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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________________________________________________________________________

FORM 10-Q

_________________________________________________________________________________________________________________

(Mark One) x☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31~~June 30, 2019

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 001-31456

_________________________________________________________________________________________________________________

GENESEE & WYOMING INC.

(Exact name of registrant as specified in its charter)

_________________________________________________________________________________________________________________

Delaware		06-0984624
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification No.)
20 West Avenue, Darien, Connecticut 06820
(Address of principal executive offices)(Zip Code)

20 West Avenue, Darien, Connecticut 06820

(Address of principal executive offices)(Zip Code)

(203) 202-8900

(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. x Yes o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company o Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Class A Common Stock	GWR	New York Stock Exchange	(NYSE)

Class		Number of Shares Outstanding
Class A Common Stock		56,517,254
Class B Common Stock		417,138

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

Shares of common stock outstanding as of the close of business on August 1, 2019:



Class		Number of Shares Outstanding
Class A Common Stock		56,592,802
Class B Common Stock		376,392

Table of Contents

INDEX
		Page
	Forward-Looking Statements	3
Part I	Financial Information	4
Item 1.	Financial Statements:
	Consolidated Balance Sheets (Unaudited) - As of March 31, 2019 and December 31, 2018	4
	Consolidated Balance Sheets (Unaudited) - As of June 30, 2019 and December 31, 2018	4
	Consolidated Statements of Operations (Unaudited) - For the Three Months Ended March 31, 2019 and 2018	5
	Consolidated Statements of Operations (Unaudited) - For the Three and Six Months Ended June 30, 2019 and 2018	5
	Consolidated Statements of Comprehensive Income (Unaudited) - For the Three Months Ended March 31, 2019 and 2018	6
	Consolidated Statements of Comprehensive Income (Unaudited) - For the Three and Six Months Ended June 30, 2019 and 2018	6
	Consolidated Statements of Changes in Equity (Unaudited) - For the Three Months Ended March 31, 2019 and 2018	7
	Consolidated Statements of Changes in Equity (Unaudited) - For the Three and Six Months Ended June 30, 2019 and 2018	7
	Consolidated Statements of Cash Flows (Unaudited) - For the Three Months Ended March 31, 2019 and 2018	8
	Consolidated Statements of Cash Flows (Unaudited) - For the Six Months Ended June 30, 2019 and 2018	9
	Notes to Consolidated Financial Statements (Unaudited)	910
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2632
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4366
Item 4.	Controls and Procedures	4366
Part II	Other Information	4467
Item 1.	Legal Proceedings	4467
Item 1A.	Risk Factors	4467
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4468
Item 3.	Defaults Upon Senior Securities	4468
Item 4.	Mine Safety Disclosures	4568
Item 5.	Other Information	4568
Item 6.	Exhibits	4568
Index to Exhibits		4669
Signatures		4770

Table of Contents

Unless the context otherwise requires, when used in this Quarterly Report on Form 10-Q, the terms "Genesee & Wyoming," "G&W," the "Company," "we," "our" and "us" refer to Genesee & Wyoming Inc. and its subsidiaries. All references to currency amounts included in this Quarterly Report on Form 10-Q, including the financial statements, are in United States dollars unless specifically noted otherwise. The term carload represents physical railcars and the estimated railcar equivalents of commodities transported by metric ton or other measure, as well as intermodal units.

From time to time, we may use our website as a channel of distribution of material company information. Financial and other material information regarding the Company is routinely posted on and accessible at www.gwrr.com/investors. In addition, you may automatically receive email alerts and other information about us by enrolling your email address in the "Email Alerts" section of www.gwrr.com/investors. The information contained on or connected to our Internet website is not deemed to be incorporated by reference in this Quarterly Report or filed with the Securities and Exchange Commission.

Forward-Looking Statements

This report and other documents referred to in this report contain forward-looking statements regarding future events and the future performance of Genesee & Wyoming Inc. that are based on current expectations, estimates and projections about our industry, our business and our performance, management's beliefs and assumptions made by management. Words such as "anticipates," "intends," "plans," "believes," "could," "should," "seeks," "expects," "will," "estimates," "trends," "outlook," variations of these words and similar expressions are intended to identify these forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to forecast, including the following: the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with affiliates of Brookfield Infrastructure and GIC; the inability to complete the proposed merger due to the failure to obtain stockholder approval for the proposed merger or the failure to satisfy other conditions to completion of the proposed merger, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transaction; risks related to disruption of management’s attention from G&W's ongoing business operations due to the transaction; the effect of the proposed merger on G&W's ability to retain and hire key personnel or maintain relationships with its customers, operating results and business generally; the risk that the proposed merger will not be consummated in a timely manner; exceeding the expected costs of the merger; risks related to the operation of our railroads; severe weather conditions and other natural occurrences, which could result in shutdowns, derailments, railroad network and port congestion or other substantial disruption of operations; customer demand and changes in our operations or loss of important customers; exposure to the credit risk of customers and counterparties; changes in commodity prices; consummation and integration of acquisitions; implementation of restructuring plans; economic, political and industry conditions, including employee strikes or work stoppages; retention and contract continuation; our ability to attract and retain skilled workers; legislative and regulatory developments, including changes in environmental and other laws and regulations to which we or our customers are subject; increased competition in relevant markets; funding needs and financing sources, including our ability to obtain government funding for capital projects; international complexities of operations, currency fluctuations, finance, tax and decentralized management; challenges of managing rapid growth, including retention and development of senior leadership; unpredictability of fuel costs; susceptibility to and outcome of various legal claims, lawsuits and arbitrations; increase in, or volatility associated with, expenses related to estimated claims, self-insured retention amounts and insurance coverage, collectability and limits; consummation of new business opportunities; decrease in revenues and/or increase in costs and expenses; susceptibility to the risks of doing business in foreign countries; uncertainties arising from a referendum in which voters in the United Kingdom (U.K.) approved an exit from the European Union (E.U.), commonly referred to as Brexit; our ability to integrate acquired businesses successfully or to realize the expected synergies associated with acquisitions; risks associated with our substantial indebtedness; failure to maintain satisfactory working relationships with partners in Australia; failure to maintain an effective system of internal control over financial reporting as well as disclosure controls and procedures and other risks including, but not limited to, those set forth in Part II Item 1A of this Quarterly Report on Form 10-Q, if any, and those noted in our 2018 Annual Report on Form 10-K under "Risk Factors." Therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Forward-looking statements speak only as of the date of this report or as of the date they were made. We do not undertake, and expressly disclaim, any duty to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF ~~MARCH~~JUNE 3130, 2019 and DECEMBER 31, 2018 (Unaudited)

(dollars in thousands, except per share and share amounts)

	March 31, 2019			December 31, 2018
	June 30, 2019			December 31, 2018
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	7082,~~108~~383		$	90,387
Accounts receivable, net	~~439~~444,~~527~~168			426,305
Materials and supplies	5955,~~368~~321			56,716
Prepaid expenses and other	6640,~~125~~074			54,185
Total current assets	~~635~~621,~~128~~946			627,593
PROPERTY AND EQUIPMENT, net	4,~~643~~669,~~936~~704			4,613,014
GOODWILL	1,~~120~~114,~~212~~478			1,115,849
INTANGIBLE ASSETS, net	1,~~429~~401,~~602~~971			1,430,197
DEFERRED INCOME TAX ASSETS, net	5,~~261~~376			4,616
OTHER ASSETS	~~547~~550,~~669~~714			77,192
Total assets	$	8,~~381~~364,~~808~~189		$	7,868,461
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt	$	2657,~~522~~289		$	28,303
Accounts payable	~~282~~269,~~917~~644			288,070
Accrued expenses	~~232~~246,~~731~~188			165,280
Total current liabilities	~~542~~573,~~170~~121			481,653
LONG-TERM DEBT, less current portion	2,~~391~~281,~~695~~191			2,425,235
DEFERRED INCOME TAX LIABILITIES, net	~~886~~889,~~183~~197			877,721
DEFERRED ITEMS - grants from outside parties	~~328~~335,~~347~~485			326,520
OTHER LONG-TERM LIABILITIES	~~576~~594,~~133~~293			127,280
COMMITMENTS AND CONTINGENCIES
EQUITY:
Class A Common Stock, $0.01 par value, one vote per share; 180,000,000 shares authorized at March 31, 2019 and December 31, 2018; 75,505,245 and 75,240,513 shares issued and 56,502,770 and 56,349,327 shares outstanding (net of 19,002,475 and 18,891,186 shares in treasury) on March 31, 2019 and December 31, 2018, respectively	755			752
Class A Common Stock, $0.01 par value, one vote per share; 180,000,000 shares authorized at June 30, 2019 and December 31, 2018; 75,584,503 and 75,240,513 shares issued and 56,581,921 and 56,349,327 shares outstanding (net of 19,002,582 and 18,891,186 shares in treasury) on June 30, 2019 and December 31, 2018, respectively	756			752
Class B Common Stock, $0.01 par value, ten votes per share; 30,000,000 shares authorized at March 31, 2019 and December 31, 2018; 417,138 and 517,138 shares issued and outstanding on March 31, 2019 and December 31, 2018, respectively	4			5
Class B Common Stock, $0.01 par value, ten votes per share; 30,000,000 shares authorized at June 30, 2019 and December 31, 2018; 376,392 and 517,138 shares issued and outstanding on June 30, 2019 and December 31, 2018, respectively	4			5
Additional paid-in capital	1,~~790~~797,~~126~~794			1,785,005
Retained earnings	2,~~519~~571,~~854~~251			2,482,252
Accumulated other comprehensive loss	(~~153~~173,~~445~~797		)	(146,456		)
Treasury stock, at cost	(708,482		)	(699,852		)
Total Genesee & Wyoming Inc. stockholders' equity	3,~~448~~487,~~812~~526			3,421,706
Noncontrolling interest	~~208~~203,~~468~~376			208,346
Total equity	3,~~657~~690,~~280~~902			3,630,052
Total liabilities and equity	$	8,~~381~~364,~~808~~189		$	7,868,461

