gain) loss on sale of assets		(64	)	(0.0	)%		25		0.0	%
Impairment of assets		3,220		2.3	%		—		0.0	%
Depreciation and amortization		11,736		8.4	%		10,755		9.0	%

Total operating expenses		110,517		79.4	%		96,397		80.7	%
Operating income		28,698		20.6	%		23,060		19.3	%
Interest expense, including amortization costs		(18,143	)				(22,153	)
Other income (loss)		495					(7,900	)

Income (loss) from continuing operations before income taxes		11,050					(6,993	)
Provision for (benefit from) income taxes		2,350					(2,772	)

Net income (loss)	$	8,700				$	(4,221	)

Operating Revenue

Operating revenue increased by $19.8 million, or 17%, to $139.2 million in the three months ended June 30, 2011, from $119.5 million in the three months ended June 30, 2010. Total carloads during the three months ended June 30, 2011 decreased 3% to 212,095 in 2011 from 218,268 in the three months ended June 30, 2010. The increase in operating revenue was due to the acquisition of Atlas, rate increases, change in commodity mix, and an increase in fuel surcharge, which increased $3.3 million from prior year.

The increase in the average revenue per carload to $498 in the three months ended June 30, 2011, from $450 in the comparable period in 2010 was primarily due to rate increases, commodity mix and fuel surcharge.

Non-freight revenue increased by $12.5 million, or 59%, to $33.6 million in the three months ended June 30, 2011 from $21.2 million in the three months ended June 30, 2010, primarily due to an increase in engineering services revenue as a result of the Atlas acquisition, an increase in other revenue related to the October 2010 OVRR operating agreement, as well as increases in demurrage, car repair revenue and real estate revenue, partially offset by a decrease in car hire income.

The following table compares our freight revenue, carloads and average freight revenue per carload for the three months ended June 30, 2011 and 2010:


	Three Months Ended						Three Months Ended
	June 30, 2011						June 30, 2010
					Average Freight						Average Freight
	Freight				Revenue per		Freight				Revenue per
	Revenue		Carloads		Carload		Revenue		Carloads		Carload
			(Dollars in thousands, except average freight revenue per carload)
Industrial Products	$	53,781		93,584	$	575	$	50,079		93,842	$	534
Agricultural Products		25,622		48,399		529		21,731		45,971		473
Construction Products		18,362		35,430		518		16,678		34,264		487
Coal		7,802		34,682		225		9,774		44,191		221

Total	$	105,567		212,095	$	498	$	98,262		218,268	$	450

Freight revenue was $105.6 million in the three months ended June 30, 2011, compared to $98.3 million in the three months ended June 30, 2010, an increase of $7.3 million or 7%. This increase was primarily due to the net effect of the following:

	•		Industrial products revenue increased $3.7 million, or 7%, primarily due metallic ores and metals carload increases of 15%, as a result of increased production at manufacturing facilities we serve in Canada and the Midwest and higher traffic hauled on behalf of other railroads, pulp, paper and allied products carload increases of 6%, as a result of increased production at most paper producers in our network, and increases in revenue per carload of 8% for the category, primarily as a result of higher rates and mix, partially offset by decreased carloads of 20% and 18% for motor vehicles and petroleum, respectively;

	•		Agricultural Products revenue increased $3.9 million, or 18%, primarily due to agricultural products carload increases of 10% as a result of increased shipments of corn and whole grain products, higher revenue per carload in the category, which includes agricultural and food products, of 12% due to favorable rates and mix, partially offset by a 5% decrease in carloads for food and kindred products;

	•		Construction Products revenue increased $1.7 million, or 10%, primarily due to increased non-metallic minerals and products carloads of 6%, and higher revenue per carload due to higher rates and mix; and

	•		Coal revenue decreased $2.0 million, or 20%, primarily due to carload decreases of 22% primarily as a result of sourcing shifts impacting our Indiana Southern Railroad and weather issues during the quarter.

Operating Expenses

Operating expenses increased to $110.5 million in the three months ended June 30, 2011, from $96.4 million in the three months ended June 30, 2010. The operating ratio was 79.4% in 2011 compared to 80.7% in 2010. The decrease in the operating ratio was primarily due to the benefit from track maintenance reimbursements in 2011, partially offset by impairment of assets and increased diesel fuel costs in the three months ended June 30, 2011 as compared to the same period in 2010.