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2019 and 2018 (Unaudited)

(in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	March 31,
	June 30,						June 30,
	2019			2018			2019			2018
OPERATING REVENUES	$	~~558~~571,~~089~~480		$	~~574~~594,~~661~~990		$	1,129,569		$	1,169,651
OPERATING EXPENSES:
Labor and benefits	~~184~~179,~~308~~943			~~183~~179,~~716~~838			364,251			363,554
Equipment rents	32,~~233~~010			34,~~087~~802			64,243			68,889
Purchased services	5154,~~248~~034			6461,~~102~~045			105,282			125,147
Depreciation and amortization	62,~~626~~517			65,~~990~~745			125,143			131,735
Diesel fuel used in train operations	4441,~~637~~504			4645,~~151~~623			86,141			91,774
Electricity used in train operations	2,~~324~~226			2,~~234~~044			4,550			4,278
Casualties and insurance	11,~~372~~839			912,~~966~~984			23,211			22,950
Materials	31,~~220~~294			32,~~469~~376			62,514			64,845
Trackage rights	21,~~640~~727			2023,~~978~~303			43,367			44,281
Net gain on sale and impairment of assets	(1,490		)	(1,036		)
Net loss/(gain) on sale and impairment of assets	980			(823		)	(510		)	(1,859		)
Restructuring and related costs	7,~~634~~561			~~283~~9,362			15,195			9,645
Other expenses, net	3031,~~627~~645			2825,~~808~~566			62,272			54,374
Total operating expenses	~~478~~477,~~379~~280			~~487~~491,~~748~~865			955,659			979,613
OPERATING INCOME	7994,~~710~~200			86103,~~913~~125			173,910			190,038
Interest income	~~547~~824			~~498~~584			1,371			1,082
Interest expense	(27,~~610~~399		)	(2528,~~236~~940		)	(55,009		)	(54,176		)
Other income/(loss), net	~~419~~2,614			~~(2,040~~288		)	3,033			(1,752		)
Income before income taxes	5370,~~066~~239			6075,~~135~~057			123,305			135,192
(Provision for)/benefit from income taxes	(14,260		)	15,890
Provision for income taxes	(18,866		)	(26,446		)	(33,126		)	(10,556		)
Net income	$	3851,~~806~~373		$	7648,~~025~~611		$	90,179		$	124,636
Less: Net income attributable to noncontrolling interest	100			927
Less: Net (loss)/income attributable to noncontrolling interest	(68		)	4,443			32			5,370
Net income attributable to Genesee & Wyoming Inc.	$	3851,~~706~~441		$	7544,~~098~~168		$	90,147		$	119,266
Basic earnings per common share attributable to Genesee & Wyoming Inc. common stockholders:	$	0.6991		$	10.2174		$	1.60		$	1.96
Weighted average shares – Basic	56,~~368~~536			6159,~~918~~996			56,433			60,946
Diluted earnings per common share attributable to Genesee & Wyoming Inc. common stockholders:	$	0.6890		$	10.1973		$	1.58		$	1.93
Weighted average shares – Diluted	57,~~132~~272			6260,~~887~~879			57,182			61,841

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2019 and 2018 (Unaudited)

(dollars in thousands)

	Three Months Ended						Six Months Ended
	March 31,
	June 30,						June 30,
	2019			2018			2019			2018
NET INCOME	$	3851,~~806~~373		$	7648,~~025~~611		$	90,179		$	124,636
OTHER COMPREHENSIVE INCOME/(LOSS):
Foreign currency translation adjustment	7(2,~~019~~191		)	(~~617~~48,923		)	4,828			(49,541		)
Net unrealized (loss)/gain on qualifying cash flow hedges, net of tax benefit/(provision) of $4,226 and ($2,150), respectively	(12,974		)	6,901
Net unrealized (loss)/gain on qualifying hedges, net of tax benefit/(provision) of $6,484, ($879), $10,710 and ($3,029), respectively	(21,525		)	2,701			(34,499		)	9,603
Changes in pension and other postretirement benefits, net of tax benefit/(provision) of $89 and ($14), respectively	(216		)	43
Changes in pension and other postretirement benefits, net of tax (provision)/benefit of ($7), ($14), $82 and ($28), respectively	62			43			(154		)	86
Other comprehensive (loss)/income	(6,171		)	6,327
Other comprehensive loss	(23,654		)	(46,179		)	(29,825		)	(39,852		)
COMPREHENSIVE INCOME	$	3227,~~635~~719		$	822,~~352~~432		$	60,354		$	84,784
Less: Comprehensive income/(loss) attributable to noncontrolling interest	918			(3,091		)
Less: Comprehensive loss attributable to noncontrolling interest	(3,370		)	(4,225		)	(2,452		)	(7,316		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO GENESEE & WYOMING INC.	$	31,~~717~~089		$	856,~~443~~657		$	62,806		$	92,100

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2019 and 2018 (Unaudited)

(dollars in thousands)

	G&W Stockholders
	Class ACommon Stock		Class BCommonStock			AdditionalPaid-inCapital			RetainedEarnings			~~AccumulatedOtherComprehensiveIncome/~~AccumulatedOtherComprehensive(Loss)/Income			TreasuryStock			Non-controlling Interest			TotalEquity
BALANCE, December 31, 2017	$	748	$	7		$	1,757,332		$	2,234,864		$	(105,534	)	$	(236,951	)	$	245,626		$	3,896,092
BALANCE, December 31, 2018	$	752	$	5		$	1,785,005		$	2,482,252		$	(146,456	)	$	(699,852	)	$	208,346		3,630,052
Net income	—		—			—			7538,~~098~~706			—			—			~~927~~100			7638,~~025~~806
Other comprehensive income/(loss)	—		—			—			—			10,345			—			(4,018		)	6,327
Other comprehensive (loss)/income	—		—			—			—			(6,989		)	—			818			(6,171		)
Value of stock issued for stock-based compensation - 115,897 shares Class A Common Stock	1		—			1,049			—			—			—			—			1,050
Conversion of 100,000 shares Class B Common Stock to Class A Common Stock	1		(1		)	—			—			—			—			—			—
Compensation cost related to stock-based compensation	—		—			4,056			—			—			—			—			4,056
Value of stock issued for stock-based compensation - 164,732 shares Class A Common Stock	2		—			2,069			—			—			—			—			2,071
Value of treasury stock repurchased - 832,232 shares	—		—			—			—			—			(60,175		)	—			(60,175		)
Compensation cost related to stock-based compensation	—		—			3,884			—			—			—			—			3,884
Amounts reclassified from accumulated other comprehensive loss to retained earnings related to the United States Tax Cuts and Jobs Act	—		—			—			2,970			(2,970		)	—			—			—
Value of treasury stock repurchased - 111,289 shares	—		—			—			—			—			(8,630		)	—			(8,630		)
Other	—		—			—(832		)	—(1,104		)	—			—			1(796		)	1(2,732		)
BALANCE, March 31, 2018	$	749	$	7		$	1,762,437		$	2,312,932		$	(98,159	)	$	(297,126	)	$	242,536		$	3,923,376
BALANCE, March 31, 2019	$	755	$	4		$	1,790,126		$	2,519,854		$	(153,445	)	$	(708,482	)	$	208,468		$	3,657,280
Net income/(loss)	—		—			—			51,441			—			—			(68		)	51,373
Other comprehensive loss	—		—			—			—			(20,352		)	—			(3,302		)	(23,654		)
Conversion of 40,746 shares Class B Common Stock to Class A Common Stock	—		—			—			—			—			—			—			—
Value of stock issued for stock-based compensation - 38,512 shares Class A Common Stock	1		—			2,095			—			—			—			—			2,096
Compensation cost related to stock-based compensation	—		—			4,227			—			—			—			—			4,227
Other (including treasury stock repurchased - 107 shares)	—		—			1,346			(44		)	—			—			(1,722		)	(420		)
BALANCE, June 30, 2019	$	756	$	4		$	1,797,794		$	2,571,251		$	(173,797	)	$	(708,482	)	$	203,376		$	3,690,902