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

	•		Labor and benefits expense increased $3.9 million, or 11%, primarily due to the acquisition of Atlas ($2.6 million), increased headcount and overtime ($2.1 million), and restricted stock amortization ($0.4 million), partially offset by decreases in health insurance expense and profit sharing costs totaling approximately $1.1 million;

	•		Equipment rents expense increased $0.3 million, or 3%, primarily due to increased car hire ($0.6 million), the acquisition of Atlas ($0.4 million), partially offset by a reduction in railcar lease expense from the expiration of certain leased cars ($0.7 million);

	•		Purchased services expense increased $1.7 million, or 17%, primarily due to the acquisition of Atlas ($1.9 million), partially offset by lower expense for bridge and rail inspections ($0.7 million);

	•		Diesel fuel expense increased $4.1 million, or 39%, primarily due to higher average fuel costs of $3.43 per gallon in 2011 compared to $2.45 per gallon in 2010, resulting in a $4.1 million increase in fuel expense. Consumption was relatively flat compared to prior year;

	•		Casualties and insurance expense increased $0.1 million, or 3%, primarily due to higher derailment costs ($0.4 million), partially offset by the settlement of other incidents in the prior year ($0.2 million);

	•		Materials expense increased $2.1 million, or 53%, primarily due to an increase in car repair material purchases ($1.1 million) as a result of an increase in car repair activities and the acquisition of Atlas ($0.9 million);

	•		Joint facilities expense increased $0.6 million, or 31%, primarily due to changes in traffic patterns;

	•		Other expenses increased $2.4 million, or 29%, primarily due to the acquisition of Atlas ($0.9 million), increased bad debt expense ($0.3 million), increased rent ($ 0.3 million), an increase in automotive fuel expense ($ 0.3 million) and increased utility expense ($ 0.2 million);

	•		The execution of the track maintenance agreement in 2011 resulted in the Shipper paying for $5.3 million of maintenance expenditures, partially offset by $0.2 million of related consulting fees;

	•		Asset sales resulted in a net gain of $0.1 million in the three months ended June 30, 2011;

	•		Impairment of assets was $3.2 million in the three months ended June 30, 2011, related to plans to reduce the fleet of locomotives; and

•

Depreciation and amortization expense increased $1.0 million, or 9%, due to the capitalization and depreciation of 2011 and 2010 capital projects and the acquisition of Atlas.

Other Income (Expense) Items

Interest Expense. Interest expense, including amortization of deferred financing costs, decreased $4.0 million to $18.1 million for the three months ended June 30, 2011, from $22.2 million in the three months ended June 30, 2010. This decrease is primarily due to a decrease in the principal amount of the senior secured notes as a result of a repayment in June 2010 and the decrease of swap termination cost amortization to $3.2 million during the three months ended June 30, 2011 from $5.6 million during the three months ended June 30, 2010. Interest expense includes $4.4 million and $6.9 million of amortization costs for the three months ended June 30, 2011 and 2010, respectively.

Other Income (loss). Other income during the three months ended June 30, 2011, primarily relates to management fee income that is recorded in connection with transactions where our employees receive restricted stock awards from related parties. As part of the restricted stock transactions, we recorded an offsetting expense in labor and benefits. Other loss during the three months ended June 30, 2010, primarily relates to $8.4 million of costs incurred in connection with the repurchase of senior secured notes during the second quarter of 2010. These costs are partially offset by the same management fee income discussed above.

Income Taxes. The overall income tax rate for the three months ended June 30, 2011 and 2010 for continuing operations was a provision of 21.3% and a benefit of 39.7%, respectively. The overall tax rate for the three months ended June 30, 2011 was favorably impacted by an adjustment of our deferred tax balances resulting from a change in tax law ($1.5 million). The Company’s overall tax rate for the three months ended June 30, 2010 was impacted by the jurisdictional mix of operating income, non-deductible permanent items and an expense relating to stock-based compensation plans ($0.2 million).