	G&W Stockholders
	Class ACommon Stock		Class BCommonStock			AdditionalPaid-inCapital			RetainedEarnings			AccumulatedOtherComprehensiveLoss			TreasuryStock			Non-controlling Interest			TotalEquity
BALANCE, December 31, 2018	$	752	$	5		$	1,785,005		$	2,482,252		$	(146,456	)	$	(699,852	)	$	208,346		$	3,630,052
Net income	—		—			—			38,706			—			—			100			38,806
Other comprehensive (loss)/income	—		—			—			—			(6,989		)	—			818			(6,171		)
Conversion of 100,000 shares Class B Common Stock to Class A Common Stock	1		(1		)	—			—			—			—			—			—
Value of stock issued for stock-based compensation - 164,732 shares Class A Common Stock	2		—			2,069			—			—			—			—			2,071
Compensation cost related to stock-based compensation	—		—			3,884			—			—			—			—			3,884
Value of treasury stock repurchased - 111,289 shares	—		—			—			—			—			(8,630		)	—			(8,630		)
Other	—		—			(832		)	(1,104		)	—			—			(796		)	(2,732		)
BALANCE, March 31, 2019	$	755	$	4		$	1,790,126		$	2,519,854		$	(153,445	)	$	(708,482	)	$	208,468		$	3,657,280

The accompanying notes are an integral part of these consolidated financial statements.

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GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2019 and 2018 (Unaudited)

(dollars in thousands) (continued)



	G&W Stockholders														Non-controlling Interest			Total Equity
	Class A Common Stock		Class B Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss)/Income			Treasury Stock			Non-controlling Interest			Total Equity
BALANCE, December 31, 2017	$	748	$	7	$	1,757,332	$	2,234,864	$	(105,534	)	$	(236,951	)	$	245,626		$	3,896,092
Net income	—		—		—		75,098		—			—			927			76,025
Other comprehensive income/(loss)	—		—		—		—		10,345			—			(4,018		)	6,327
Value of stock issued for stock-based compensation - 115,897 shares Class A Common Stock	1		—		1,049		—		—			—			—			1,050
Compensation cost related to stock-based compensation	—		—		4,056		—		—			—			—			4,056
Value of treasury stock repurchased - 832,232 shares	—		—		—		—		—			(60,175		)	—			(60,175		)
Amounts reclassified from accumulated other comprehensive loss to retained earnings related to the United States Tax Cuts and Jobs Act	—		—		—		2,970		(2,970		)	—			—			—
Other	—		—		—		—		—			—			1			1
BALANCE, March 31, 2018	$	749	$	7	$	1,762,437	$	2,312,932	$	(98,159	)	$	(297,126	)	$	242,536		$	3,923,376
Net income	—		—		—		44,168		—			—			4,443			48,611
Other comprehensive loss	—		—		—		—		(37,511		)	—			(8,668		)	(46,179		)
Conversion of 30,000 shares Class B Common Stock to Class A Common Stock	—		—		—		—		—			—			—			—
Value of stock issued for stock-based compensation - 42,102 shares Class A Common Stock	1		—		1,856		—		—			—			—			1,857
Compensation cost related to stock-based compensation	—		—		4,515		—		—			—			—			4,515
Value of treasury stock repurchased - 1,873,170 shares	—		—		—		—		—			(134,952		)	—			(134,952		)
Distribution to noncontrolling interest	—		—		—		—		—			—			(14,898		)	(14,898		)
Other	—		—		—		—		—			—			48			48
BALANCE, June 30, 2018	$	750	$	7	$	1,768,808	$	2,357,100	$	(135,670	)	$	(432,078	)	$	223,461		$	3,782,378

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~THREE~~SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2019 and 2018 (Unaudited)

(dollars in thousands)

	Three Months Ended
	Six Months Ended
	March 31,
	June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3890,~~806~~179		$	76124,~~025~~636
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	62125,~~626~~143			65131,~~990~~735
Stock-based compensation	38,~~880~~100			48,~~052~~601
Deferred income taxes	922,~~312~~534			(2411,~~148~~489		)
Net gain on sale and impairment of assets	(1,490		)	(1,036		)
Insurance proceeds received	1,600			—
Net gain on sale and impairment of assets	(510		)	(1,859		)
Changes in assets and liabilities which provided/(used) cash:
Accounts receivable, net	(4,~~393~~930		)	(646,~~299~~519		)
Materials and supplies	(1,~~972~~278		)	2,~~593~~460
Prepaid expenses and other	~~819~~(7,121		)	(7,~~025~~587		)
Accounts payable and accrued expenses	(2118,~~062~~673		)	~~(12~~20,~~381~~665		)
Other assets and liabilities, net	85,~~077~~521			310,~~588~~684
Net cash provided by operating activities	~~103~~223,~~389~~121			~~101~~231,~~359~~327
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(67144,~~788~~740		)	(58133,~~222~~328		)
Grant proceeds from outside parties	614,~~495~~881			512,~~934~~901
Insurance proceeds for replacement of assets	—			1,600
Proceeds from settlement of derivative transactions	45,360			—
Proceeds from disposition of property and equipment	2,594			1,423
Proceeds from sale of business	—			7,927
Net cash used in investing activities	(58,699		)	(49,265		)
Insurance proceeds for replacement of assets	1,597			1,866
Proceeds from disposition of property and equipment	4,176			2,795
Contributions to joint venture	(2,700		)	(2,921		)
Net cash used in investing activities	(81,426		)	(110,760		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on revolving line-of-credit, long-term debt and finance lease obligations	(~~155~~319,~~045~~338		)	(~~121~~706,~~850~~965		)
Proceeds from revolving line-of-credit and long-term borrowings	95,951			176,840
Proceeds from revolving line-of-credit and long-term debt	178,726			795,241
Common share repurchases	(4,796		)	(57,376		)
Debt amendment/issuance costs	—			(5,303		)
Installment payments on Freightliner deferred consideration	—			(6,255		)
Purchase of additional shares in Freightliner Australia	(4,696		)	—
Other financing related activities, net	(1,989		)	(1,973		)
Common share repurchases	(4,796		)	(192,324		)
Net cash used in financing activities	(65,879		)	(10,614		)
Distribution to noncontrolling interest	—			(14,898		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	910			(562		)
Installment payments on Freightliner deferred consideration	(2,522		)	(6,255		)
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS	(20,279		)	40,918
Other financing related activities, net	(253		)	(893		)
Net cash used in financing activities	(152,879		)	(131,397		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS	3,180			60
DECREASE IN CASH AND CASH EQUIVALENTS	(8,004		)	(10,770		)
CASH AND CASH EQUIVALENTS, beginning of period	90,387			80,472
CASH AND CASH EQUIVALENTS, end of period	$	7082,~~108~~383		$	~~121~~69,~~390~~702

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents GENESEE & WYOMING 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 Genesee & Wyoming Inc. and its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. These interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and are unaudited. They 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 (U.S. GAAP). In the opinion of management, the unaudited financial statements for the three and six months ended ~~March~~June 3130, 2019 and 2018 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 the interim periods presented. 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 2018 was derived from the audited financial statements in the Company's 2018 Annual Report on Form 10-K, but does not include all disclosures required by U.S. GAAP.

The results of operations of the foreign entities are maintained in the local currency of the respective subsidiary and translated into United States dollars at the applicable exchange rates for inclusion in the consolidated financial statements. As a result, any appreciation or depreciation of these currencies against the United States dollar will impact the Company's results of operations.

The interim consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2018 included in the Company's 2018 Annual Report on Form 10-K.

During the process of preparing the Form 10-K for the year ended December 31, 2018, the Company determined that there was an error in and revised its statement of cash flows for the six months ended June 30, 2018, which resulted in the following offsetting adjustments: an increase of $33 million in principal payments on revolving line-of-credit, long-term debt and capital lease obligations, representing cash outflows from financing activities, and an increase of $33 million in proceeds from revolving line-of-credit and long-term debt, representing cash inflows from financing activities. There was no effect on any other section of the Company's statement of cash flows, and this revision had no impact on the Company's consolidated balance sheet as of December 31, 2018 or the Company's consolidated statements of operations or comprehensive income for the three and six months ended June 30, 2018. The Company does not consider this revision material to any previously issued consolidated financial statements.

When comparing the Company's results of operations from one reporting period to another, it is important to consider that the Company has historically experienced fluctuations in revenues and expenses due to acquisitions and divestitures, changing economic conditions, fluctuations in commodity prices, competitive forces, changes in foreign currency exchange rates, rail network issues and congestion, the ability to attract and retain skilled workers, one-time freight moves, fuel price fluctuations, customer plant expansions and shutdowns, sales of property and equipment, derailments and weather-related conditions, such as hurricanes, cyclones, tornadoes, high winds, droughts, heavy snowfall, unseasonably hot or cold weather, freezing and flooding, among other factors. In periods when these events occur, the Company's results of operations are not easily comparable from one period to another. Finally, certain of the Company's railroads have commodity shipments that are sensitive to general economic conditions, global commodity prices and foreign exchange rates, such as steel products, iron ore, paper products, lumber and forest products and agricultural products, as well as product specific market conditions, such as the availability of lower priced alternative sources of power generation (coal) and energy commodity price differentials (crude oil and natural gas liquids) or congestion at ports (intermodal). Other shipments are relatively less affected by economic conditions and are more closely affected by other factors, such as winter weather (salt) and seasonal rainfall (agricultural products). As a result of these and other factors, the Company's results of operations in any reporting period may not be directly comparable to the Company's results of operations in other reporting periods.

2. CHANGES IN OPERATIONS:

North American Operations

Canada Lease Expirations: Two of the Company's short line railroad leases in Canada (Goderich-Exeter Railway (GEXR) and Southern Ontario Railway (SORR)) expired at the end of 2018. The Company's results for the three and six months ended ~~March~~June 3130, 2018 included $5.56 million and $11.1 million, respectively, of revenues ~~and~~from nothese ~~material~~leased ~~impact~~railroads. onThe Company's results included no material operating income from these leased railroads for the three and six months ended June 30, 2018.

~~U.K./European~~ ~~Operations~~10

U.K. Operations Optimization: In May 2018, the Company began a program to restructure and further optimize its operations in the U.K., which it intends to complete by 2020. The program includes the rationalization of the locomotive and railcar fleet, management restructuring (following the U.K. consultative process) and technology investments to upgrade systems to enhance productivity and service quality.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~Restructuring and related costs associated with the optimization are expected to be approximately $34 million (at an exchange rate of $1~~U.30K./European ~~for one British pound) and are comprised of the following (dollars in thousands):~~Operations

	Three Months Ended March 31, 2019		Total Costs Incurred Through March 31, 2019		Estimated Total Restructuring and Related Costs
Rationalization of locomotive and railcar fleet	$	—	$	6,301	$	8,000
Management restructuring(a)	4,083		8,723		12,000
Productivity and automation investments	1,413		5,456		14,000
Total	$	5,496	$	20,480	$	34,000

Restructuring and related costs associated with the optimization are expected to be approximately $37 million (at an exchange rate of $1.30 for one British pound) and are comprised of the following (dollars in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019		Total Costs Incurred Through June 30, 2019		Estimated Total Restructuring and Related Costs
Rationalization of locomotive and railcar fleet	$	—	$	—	$	6,301	$	9,000
Management restructuring^(a)	5,058		9,141		13,781		16,000
Productivity and automation investments	1,725		3,138		7,181		12,000
Total	$	6,783	$	12,279	$	27,263	$	37,000


(a)	Subject to requisite U.K. consultative process.

Changes in restructuring and related liabilities for the U.K. Operations Optimization program for the six months ended June 30, 2019 was as follows (dollars in thousands):

	Rationalization of Locomotive and Railcar Fleet			Management Restructuring			Productivity and Automation Investments			Total
Restructuring and related liabilities as of December 31, 2018	$	4,094		$	982		$	—		$	5,076
Restructuring and related costs incurred	—			49,~~083~~141			13,~~413~~138			512,~~496~~279
Cash payments	(~~352~~610		)	(36,~~478~~691		)	(13,~~413~~138		)	(510,~~243~~439		)
Non-cash settlements	—			—			—			—
Restructuring and related liabilities as of March 31, 2019	$	3,742		$	1,587		$	—		$	5,329
Restructuring and related liabilities as of June 30, 2019	$	3,484		$	3,432		$	—		$	6,916

Continental Europe Intermodal Business: On June 5, 2018, the Company sold its Continental Europe intermodal business, ERS Railways B.V. (ERS), for gross cash proceeds of €11.2 million (or $13.1 million at the exchange rate on June 5, 2018) or €6.8 million (or $7.9 million at the exchange rate on June 5, 2018) net of €4.4 million (or $5.2 million at the exchange rate on June 5, 2018) of cash on hand that transferred to the buyer. The Company's results for the three and six months ended ~~March~~June 3130, 2018 included $149.74 million and $24.1 million, respectively, of revenues from ERS. The Company's results for the three and nosix ~~material~~months ~~impact~~ended onJune 30, 2018 included no material operating income from ERS.

~~3. EARNINGS~~ ~~PER COMMON SHARE:~~11

The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2019 and 2018 (in thousands, except per share amounts):

	Three Months Ended
	March 31,
	2019		2018
Numerators:
Net income attributable to Genesee & Wyoming Inc.	$	38,706	$	75,098
Denominators:
Weighted average Class A common shares outstanding – Basic	56,368		61,918
Weighted average Class B common shares outstanding	498		701
Dilutive effect of employee stock-based awards	266		268
Weighted average shares – Diluted	57,132		62,887
Earnings per common share attributable to Genesee & Wyoming Inc. common stockholders:
Basic earnings per common share	$	0.69	$	1.21
Diluted earnings per common share	$	0.68	$	1.19

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

3. EARNINGS PER COMMON SHARE:

The following table sets forth the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2019 and 2018 (in thousands, except per share amounts):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Numerators:
Net income attributable to Genesee & Wyoming Inc.	$	51,441	$	44,168	$	90,147	$	119,266
Denominators:
Weighted average Class A common shares outstanding – Basic	56,536		59,996		56,433		60,946
Weighted average Class B common shares outstanding	405		673		452		687
Dilutive effect of employee stock-based awards	331		210		297		208
Weighted average shares – Diluted	57,272		60,879		57,182		61,841
Earnings per common share attributable to Genesee & Wyoming Inc. common stockholders:
Basic earnings per common share	$	0.91	$	0.74	$	1.60	$	1.96
Diluted earnings per common share	$	0.90	$	0.73	$	1.58	$	1.93

The following total number of shares of Class A Common Stock issuable under the assumed exercise of stock-based awards computed based on the treasury stock method were excluded from the calculation of diluted earnings per common share, as the effect of including these shares would have been antidilutive (in thousands):

	Three Months Ended		Six Months Ended
	March 31,
	June 30,		June 30,
	2019	2018	2019	2018
Antidilutive shares	~~717~~257	~~945~~1,130	566	1,043

Share Repurchase

In October 2018, the Company completed its $300 million share repurchase program that had been approved in 2015, and the Company's Board of Directors authorized a new $500 million share repurchase program of Class A Common Stock, subject to certain limitations under the Company's credit facility. The table below presents information regarding shares repurchased by the Company under the share repurchase programs during the three and six months ended ~~March~~June 3130, 2019 and 2018 (in thousands, except ~~for~~ per share amounts):

	Three Months Ended				Six Months Ended
	March 31,
	June 30,				June 30,
	2019		2018		2019		2018
Class A Common Stock repurchased	65—		~~793~~1,873		65		2,666
Average price paid per share of Class A Common Stock repurchased	$	~~73.94~~—	$	72.3504	$	73.94	$	72.14

Repurchased shares are recorded in treasury stock, at cost, which includes any applicable commissions and fees. As of ~~March~~June 3130, 2019, the remaining amount authorized for repurchase under the $500 million share repurchase program was $335.0 million. In light of the Company's entry into the merger agreement with affiliates of Brookfield Infrastructure and GIC, future share repurchases under the repurchase program have been suspended. See Note 15, Subsequent Events, for additional information regarding the merger agreement.

~~4. ACCOUNTS~~ ~~RECEIVABLE:~~12

Accounts receivable consisted of the following as of March 31, 2019 and December 31, 2018 (dollars in thousands):

	March 31, 2019			December 31, 2018
Accounts receivable – trade	$	399,157		$	397,255
Accounts receivable – grants from outside parties	17,263			19,376
Accounts receivable – insurance and other third-party claims	33,575			19,729
Total accounts receivable	449,995			436,360
Less: Allowance for doubtful accounts	(10,468		)	(10,055		)
Accounts receivable, net	$	439,527		$	426,305

The timing of revenue recognition, billings and cash collections result in trade accounts receivable, contract assets and contract liabilities. The Company’s contract assets and liabilities are typically short-term in nature, with terms settled within a 12-month period. The Company had no material contract assets or contract liabilities recorded on the consolidated balance sheet as of March 31, 2019 or December 31, 2018.

Grants from Outside Parties

The Company periodically receives grants for the upgrade and construction of rail lines and the upgrade of locomotives

from federal, provincial, state and local agencies in the United States and provinces in Canada in which the Company operates.