Comparison of Operating Results for the Six months Ended June 30, 2011 and 2010

The following table sets forth the results of operations for the six months ended June 30, 2011 and 2010 (in thousands):


	Six months Ended June 30,
	2011					2010
Operating revenue	$	264,152		100.0	%	$	234,398		100.0	%
Operating expenses:
Labor and benefits		83,476		31.6	%		75,636		32.3	%
Equipment rents		17,555		6.7	%		17,136		7.3	%
Purchased services		20,433		7.7	%		18,228		7.8	%
Diesel fuel		28,745		10.9	%		21,762		9.3	%
Casualties and insurance		7,089		2.7	%		8,439		3.6	%
Materials		11,013		4.2	%		7,799		3.3	%
Joint facilities		4,755		1.8	%		4,091		1.7	%
Other expenses		20,605		7.8	%		17,377		7.4	%
Track maintenance expense reimbursement		(9,283	)	(3.5	)%		—		0.0	%
Net loss (gain) on sale of assets		143		0.0	%		(9	)	0.0	%
Impairment of assets		3,220		1.2	%		—		0.0	%
Depreciation and amortization		23,500		8.9	%		21,678		9.3	%

Total operating expenses		211,251		80.0	%		192,137		82.0	%

Operating income		52,901		20.0	%		42,261		18.0	%
Interest expense, including amortization costs		(36,734	)				(44,857	)
Other income (loss)		1,035					(7,441	)

Income (loss) from continuing operations before income taxes		17,202					(10,037	)
Provision for (benefit from) income taxes		4,417					(3,302	)

Net income (loss)	$	12,785				$	(6,735	)

Operating Revenue

Operating revenue increased by $29.8 million, or 13%, to $264.2 million in the six months ended June 30, 2011, from $234.4 million in the six months ended June 30, 2010. Total carloads during the six months ended June 30, 2011 decreased 2% to 421,137 in 2011 from 429,518 in the six months ended June 30, 2010. The increase in operating revenue was due to the acquisition of Atlas, rate increases, change in commodity mix and an increase in fuel surcharge, which increased $4.3 million from prior year.

The increase in the average revenue per carload to $483 in the six months ended June 30, 2011, from $450 in the comparable period in 2010 was primarily due to rate increases, commodity mix, fuel surcharge and strengthening of the Canadian dollar.

Non-freight revenue increased by $19.6 million, or 48%, to $61.0 million in the six months ended June 30, 2011 from $41.3 million in the six months ended June 30, 2010, primarily due to an increase in engineering services revenue, as a result of the acquisition of Atlas, demurrage, an increase in other revenue related to the October 2010 OVRR operating agreement, car repair revenue, and real estate revenue, partially offset by decreases in car hire income.

The following table compares our freight revenue, carloads and average freight revenue per carload for the six months ended June 30, 2011 and 2010:


	Six Months Ended						Six Months Ended
	June 30, 2011						June 30, 2010
					Average Freight						Average Freight
	Freight				Revenue per		Freight				Revenue per
	Revenue		Carloads		Carload		Revenue		Carloads		Carload
			(Dollars in thousands, except average freight revenue per carload)
Industrial Products	$	104,916		186,249	$	563	$	98,506		185,107	$	532
Agricultural Products		47,648		92,745		514		44,068		93,931		469
Construction Products		34,249		66,716		513		31,164		63,514		491
Coal		16,389		75,427		217		19,359		86,966		223

Total	$	203,202		421,137	$	483	$	193,097		429,518	$	450

Freight revenue was $203.2 million in the six months ended June 30, 2011, compared to $193.1 million in the six months ended June 30, 2010, an increase of $10.1 million or 5%. This increase was primarily due to the net effect of the following:

	•		Industrial products revenue increased $6.4 million, or 7%, primarily due to chemical carload increases of 3% as a result of increased shipments on behalf of another railroad, metallic ores and metals carload increases of 6% as a result of increased production at manufacturing facilities we serve in Canada and the Midwest and higher traffic hauled on behalf of other railroads, pulp, paper and allied products carload increases of 8%, and increases in revenue per carload of 6% for the category, primarily due to higher rates and mix, partially offset by decreased carloads of 18% for motor vehicles;

	•		Agricultural products revenue increased $3.6 million, or 8%, primarily due to increases in revenue per carload of 10% for the category, due to higher rates and mix, partially offset by slightly lower carloads in 2011;

	•		Construction products revenue increased $3.1 million, or 10%, primarily due to increased non-metallic minerals and products carloads of 9%, and increased revenue per carload of 4% for the category, primarily due to higher rates and mix; and

	•		Coal revenue decreased $3.0 million, or 15%, primarily due to carload decreases of 13% as a result of a sourcing shift in our Indiana business and weather.