These grants typically reimburse the Company for 50% to 100% of the actual cost of specific projects. In total, the Company

received grant proceeds of $6.5 million and $5.9 million for the three months ended March 31, 2019 and 2018, respectively, from such grant programs. The proceeds were presented as cash inflows from investing activities within the statement of cash flows for each of the applicable periods. The Company records additions to property and equipment for its grant-funded projects and defers the amount of the grants. The amortization of deferred grants is a non-cash offset to depreciation expense over the useful lives of the related assets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	Three Months Ended
	March 31,
	2019		2018
Amortization of deferred grants	$	3,508	$	2,467

4. ACCOUNTS RECEIVABLE:

Accounts receivable consisted of the following as of June 30, 2019 and December 31, 2018 (dollars in thousands):



	June 30, 2019			December 31, 2018
Accounts receivable – trade	$	406,770		$	397,255
Accounts receivable – grants from outside parties	18,748			19,376
Accounts receivable – insurance and other third-party claims	31,707			19,729
Total accounts receivable	457,225			436,360
Less: Allowance for doubtful accounts	(13,057		)	(10,055		)
Accounts receivable, net	$	444,168		$	426,305

Grants from Outside Parties

The Company periodically receives grants for the upgrade and construction of rail lines and the upgrade of locomotives from federal, provincial, state and local agencies in the United States and provinces in Canada in which the Company operates.

These grants typically reimburse the Company for 50% to 100% of the actual cost of specific projects. In total, the Company received grant proceeds of $14.9 million and $12.9 million for the six months ended June 30, 2019 and 2018, respectively, from such grant programs. The proceeds were presented as cash inflows from investing activities within the statement of cash flows for each of the applicable periods. The Company records additions to property and equipment for its grant-funded projects and defers the amount of the grants. The amortization of deferred grants is a non-cash offset to depreciation expense over the useful lives of the related assets.

The following table sets forth the offset to depreciation expense from the amortization of deferred grants recorded by the Company during the three and six months ended June 30, 2019 and 2018 (dollars in thousands):



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Amortization of deferred grants	$	3,315	$	3,136	$	6,823	$	5,603

Insurance and Third-Party Claims

The increase in the balance of the accounts receivable from insurance and other third-party claims for the ~~three~~six months ended ~~March~~June 3130, 2019 was primarily related to the anticipated insurance recovery associated with a personal injury that occurred in the U.K. in 2019. The receivable and the associated claim liability were recorded on the balance sheet as of ~~March~~June 3130, 2019.

The Company recently completed its annual property insurance renewal, which takes effect on August 1, 2019. Effective with this renewal, the Company's property policies will have various self-insured retentions, which vary based on the type and location of the incident, up to $10.0 million.

5. LEASES:

On January 1, 2019, the Company adopted Accounting Standards Update (ASU) 2016-02, Leases (the New Standard), and all related amendments, which supersedes the previous lease guidance, using the transition method with the election not to adjust comparative periods. The New Standard requires lessees to recognize leases on their balance sheet as a right-of-use (ROU) asset with a corresponding lease liability. The adoption resulted in the recognition of ROU assets included in other assets and lease liabilities included in accrued expenses and other long-term liabilities of approximately $495 million in the Company's consolidated balance sheet, each as a result of the new requirement to recognize operating leases. No material cumulative-effect adjustment was recognized in retained earnings, and the adoption did not materially impact operating results, liquidity or the Company's debt-covenant compliance under these agreements. The Company continues to recognize its capital leases on the balance sheet but these leases are now referred to as "finance" leases, as required by the New Standard.

~~The~~ Company enters into leases for railcars, locomotives and other equipment as well as real property. These leases may contain variable payments that vary with rate or index changes or include payment of a per car fee or per mile fee to use the track under variable lease contracts. The Company may receive rent holidays and other incentives provided by the landlord on lease agreements. On occasion the Company subleases assets to other parties.13

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The Company enters into leases for railcars, locomotives and other equipment as well as real property. These leases may contain variable payments that vary with rate or index changes or include payment of a per car fee or per mile fee to use the track under variable lease contracts. The Company may receive rent holidays and other incentives provided by the lessor on lease agreements. On occasion, the Company subleases assets to other parties.

As of January 1, 2019, the Company adopted a number of practical expedients and exemptions included in the New Standard, which were intended to reduce the cost and complexity of complying with the transition requirements. The Company chose the following practical expedients and exemptions in setting its accounting policy elections for transition to:


1.	Not recognize an asset and liability for leases of all asset classes with a term of 12 months or less;


2.	Carry forward the historical lease classification and not reassess its existing contracts to determine whether the arrangements contained a lease or whether initial direct costs qualified for capitalization;


3.	Not separate lease and non-lease components; and


4.	Carry forward its current accounting treatment for land easements on existing agreements.

Lease contracts may include one or more renewal options, with renewal terms from one to fifty years or more. Leases may also include options to terminate the arrangement or options to purchase the underlying ~~lease~~leased property. The exercise of lease options are generally at the discretion of the Company's management team. The Company determines the expected term of a lease and includes options that are reasonably certain to be exercised in the calculation of its ~~right-of-use~~ROU assets and lease liabilities.

The determination of whether a contract contains a lease, as well as the analysis regarding the allocation of consideration in a contract between lease and non-lease components, is performed on a case by case basis and considers the nature and interdependency of the individual assets in the arrangement. The Company generally accounts for lease assets as a single component as the assets in most agreements are highly interrelated and dependent upon each other to fulfill the arrangement.

As the implicit rate is not readily determinable in most of the Company's lease agreements, the Company uses its estimated secured incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The 12following table summarizes the Company's leased assets and lease liabilities recorded in the consolidated balance sheet as of June 30, 2019 (dollars in thousands):



	Balance Sheet Location	June 30, 2019
Leased right-of-use assets:
Operating leased assets	Other assets	$	494,803
Finance leased assets, net	Property and equipment, net^(a)	90,716
Total leased assets		$	585,519
Lease liabilities:
Current
Operating lease liabilities	Accrued expenses	$	65,004
Finance lease liabilities	Current portion of long-term debt	11,477
Non-current
Operating lease liabilities	Other long-term liabilities	428,087
Finance lease liabilities	Long-term debt, less current portion	72,500
Total lease liabilities		$	577,068


(a)	Net of $29.2 million of accumulated amortization as of June 30, 2019, which was recognized in depreciation and amortization expense within the Company's consolidated statement of operations.

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table summarizes the ~~Company's~~components of lease ~~assets~~expense ~~and~~for ~~liabilities recorded in~~ the ~~consolidated~~three ~~balance~~and ~~sheet~~six asmonths ofended ~~March~~June 3130, 2019 (dollars in thousands):

	Balance Sheet Location	March 31, 2019
	Location of Amount Recognized in Earnings	Three Months Ended			Six MonthsEnded
Lease right-of-use assets:
		June 30, 2019			June 30, 2019
Operating lease assets	Other assets	$	495,399
Finance leases:
Finance lease assets, net	Property and equipment, net(a)	74,816
Amortization of right-of-use assets	Depreciation and amortization	$	1,888		$	3,761
Total lease assets		$	570,215
Interest on lease liability	Interest expense	847			1,673
Lease liabilities:
Total finance lease cost		$	2,735		$	5,434
Current
Operating leases:
Operating lease liabilities	Accrued expenses	$	62,759
Operating lease cost	Equipment rents/Trackage rights	$	22,533		$	44,684
Finance lease liabilities	Current portion of long-term debt	9,786
Short-term lease cost	Equipment rents/Trackage rights	2,566			4,993
Non-current
Variable lease cost	Equipment rents/Trackage rights	2,995			4,907
Operating lease liabilities	Other long-term liabilities	431,218
Sublease income (gross basis)	Operating revenues	(1,527		)	(2,250		)
Finance lease liabilities	Long-term debt, less current portion	60,955
Total operating lease cost		$	26,567		$	52,334
Total lease liabilities		$	564,718
Total lease cost		$	29,302		$	57,768

The maturities of lease liabilities under the New Standard based on the Company's reasonably certain holding period for each lease were as follows as of June 30, 2019 (dollars in thousands):

(a) Net of $25.6 million of accumulated amortization as of March 31, 2019, which was recognized in depreciation and amortization expense within the Company's consolidated statement of operations.