Operating Expenses

Operating expenses increased to $211.3 million in the six months ended June 30, 2011, from $192.1 million in the six months ended June 30, 2010. The operating ratio was 80.0% in 2011 compared to 82.0% in 2010. The decrease in the operating ratio was primarily due to including the benefit from the track maintenance reimbursements in 2011, partially offset by an increase in diesel fuel expense in 2011 and impairment of assets.

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

	•		Labor and benefits expense increased $7.8 million, or 10%, primarily due to increased salaries and wages as a result of the acquisition of Atlas ($4.1 million), increased headcount and overtime ($3.8 million), severance costs ($1.6 million), and restricted stock amortization ($1.1 million), partially offset by decreases in health insurance expense and profit sharing costs totaling approximately $2.5 million;

	•		Equipment rents expense increased $0.4 million, or 2%, primarily due to higher car hire costs ($1.2 million) and the acquisition of Atlas ($0.5 million), partially offset by a $1.3 million reduction in railcar lease expense from the expiration of certain leased cars;

	•		Purchased services expense increased $2.2 million, or 12%, primarily due to the acquisition of Atlas ($1.9 million), contract labor costs as a result of severe weather and an increase in professional fees for special projects ($1.2 million), partially offset by a decrease in legal fees ($0.9 million);

	•		Diesel fuel expense increased $7.0 million, or 32%, primarily due to higher average fuel costs of $3.26 per gallon in 2011 compared to $2.39 per gallon in 2010, resulting in a $7.5 million increase in fuel expense, partially offset by a favorable consumption variance of $0.5 million due to the decrease in carload volume;

	•		Casualties and insurance expense decreased $1.4 million, or 16%, primarily due to the reduction of reserves as a result of the expiration of the statute of limitations related to the Indiana & Ohio Railway (“IORY”) styrene incident ($1.2 million) and the settlement of other incidents from prior years ($0.2 million);

	•		Materials expense increased $3.2 million, or 41%, primarily due to a $2.0 million increase in car repair material purchases as a result of an increase in car repair activities and the acquisition of Atlas ($1.2 million);

	•		Joint facilities expense increased $0.7 million, or 16%, primarily due to changes in traffic patterns;

	•		Other expenses increased $3.2 million, or 19%, primarily due to the acquisition of Atlas ($1.4 million), an increase in bad debt expense ($0.6 million), increases in automotive fuel expense and crew transportation ($0.6 million) and increases in utilities and communication expenses ($0.3 million);

	•		The execution of the track maintenance agreement in 2011 resulted in the Shipper paying for $9.5 million of maintenance expenditures, partially offset by $0.3 million of related consulting fees;

	•		Asset sales resulted in a net loss of $0.1 million in the six months ended June 30, 2011;

	•		Impairment of assets was $3.2 million in the six months ended June 30, 2011 as a result of plans to reduce the fleet of locomotives; and

	•		Depreciation and amortization expense increased $1.8 million, or 8%, due to the capitalization and depreciation of 2011 and 2010 capital projects and the acquisition of Atlas.

Other Income (Expense) Items

Interest Expense. Interest expense, including amortization of deferred financing costs, decreased $8.1 million to $36.7 million for the six months ended June 30, 2011, from $44.9 million in the six months ended June 30, 2010. This decrease is primarily due to a decrease in the principal amount of the senior secured notes as a result of the June 2010 repayment and the decrease of swap termination cost amortization to $6.9 million during the six months ended June 30, 2011 from $11.7 million during the six months ended June 30, 2010. Interest expense includes $9.2 million and $14.2 million of amortization costs for the six months ended June 30, 2011 and 2010, respectively.

Other Income (Loss). Other income during the six months ended June 30, 2011, primarily relates to management fee income that is recorded in connection with transactions where our employees receive restricted stock awards from related parties. As part of the restricted stock transactions, we recorded an offsetting expense in labor and benefits. Other loss during the six months ended June 30, 2010, primarily relates to $8.4 million of costs incurred in connection with the repurchase of senior secured notes during the second quarter of 2010. These costs are partially offset by the same management fee income discussed above.

Income Taxes. The overall income tax rate for the six months ended June 30, 2011 and 2010 for continuing operations was a provision of 25.7% and a benefit of 32.9%, respectively. The overall tax rate for the six months ended June 30, 2011 was favorably impacted by an adjustment of our deferred tax balances resulting from a change in tax law ($1.6 million). The Company’s overall tax rate for the six months ended June 30, 2010 was impacted by the jurisdictional mix of operating income, non-deductible permanent items and an expense relating to stock-based compensation plans ($1.1 million).

Liquidity and Capital Resources

The discussion of liquidity and capital resources that follows reflects our consolidated results and includes all subsidiaries. We have historically met our liquidity requirements primarily from cash generated from operations and borrowings under our credit agreements which is used to fund capital expenditures and debt service requirements. For the six months ended June 30, 2011, there was a net cash inflow from operations of $52.7 million. We believe that we will be able to generate sufficient cash flow from operations to meet our

capital expenditure and debt service requirements through our continued focus on revenue growth and operating efficiency as discussed under “— Managing Business Performance.”

Operating Activities

Cash provided by operating activities was $52.7 million for the six months ended June 30, 2011, compared to $58.7 million for the six months ended June 30, 2010. The decrease in cash flows from operating activities was primarily due to working capital changes.

Investing Activities

Cash used in investing activities was $39.2 million for the six months ended June 30, 2011, compared to $29.9 million for the six months ended June 30, 2010. The increase in cash used in investing activities was primarily due to the acquisition of three short line railroads for $12.7 million in 2011. Capital expenditures, net of NECR grant reimbursements were also slightly lower in 2011 at $29.2 million compared to $30.6 million in 2010. Asset sale proceeds were $2.8 million for the six months ended June 30, 2011 compared to $0.6 million for the six months ended June 30, 2010.

Financing Activities

Cash used in financing activities was $50.5 million for the six months ended June 30, 2011, compared to $76.9 million in the six months ended June 30, 2010. The cash used in financing activities in the six months ended June 30, 2011 was primarily due to the repurchase of common stock of $50.1 million as part of the stock repurchase program that was announced on February 23, 2011. The cash used in financing activities in the six months ended June 30, 2010 was primarily for the repayment of $74.0 million of the senior secured notes in the second quarter of 2010.

Working Capital

As of June 30, 2011, we had working capital of $130.0 million, including cash on hand of $116.5 million, and approximately $24.5 million of availability under the ABL Facility, compared to working capital of $152.0 million, including cash on hand of $153.0 million, and $21.4 million of availability under the ABL Facility at December 31, 2010. The working capital decrease at June 30, 2011, compared to December 31, 2010, is primarily due to the use of cash to repurchase $50.0 million of common stock as part of the stock repurchase plan and the acquisition of three short-line railroads for $12.7 million. Our cash flows from operations and borrowings under our credit agreements historically have been sufficient to meet our ongoing operating requirements, to fund capital expenditures for property, plant and equipment, and to satisfy our debt service requirements.

Long-term Debt

$740 million 9.25% Senior Secured Notes

On June 23, 2009, we sold $740.0 million of 9.25% senior secured notes due July 1, 2017 in a private offering, for gross proceeds of $709.8 million after deducting the initial purchaser’s fees and the original issue discount. The notes are secured by first-priority liens on substantially all of our and the guarantors’ assets. The guarantors are defined essentially as our existing and future wholly-owned domestic restricted subsidiaries.

On November 2, 2009, we commenced an exchange offer of the privately placed senior secured notes for senior secured notes which have been registered under the Securities Act of 1933, as amended. The registered notes have terms that are substantially identical to the privately placed notes.

On November 16, 2009, we redeemed $74 million aggregate principal amount of the notes at a cash redemption price of 103%, plus accrued interest thereon to, but not including, the redemption date.

On June 24, 2010, we redeemed $74 million aggregate principal amount of the notes at a cash redemption price of 103%, plus accrued interest thereon to, but not including, the redemption date.

$40 million ABL Facility

In connection with the issuance of the senior secured notes on June 23, 2009, we also entered into a $40 million Asset Backed Loan Facility (“ABL Facility”). The ABL Facility matures on June 23, 2013 and bears interest at LIBOR plus 4.00%. Obligations under the ABL Facility are secured by a first-priority lien in the ABL collateral. ABL collateral includes accounts receivable, deposit accounts,

securities accounts and cash. As of June 30, 2011, we had no outstanding balance under the ABL Facility and approximately $24.5 million of undrawn availability, taking into account borrowing base limitations.

On June 10, 2010, we entered into Amendment No. 1 to the ABL Facility improving certain terms of the ABL Facility. Among other things, this Amendment eliminated the LIBOR-based interest rate floor of 2.5%, modified the borrowing base calculation and reporting requirements to require less frequent financial reporting in certain circumstances, adjusted the limitations on permitted acquisitions and restricted payments and amended the financial covenants to incorporate cash balances in certain definitions.