	Finance Leases		Operating Leases
Maturity of lease liabilities:
2019 (remainder)	$	7,789	$	45,446
2020	19,586		74,453
2021	10,807		64,080
2022	15,097		52,091
2023	10,862		43,242
Thereafter	35,671		564,700
Total lease payments	99,812		844,012
Less: Imputed interest	15,835		350,921
Total lease liabilities	$	83,977	$	493,091

The following table summarizes the components of lease expense for the three months ended March 31, 2019 (dollars in thousands):

	Location of Amount Recognized in Earnings	Three Months Ended
		March 31, 2019
Finance leases:
Amortization of right-of-use assets	Depreciation and amortization	$	1,873
Interest on lease liability	Interest expense	826
Total finance lease cost		$	2,699
Operating leases:
Operating lease cost	Equipment rents/Trackage rights	$	21,760
Short-term lease cost	Equipment rents/Trackage rights	1,355
Variable lease cost	Equipment rents/Trackage rights	704
Sublease income (gross basis)	Operating revenues	(723		)
Total operating lease cost		$	23,096
Total lease cost		$	25,795

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

	Finance Leases		Operating Leases
Maturity of lease liabilities:
2019 (remainder)	$	7,590	$	65,831
2020	18,859		68,232
2021	9,886		60,260
2022	14,281		50,476
2023	9,969		42,357
Thereafter	20,726		536,872
Total lease payments	81,311		824,028
Less: Imputed interest	10,570		330,051
Total lease liabilities	$	70,741	$	493,977

The following is a summary of future minimum lease payments based on the minimum non-cancelable lease term as required under previous guidance for capital and operating leases as of December 31, 2018 (dollars in thousands):



	Capital		Operating
2019	$	11,405	$	82,191
2020	17,261		63,062
2021	8,668		54,305
2022	9,625		44,739
2023	10,780		35,919
Thereafter	13,988		383,739
Total minimum payments	$	71,727	$	663,955

	Three Months Ended
	March 31, 2019
Cash flow information:
Cash paid for operating leases included in operating activities	$	23,126
Cash paid for finance leases included in operating activities	$	722
Cash paid for finance leases included in financing activities	$	2,288
Weighted average remaining lease term (in years):
Operating leases	27.0
Finance leases	5.9
Weighted average discount rate:
Operating leases	3.9		%
Finance leases	5.0		%
New leases:
Right-of-use assets obtained in exchange for operating lease liabilities	$	15,038
Right-of-use assets obtained in exchange for finance lease liabilities	$	9,926

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table presents supplemental cash flow and other information for the Company's leases as of and for the six months ended June 30, 2019 (dollars in thousands):



	Six Months Ended
	June 30, 2019
Cash flow information:
Cash paid for operating leases included in operating activities	$	45,571
Cash paid for finance leases included in operating activities	$	1,387
Cash paid for finance leases included in financing activities	$	4,688

Weighted average remaining lease term (in years):
Operating leases	26.5
Finance leases	8.2

Weighted average discount rate:
Operating leases	3.8		%
Finance leases	4.4		%

New leases:
Right-of-use assets obtained in exchange for operating lease liabilities	$	31,445
Right-of-use assets obtained in exchange for finance lease liabilities	$	27,335

6. DERIVATIVE FINANCIAL INSTRUMENTS:

The Company actively monitors its exposure to interest rate and foreign currency exchange rate risks and uses derivative financial instruments to manage the impact of risks associated with underlying interest rate and foreign exchange rate exposures. The Company's use of these derivative financial instruments may result in short-term gains or losses and increased earnings volatility. The instruments held by the Company are recorded in the consolidated balance sheets at fair value in prepaid expenses and other, other assets, accrued expenses or other long-term liabilities.

The Company may designate derivatives as a hedge of a forecasted transaction or a hedge of the variability of the cash flows to be received or paid in the future related to a recognized asset or liability (cash flow hedge). The portion of the changes in the fair value of the derivative used as a cash flow hedge that is offset by changes in the expected cash flows related to a recognized asset or liability is recorded in other comprehensive income/(loss) (OCI). Amounts recorded in OCI may be realized and reported in the consolidated statements of operations on the same line item as the hedged item in the event the hedged item is settled, did not or is no longer expected to occur or if the hedging relationship is no longer effective.

The Company ~~matches~~may ~~the~~designate ~~hedge~~fair ~~instrument~~value hedges to ~~the~~mitigate ~~underlying~~foreign ~~hedged~~currency ~~item~~exchange ~~(assets,~~rates ~~liabilities,~~on ~~firm~~non-functional ~~commitments~~currency assets or ~~forecasted transactions)~~liabilities. AtThe ~~inception~~Company ofuses the ~~hedge~~mark-to-market ~~and~~approach atto ~~least~~remeasure ~~quarterly thereafter,~~ the ~~Company~~hedged ~~assesses~~item ~~whether~~and the ~~derivatives~~hedging ~~used~~instrument. toThe ~~hedge transactions are highly effective in offsetting~~ changes in ~~either~~ the fair value ~~or cash flows~~ of the hedged item. ~~When it~~ is ~~determined~~included ~~that~~in aother ~~derivative~~income/(loss), ~~instrument~~net ~~ceases~~and toare beoffset aby ~~highly~~changes ~~effective~~in ~~hedge of~~ the ~~underlying~~fair ~~transaction,~~value ~~the~~of ~~Company discontinues hedge accounting, and any gains or losses on~~ the ~~derivative~~hedging instrument ~~thereafter~~which are ~~recognized~~reported in ~~earnings during~~ the ~~period~~same inincome ~~which~~statement itline ~~no longer qualifies for hedge accounting~~item.

~~From~~In ~~time to time~~addition, the Company may ~~enter~~designate ~~into~~net ~~certain~~investment ~~derivative~~hedges ~~instruments~~to ~~that~~reduce ~~may~~the ~~not~~impact beof ~~designated~~the asvariability ~~hedges~~of ~~for~~foreign ~~accounting~~currency ~~purposes.~~exchange ~~For~~rates ~~example,~~on toits ~~mitigate~~net investments in certain non-U.S. operations using cross-currency ~~exposures~~swaps. ~~related~~The toCompany ~~intercompany~~measures ~~debt,~~the effectiveness of the hedge by offsetting the changes in the fair value of the cross-currency swap ~~contracts~~and ~~may~~the behedged ~~entered~~asset ~~into~~or ~~for~~liability. ~~periods~~Gains ~~consistent~~and ~~with~~losses on the ~~underlying~~after-tax ~~debt.~~effective ~~The~~portion ~~Company~~of ~~believes~~the ~~such~~net ~~instruments~~investment hedge are ~~closely~~reported ~~correlated~~in ~~with~~currency ~~the~~translation ~~underlying~~adjustments ~~exposure,~~where ~~thus~~they ~~reducing~~remain until the ~~associated~~investment ~~risk~~is liquidated. The ~~gains~~Company orrecords ~~losses~~the ~~from~~portion of the ~~changes~~gain inor loss on the ~~fair~~hedging ~~value~~instrument ofthat ~~derivative~~exceeds ~~instruments~~the ~~not~~gain ~~accounted~~or ~~for~~loss ~~using~~of ~~hedge~~the ~~accounting~~hedged ~~are~~item ~~recognized~~as inan ~~current~~offset ~~period~~to ~~earnings~~the ~~within~~tax ~~other~~impact ~~income/(loss),~~recognized ~~net~~during the period.

The ~~following~~Company ~~table~~matches ~~summarizes~~the hedge instrument to the underlying hedged item (assets, liabilities, firm commitments or forecasted transactions). At inception of the hedge and at least quarterly thereafter, the Company assesses whether the derivatives used to hedge transactions are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. When it is determined that a derivative instrument ceases to be a highly effective hedge of the underlying transaction, the Company's discontinues hedge accounting, and any gains or losses on the derivative ~~instruments~~instrument ~~recorded~~thereafter are recognized in earnings during the ~~consolidated~~period ~~balance~~in ~~sheets~~which asit ofno ~~March 31,~~longer ~~2019~~qualifies for hedge accounting. Gains and ~~December 31,~~losses ~~2018~~on ~~(dollars~~any excluded components of derivatives designated as hedges are recorded in ~~thousands~~OCI and amortized to other income/(loss):, net over the life of the hedge.

		Fair Value
	Balance Sheet Location	March 31, 2019		December 31, 2018
Asset Derivatives:
Derivatives designated as hedges:
British pound forward contracts	Prepaid expenses and other	$	23,198	$	—
British pound forward contracts	Other assets	—		26,011
Total derivatives designated as hedges		$	23,198	$	26,011
Derivatives not designated as hedges:
Cross-currency swap contract	Prepaid expenses and other	$	13,648	$	19,684
Total derivatives not designated as hedges		$	13,648	$	19,684
Liability Derivatives:
Derivatives designated as hedges:
Interest rate swap agreements	Accrued expenses	$	3,864	$	1,954
British pound forward contracts	Accrued expenses	191		—
Interest rate swap agreements	Other long-term liabilities	28,323		12,441
British pound forward contracts	Other long-term liabilities	—		59
Total derivatives designated as hedges		$	32,378	$	14,454

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

~~The~~From ~~following~~time ~~table~~to ~~shows~~time, the ~~effect~~Company ofmay ~~the~~enter ~~Company's~~into certain derivative instruments ~~designated~~that asmay ~~cash~~not ~~flow~~be designated as hedges for ~~the~~accounting ~~three~~purposes. ~~months~~The ~~ended~~Company ~~March 31~~believes such instruments are closely correlated with the underlying exposure, ~~2019~~thus ~~and~~reducing ~~2018~~the associated risk. The gains or losses from the changes in ~~OCI~~the ~~(dollars~~fair value of derivative instruments not accounted for using hedge accounting are recognized in ~~thousands~~current period earnings within other income/(loss):, net.