On February 23, 2011, we entered into Amendment No.2 to the ABL Facility. This amendment adjusted certain terms of the ABL Facility and increased the threshold for Restricted Payments, as defined in the ABL Facility, to allow share repurchases of our common stock in an amount not to exceed $ 75 million without affecting other Restricted Payment baskets.

Covenants to Senior Secured Notes and ABL Facility

The indenture governing the senior secured notes contains certain limitations and restrictions on us and our restricted subsidiaries’ (as of the date of this report, all of our subsidiaries were restricted subsidiaries) ability to, among other things, incur additional indebtedness; issue preferred and disqualified stock; purchase or redeem capital stock; make certain investments; pay dividends or make other payments or loans or transfer property; sell assets; enter into certain types of transactions with affiliates involving consideration in excess of $5.0 million; create liens on certain assets; and sell all or substantially all of our assets or our guarantor’s assets or merge with or into another company.

The covenants are subject to important exceptions and qualifications described below.

We and our restricted subsidiaries are prohibited from incurring or issuing additional indebtedness and disqualified stock and our restricted subsidiaries are prohibited from issuing preferred stock unless our fixed charge coverage ratio, defined as Adjusted EBITDA less capital expenditures divided by fixed charges, for the most recently ended four full fiscal quarters would have been at least 2.00 to 1.00 on a pro forma basis. In addition, we may, among other things, incur certain credit facilities debt not to exceed the greater of (i) $60 million and (ii) the borrowing base; purchase money indebtedness or capital lease obligations not to exceed the greater of (i) $80 million and (ii) 5.0% of total assets; indebtedness of foreign subsidiaries not to exceed the greater of (i) $25 million and (ii) 15% of total assets of foreign subsidiaries; acquired debt so long as we would be permitted to incur at least an additional $1 of indebtedness under its fixed charge ratio or such ratio is greater following the transaction; and up to $100 million (limited to $50 million for restricted subsidiaries) of indebtedness, disqualified stock or preferred stock, subject to increase from the proceeds of certain equity sales and capital contributions.

Furthermore, we and our restricted subsidiaries are prohibited from purchasing or redeeming capital stock; making certain investments, paying dividends or making other payments or loans or transfers of property, unless we could incur an additional dollar of indebtedness under our fixed charge ratio and such payment is less than 50% of our consolidated net income plus certain other items that increase the size of the payment basket. In addition, we may, among other things, make any payment from the proceeds of a capital contribution or concurrent offering of equity interests of us; make stock buy-backs from current and former employees/directors in an amount to not exceed $5 million per year, subject to carryover of unused amounts into subsequent years (capped at $10 million in any year) and subject to increase for cash proceeds from certain equity issuances to employees/directors and cash proceeds from key man life insurance; make investments in unrestricted subsidiaries in an amount not to exceed (i) $10 million and (ii) 0.75% of total assets; pay dividends following a public offering up to 6% per annum of the net proceeds received by us; make any payments up to $25 million. Moreover, we may make investments in an amount not to exceed the greater of (i) $25 million and (ii) 2.0% of total assets, investments in a similar business not to exceed the greater of (i) $50 million and (ii) 3% of total assets and advances to employees not in excess of $5 million.

Adjusted EBITDA, as defined in the indenture governing the senior secured notes, is the key financial covenant measure that monitors our ability to undertake key investing and financing functions, such as making investments, transferring property, paying dividends, and incurring additional indebtedness.


	Three Months Ended						Six months Ended
	June 30,						June 30,
	2011			2010			2011			2010
				(in thousands)
Cash flows from operating activities to Adjusted EBITDA Reconciliation:
Net cash provided by operating activities	$	29,605		$	33,290		$	52,728		$	58,730
Changes in working capital accounts		1,659			(13,583	)		2,674			(23,774	)
Depreciation and amortization, including amortization of debt issuance costs classified in interest expense		(12,919	)		(11,988	)		(25,864	)		(24,139	)
Amortization of swap termination costs		(3,201	)		(5,635	)		(6,878	)		(11,708	)
Net gain (loss) on sale or disposal of properties		64			(25	)		(143	)		9
Impairment of assets		(3,220	)		—			(3,220	)		—
Loss on debt extinguishment		—			(8,357	)		—			(8,357	)
Equity compensation costs		(2,370	)		(1,965	)		(4,979	)		(3,490	)
Deferred income taxes		(918	)		4,042			(1,533	)		5,994

Net income (loss)		8,700			(4,221	)		12,785			(6,735	)

Add:
Provision for (benefit from) income taxes		2,350			(2,772	)		4,417			(3,302	)
Interest expense, including amortization costs		18,143			22,153			36,734			44,857
Depreciation and amortization		11,736			10,755			23,500			21,678

EBITDA		40,929			25,915			77,436			56,498
Add:
Equity compensation costs		2,370			1,965			4,979			3,490
Impairment of assets		3,220			—			3,220			—
Loss on debt extinguishment		—			8,357			—			8,357
Acquisition expense		243			261			315			261

Adjusted EBITDA	$	46,762		$	36,498		$	85,950		$	68,606

Based on current levels of Adjusted EBITDA, we are not restricted in undertaking key investing and financing functions as discussed above.

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

The ABL Facility includes customary affirmative and negative covenants, including, among other things, restrictions on (i) the incurrence of indebtedness and liens, (ii) investments and loans, (iii) dividends and other payments with respect to capital stock, (iv) redemption and repurchase of capital stock, (v) mergers, acquisitions and asset sales, (vi) payments and modifications of other debt (including the notes), (vii) affiliate transactions, (viii) altering our business, (ix) engaging in sale-leaseback transactions and (x) entering into agreements that restrict our ability to create liens or repay loans or issue capital stock. In addition, if total liquidity under the ABL Facility is below $20.0 million, we will be subject to a minimum fixed charge coverage ratio of 1.1 to 1.0.

Interest Rate Swaps

On February 14, 2007, we entered into an interest rate swap with a termination date of February 15, 2014. The total notional amount of the swap started at $425 million for the period commencing February 14, 2007 through November 14, 2007, increasing to a total notional amount of $525 million for the period commencing November 15, 2007 through November 14, 2008, and ultimately increased to $625 million for the period commencing November 15, 2008 through February 15, 2014. Under the terms of the interest rate swap, we were required to pay a fixed interest rate of 4.9485% on the notional amount while receiving a variable interest rate equal to the 90 day LIBOR. This swap qualified, was designated and was accounted for as a cash flow hedge under ASC 815. This interest rate swap agreement was terminated in June 2009, in connection with the repayment of the bridge credit facility, and thus had no fair value at

December 31, 2010. Interest expense of $0.3 million was recognized during the six months ended June 30, 2010 for the portion of the hedge deemed ineffective. Pursuant to ASC 815, the fair value balance of the swap at the termination date remains in accumulated other comprehensive loss, net of tax, and is amortized into interest expense over the remaining life of the original swap (through February 14, 2014). As a result of the $74 million redemption of the notes during June 2010, an additional $1.7 million of unamortized expense was recognized during the six months ended June 30, 2011. This was the result of reducing the face value of the outstanding senior secured notes below the notional amount of the swap. As of June 30, 2011, accumulated other comprehensive loss included $8.6 million, net of tax, of unamortized loss relating to the terminated swap. Reclassifications from accumulated other comprehensive loss to interest expense in the next twelve months will be approximately $8.4 million, or $5.1 million, net of tax.

For derivative instruments in an asset position, we analyze the credit standing of the counterparty and factor it into the fair value measurement. ASC 820 states that the fair value of a liability must reflect the nonperformance risk of the reporting entity. Therefore, the impact of our credit worthiness has also been factored into the fair value measurement of the derivative instruments in a liability position.

Off Balance Sheet Arrangements

We currently have no off balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks from changing foreign currency exchange rates, interest rates and diesel fuel prices. Changes in these factors could cause fluctuations in earnings and cash flows.

Foreign Currency. Our foreign currency risk arises from owning and operating railroads in Canada. As of June 30, 2011, we had not entered into any currency hedging transactions to manage this risk. A decrease in the Canadian dollar could negatively impact our reported revenue and earnings for the affected period. During the three months ended June 30, 2011, the Canadian dollar decreased 1% in value in comparison to the U.S dollar. The average rate for the three months ended June 30, 2011, was 6% higher than it was for the same period in 2010. The increase in the average Canadian dollar exchange rate led to an increase of $1.1 million in reported revenue and a $0.4 million increase in reported operating income in 2011, compared to 2010. A 10% unfavorable change in the 2011 average exchange rate would have negatively impacted 2011 revenue by $1.7 million and operating income by $0.6 million.