	Total Cash Flow Hedge OCI Activity, Net of Tax
	Three Months Ended
	March 31,
	2019			2018
Derivatives Designated as Cash Flow Hedges:
Effective portion of net changes in fair value recognized in OCI, net of tax:
Interest rate swap agreements	$	(13,406	)	$	6,892
British pound forward contracts, net (a)	432			9
	$	(12,974	)	$	6,901

The following table summarizes the fair value of the Company's derivative instruments recorded in the consolidated balance sheets as of June 30, 2019 and December 31, 2018 (dollars in thousands):

(a) The three months ended March 31, 2019 represented a net gain of $2.8 million for the mark-to-market of the U.K. intercompany loan, partially offset by a net loss of $2.4 million for the mark-to-market of the British pound forward contracts. The three months ended March 31, 2018 represented a net gain of $5.5 million for the mark-to-market of the U.K. intercompany loan, offset by a net loss of $5.5 million for the mark-to-market of the British pound forward contracts.



		Fair Value
	Balance Sheet Location	June 30, 2019		December 31, 2018
Asset Derivatives:
Derivatives designated as cash flow hedges:
British pound forward contracts	Prepaid expenses and other	$	3,055	$	—
British pound forward contracts	Other assets	—		26,011
Total derivatives designated as hedges		$	3,055	$	26,011
Derivatives not designated as hedges:
Cross-currency swap contract	Prepaid expenses and other	$	—	$	19,684
Total derivatives not designated as hedges		$	—	$	19,684

Liability Derivatives:
Derivatives designated as cash flow hedges:
Interest rate swap agreements	Accrued expenses	$	6,774	$	1,954
British pound forward contracts	Accrued expenses	14		—
Interest rate swap agreements	Other long-term liabilities	53,446		12,441
British pound forward contracts	Other long-term liabilities	—		59
Derivative designated as a net investment hedge:
Cross-currency swap contract	Other long-term liabilities	807		—
Derivative designated as a fair value hedge:
Cross-currency swap contract	Other long-term liabilities	2,387		—
Total derivatives designated as hedges		$	63,428	$	14,454

~~The~~ following table shows the effect of the Company's derivative instruments not designated as hedges for the three months ended March 31, 2019 and 2018 in the consolidated statements of operations (dollars in thousands):17

		Amount Recognized in Earnings
	Location of Amount Recognized in Earnings	Three Months Ended
		March 31,
		2019			2018
Derivative Instruments Not Designated as Hedges:
Cross-currency swap agreements, net (a)	Other income/(loss), net	$	(2,485	)	$	(2,762	)
		$	(2,485	)	$	(2,762	)

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

~~(a)~~NOTES ~~The~~TO ~~three~~CONSOLIDATED ~~months~~FINANCIAL ~~ended~~STATEMENTS March 31, 2019 represented a net loss of $7.4 million for the mark-to-market of the Swaps, partially offset by a net gain of $4.9 million for the mark-to-market of the GRail Intercompany Loan. The three months ended March 31, 2018 represented a net loss of $8.2 million for the mark-to-market of the GRail Intercompany Loan, offset by a net gain of $5.4 million for the mark-to-market of the Swaps.(Unaudited)

The following table shows the effective portion of net changes in the fair value of the Company's derivative instruments designated as hedges recognized in OCI, net of tax for the three and six months ended June 30, 2019 and 2018 (dollars in thousands):



	Total Derivatives Designated as Hedges OCI Activity, Net of Tax
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Derivatives Designated as Hedges:
Cash Flow Hedges:
Interest rate swap agreements	$	(21,299	)	$	2,687		$	(34,705	)	$	9,580
Foreign currency forward contracts	—			288			—			288
British pound forward contracts, net ^(a)	1,026			(274		)	1,458			(265		)
	$	(20,273	)	$	2,701		$	(33,247	)	$	9,603
Net Investment Hedge:
Cross-currency swap contract	$	(822	)	$	—		$	(822	)	$	—

Fair Value Hedge:
Cross-currency swap contract	$	(430	)	$	—		$	(430	)	$	—

Total derivatives designated as hedges	$	(21,525	)	$	2,701		$	(34,499	)	$	9,603


(a)	The three and six months ended June 30, 2019 represented a net gain of $16.7 million and $19.5 million, respectively, for the mark-to-market of the U.K. intercompany loan, partially offset by a net loss of $15.6 million and $18.0 million, respectively, for the mark-to-market of the British pound forward contracts.

The three and six months ended June 30, 2018 represented a net loss of $9.2 million and $3.7 million, respectively, for the mark-to-market of the U.K. intercompany loan, partially offset by a net gain of $9.0 million and $3.5 million, respectively, for the mark-to-market of the British Pound forward contracts.

The following table shows the effect of the Company's derivative instruments not designated as hedges for the three and six months ended June 30, 2019 and 2018 in the consolidated statements of operations (dollars in thousands):



		Amount Recognized in Earnings
	Location of Amount Recognized in Earnings	Three Months Ended				Six Months Ended
		June 30,				June 30,
		2019		2018		2019			2018
Derivatives Not Designated as Hedges:
Cross-currency swap agreements, net ^(a)	Other income/(loss), net	$	715	$	272	$	(1,770	)	$	(2,490	)

(a)

The three months ended June 30, 2019 represented a net gain of $7.1 million for the mark-to-market of the swaps, partially offset by a net loss of $6.4 million for the mark-to-market of the GRail Intercompany Loan. The six months ended June 30, 2019 represented a net loss of $1.4 million for the mark-to-market of the GRail Intercompany Loan and a net loss of $0.3 million for the mark-to-market of the swaps. This derivative was settled in June 2019, and the Company received cash proceeds of €17.0 million (or $19.3 million at the exchange rate on June 30, 2019).

The three months ended June 30, 2018 represented a net gain of $3.0 million for the mark-to-market of the GRail Intercompany Loan, partially offset by a net loss of $2.8 million for the mark-to-market of the swaps. The six months ended June 30, 2018 represented a net loss of $5.1 million for the mark-to-market of the GRail Intercompany Loan, partially offset by a net gain of $2.6 million for the mark-to-market of the swaps.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following table shows the cash flow impacts from the Company's derivatives that settled during the six months ended June 30, 2019 (dollars in thousands):



	Six Months Ended
	June 30, 2019
Derivatives designated as hedges:
British pound forward contracts	$	26,088

Derivatives not designated as hedges:
Cross-currency swap contract	19,272
Total cash received from settlement of derivative transactions, investing activities	$	45,360

Interest Rate Risk Management

The Company uses interest rate swap agreements to manage its exposure to the changes in interest rates on the Company's variable rate debt. Interest payments accrued each reporting period for these interest rate swaps are recognized in interest expense.

The following table summarizes the terms of the Company's outstanding interest rate swap agreements entered into to manage the Company's exposure to changes in interest rates on its variable rate debt (amounts in thousands):



Effective Date	Expiration Date	Notional Amount		Pay Fixed Rate	Receive Variable Rate
12/1/2016	12/1/2021	A$	517,500	2.44%	AUD-BBR
8/31/2018	8/31/2021 - 8/31/2048	$	500,000	2.70% - 2.87%	1-month LIBOR

During ~~each of~~ the three and six months ended ~~March~~June 3130, 2019, $1.0 million and $1.5 million, respectively, of net losses associated with the Company's interest rate swaps were realized and recorded as interest expense in the consolidated statements of operations. During the three and six months ended June 30, 2018, $0.52 million ofand ~~existing~~$0.7 million, respectively, of net losses associated with the Company's interest rate swaps were realized and recorded as interest expense in the consolidated statements of operations. Based on the Company's fair value assumptions as of ~~March~~June 3130, 2019, it expects to realize $47.0 million of ~~existing~~ net losses that are reported in accumulated other comprehensive loss (AOCL) into earnings within the next 12 months. See Note 11, Accumulated Other Comprehensive Loss, for additional information regarding the Company's ~~cash~~derivatives ~~flow~~designated as hedges.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Foreign Currency Exchange Rate Risk

As of ~~March~~June 3130, 2019, the Company's foreign subsidiaries had $1.0 billion of third-party debt, including finance leases, denominated in the local currencies in which the Company's foreign subsidiaries operate, including the Australian dollar, the British pound, the Canadian dollar and the Euro. The debt service obligations associated with this foreign currency debt are generally funded directly from those foreign operations. As a result, foreign currency risk related to this portion of the Company's debt service payments is limited. However, in the event the foreign currency debt service is not paid by the Company's foreign subsidiaries and is paid by its United States subsidiaries, the Company may face exchange rate risk if the Australian dollar, the British pound, the Canadian dollar or the Euro were to appreciate relative to the United States dollar and require higher United States dollar equivalent cash.