During the six months ended June 30, 2011, the Canadian dollar increased 2% in value in comparison to the U.S dollar. The average rate for the six months ended June 30, 2011, was 6% higher than it was for the same period in 2010. The increase in the average Canadian dollar exchange rate led to an increase of $2.0 million in reported revenue and a $0.5 million increase in reported operating income in 2011, compared to 2010. A 10% unfavorable change in the 2011 average exchange rate would have negatively impacted 2011 revenue by $3.4 million and operating income by $1.2 million.

Interest Rates. Our senior secured notes issued in June 2010 are fixed rate instruments, and therefore, would not be impacted by changes in interest rates. Our potential interest rate risk results from our ABL Facility as an increase in interest rates would result in lower earnings and increased cash outflows. We do not currently have any outstanding balances under this facility, but if we were to draw upon it, we would be subject to changes in interest rates.

Diesel Fuel. We are exposed to fluctuations in diesel fuel prices, as an increase in the price of diesel fuel would result in lower earnings and increased cash outflows. Fuel costs represented 10.5% of total operating revenues during the three months ended June 30, 2011. Due to the significance of fuel costs to our operations and the historical volatility of fuel prices, we participate in fuel surcharge programs which provide additional revenue to help offset the increase in fuel expense. These fuel surcharge programs fluctuate with the price of diesel fuel with a lag of three to six months. Each one-cent change in the price of fuel would result in approximately a $0.2 million change in fuel expense on an annual basis.

ITEM 4. CONTROLS AND PROCEDURES

Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”)) are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in Commission’s rules and forms and that such information is accumulated and communicated to our management, including our chief executive and chief financial officers as appropriate to allow timely decisions regarding required disclosure. Additionally, as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that no changes in our internal control over financial reporting occurred during our second fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Items 1, 3, 4 and 5 are not applicable and have been omitted.

ITEM 1A. RISK FACTORS

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors described under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Commission on March 4, 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

During the three months ended June 30, 2011, the following purchases of the Company’s shares of Common Stock were made by or on behalf of the Company or any “affiliated purchaser” of the Company (as such term is defined in Rule 10b-18(a)(3) of the Securities Act of 1933, as amended). During the three months ended June 30, 2011, the Company accepted 32,324 shares in lieu of cash payments by employees for payroll tax withholdings relating to stock based compensation.


					Total Number of		Approximate Dollar
					Shares Purchased as		Value of Shares that
					Part of Publicly		May Yet Be Purchased
	Total Number of		Average Price Paid		Announced Plans or		Under the Plans or
Period	Shares Purchased		per Share		Programs		Programs
April 1 through April 30, 2011		983,660	$	16.92		970,852		—
May 1 through May 31, 2011		4,260		17.02		—		—
June 1 through June 30, 2011		15,256		14.98		—		—

Total		1,003,176	$	16.89		—		—

On February 23, 2011, we announced that our Board of Directors had approved a stock repurchase program. Under the program, we were authorized to repurchase up to $50.0 million of our outstanding shares of common stock from time to time at prevailing prices in the open market or in privately negotiated transactions. The timing and actual number of shares repurchased depended on a variety of factors including the price and availability of the Company’s shares, trading volume and general market conditions. On April 18, 2011, we completed the stock repurchase program, repurchasing a total of 3,036,769 shares at a weighted average cost of $16.46 per share.

ITEM 6. EXHIBITS

Exhibits


31.1		Rule 13a-14(a)/15d-14(a) Certification of the Principal Executive Officer

31.2		Rule 13a-14(a)/15d-14(a) Certification of the Principal Financial Officer

32.1		Principal Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

32.2		Principal Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002

101		The following materials from RailAmerica’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance Sheets at June 30, 2011 and December 31, 2010, (ii) Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010; (iii) Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010, and (iv) Notes to Condensed, Consolidated Financial Statements*

*		Pursuant to Rule 406 T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	RAILAMERICA, INC.

Date: July 28, 2011	By:	/s/ B. Clyde Preslar
	B. Clyde Preslar, Senior Vice President and
	Chief Financial Officer
	(on behalf of registrant and as Principal
	Financial Officer)

Attached files

RAILAMERICA INC /DE Reports

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