The Company is also exposed to foreign currency exchange rate risk, including non-functional currency intercompany debt, typically associated with acquisitions and any timing difference between announcement and closing of an acquisition of a foreign business. To mitigate currency exposures related to non-functional currency denominated intercompany debt, foreign currency forward contracts or cross-currency swaps may be entered into for periods consistent with the underlying debt. In cases where foreign currency forward contracts or cross-currency swaps do not qualify for hedge accounting, the gains or losses from changes in the fair value are recognized in current period earnings within other income/(loss), net.

In 2015, the Company, in conjunction with the acquisition of Freightliner Group Limited (Freightliner) in the U.K., transferred cash from the United States to the U.K. through an intercompany loan with a notional amount of £120.0 million (or $181.0 million at the exchange rate on the effective date of the loan). The loan and its associated accrued interest as of March 31, 2019 of £32.6 million (or $42.4 million at the exchange rate on March 31, 2019) are each expected to remain outstanding until maturity of the loan. To mitigate the foreign currency exchange rate risk related to this non-functional currency intercompany loan and the related interest, the Company entered into British pound forward contracts, which are accounted for as cash flow hedges.19

As of March 31, 2019, the Company's outstanding British Pound forwards had a notional amount of £152.6 million with a settlement date of March 31, 2020 and exchange rates ranging from 1.28 to 1.57 GBP to USD.

During each of the three months ended March 31, 2019 and 2018, $0.2 million of net gains were recorded as interest income in the consolidated statements of operations. Based on the Company's fair value assumptions as of March 31, 2019, it expects to realize $0.8 million of existing net gains that are reported in AOCL into earnings within the next 12 months. See Note 11, Accumulated Other Comprehensive Loss, for additional information regarding the Company's cash flow hedges.

In 2016, in conjunction with an acquisition in Australia, the Company's subsidiaries, G&W Australia Holdings LP (GWAHLP) and GWI Holding B.V. (GWBV), entered into an A$248.9 million non-recourse subordinated partner loan agreement (GRail Intercompany Loan), which is eliminated in consolidation. To mitigate the foreign currency exchange rate risk related to the non-functional currency intercompany loan, the Company entered into two Euro/Australian dollar floating-to-floating cross-currency swap agreements (the Swaps) on December 22, 2016, which effectively convert the A$248.9 million intercompany loan receivable in the Netherlands into a €171.7 million loan receivable. These agreements do not qualify as hedges for accounting purposes and, accordingly, mark-to-market changes in the fair value of the Swaps relative to the underlying GRail Intercompany Loan will be recorded over the life of the agreements, which expire on June 30, 2019.

The first swap requires the Company to pay Australian dollar BBR plus 4.50% based on a notional amount of A$123.9 million and allows the Company to receive EURIBOR plus 2.68% based on a notional amount of €85.5 million on a semi-annual basis. BBR is the Bankers Buyers Rate and EURIBOR is the Euro Interbank Offered Rate, which the Company believes are generally considered equivalents to LIBOR. The second swap requires the Company to pay Australian dollar BBR plus 4.50% based on a notional amount of A$125.0 million and allows the Company to receive EURIBOR plus 2.90% based on a notional amount of €86.3 million on a semi-annual basis. The Swaps require semi-annual net settlement payments.

During the three months ended March 31, 2019 and 2018, $2.5 million and $2.8 million of net expense, respectively, was realized within other income/(loss), net in the consolidated statement of operations as a result of the mark-to-market impact of the GRail Intercompany Loan compared to the mark-to-market of the Swaps. Over the life of the Swaps, the Company expects the cumulative impact of net gains and losses from the mark-to-market of the GRail Intercompany Loan and Swaps to be approximately zero.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

In 2015, the Company, in conjunction with the acquisition of Freightliner Group Limited (Freightliner) in the U.K., transferred cash from the United States to the U.K. through an intercompany loan with a notional amount of £120.0 million (or $181.0 million at the exchange rate on the effective date of the loan). To mitigate the foreign currency exchange rate risk related to the outstanding balance of this loan, the Company entered into British pound forward contracts, which were accounted for as cash flow hedges. During the six months ended June 30, 2019, the Company settled certain of its British pound forward contracts, which had notional amounts totaling £120.0 million with a settlement date of March 31, 2020 and exchange rates ranging from 1.50 to 1.51 GBP to USD. Upon settlement, the Company received cash proceeds of $26.1 million.

As of June 30, 2019, the Company's outstanding British pound forward contracts had a notional amount of £32.6 million with a settlement date of March 31, 2020 and exchange rates ranging from 1.28 to 1.57 GBP to USD. During the three and six months ended June 30, 2019, $0.5 million and $0.7 million, respectively, of net gains were recorded as interest income in the consolidated statements of operations. During the three and six months ended June 30, 2018, $0.2 million and $0.3 million, respectively, of net gains were recorded as interest expense in the consolidated statements of operations. Based on the Company's fair value assumptions as of June 30, 2019, it expects to realize $0.3 million of net gains that are reported in AOCL into earnings within the next 12 months. See Note 11, Accumulated Other Comprehensive Loss, for additional information regarding the Company's derivatives designated as hedges.

In 2016, in conjunction with an acquisition in Australia, the Company's subsidiaries, G&W Australia Holdings LP (GWAHLP) and GWI Holding B.V. (GWBV), entered into an A$248.9 million non-recourse subordinated partner loan agreement (GRail Intercompany Loan), which is eliminated in consolidation. To mitigate the foreign currency exchange rate risk related to the non-functional currency intercompany loan, the Company entered into two Euro/Australian dollar floating-to-floating cross-currency swap agreements (the Swaps) on December 22, 2016. These agreements did not qualify as hedges for accounting purposes, and, accordingly, mark-to-market changes in the fair value of the Swaps relative to the underlying GRail Intercompany Loan were recorded over the life of the agreements, which expired on June 30, 2019. Upon settlement of the agreements, the Company received cash proceeds of €17.0 million (or $19.3 million at the exchange rate on June 30, 2019).

In June 2019, the Company entered into two new cross-currency swap agreements designated as fair value hedges of the non-functional currency GRail intercompany loan. In addition, the Company entered into a cross-currency swap in June 2019 that was designated as a net investment hedge of the GWBV investment. During the three and six months ended June 30, 2019, the Company recognized a gain of less than $0.1 million of foreign currency translation adjustment within OCI and a loss of less than $0.1 million within other income/(loss), net in the consolidated statement of operations related to amortization of excluded components of its net investment hedge. Based on the Company's assumptions as of June 30, 2019, its net investment hedge and fair value hedge, which each terminate on June 30, 2021, are expected to realize $0.4 million and $0.2 million, respectively, of net losses that are currently reported in AOCL into earnings within the next 12 months. See Note 11, Accumulated Other Comprehensive Loss, for additional information regarding the Company's derivatives designated as hedges.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

7. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following table presents the Company's financial instruments carried at fair value using Level 2 inputs as of ~~March~~June 3130, 2019 and December 31, 2018 (dollars in thousands):

	March 31, 2019		December 31, 2018
	June 30, 2019		December 31, 2018
Financial instruments carried at fair value using Level 2 inputs:
Financial assets carried at fair value:
British pound forward contracts	$	233,~~198~~055	$	26,011
Cross-currency swap contracts	~~13,648~~—		19,684
Total financial assets carried at fair value	$	363,~~846~~055	$	45,695
Financial liabilities carried at fair value:
Interest rate swap agreements	$	3260,~~187~~220	$	14,395
British pound forward contracts	~~191~~14		59
Total financial liabilities carried at fair value	$	32,378	$	14,454
Cross-currency swap contract - net investment hedge	807		—
Cross-currency swap contract - fair value hedge	2,387		—
Total financial liabilities carried at fair value	$	63,428	$	14,454

Financial Instruments Carried at Fair Value: Derivative instruments are recorded on the consolidated balance sheets as either assets or liabilities measured at fair value. ~~During~~As more fully described in Note 6, Derivative Financial Instruments, during the reporting period, the Company's derivative financial instruments consisted of interest rate swap agreements, foreign currency forward contracts and cross-currency swap agreements. The Company estimated the fair value of its ~~interest~~derivative ~~rate~~financial ~~swap~~instruments ~~agreements~~ based on Level 2 valuation inputs, including fixed interest rates, LIBOR ~~and BBR implied forward interest rates and the remaining time to maturity. The Company estimated the fair value of its British pound forward contracts based on Level 2 valuation inputs~~, ~~including LIBOR implied forward interest rates,~~ British pound LIBOR ~~implied forward interest rates and the remaining time to maturity. The Company estimated the fair value of its foreign currency forward contracts based on Level 2 valuation inputs~~, ~~including~~ BBR ~~implied forward interest rates~~ and ~~the remaining time to maturity. The Company estimated the fair value of its cross-currency swap agreements based on Level 2 valuation inputs, including~~ EURIBOR implied forward interest rates, ~~BBR implied forward interest rates~~ and the remaining time to maturity.

The following table presents the carrying value, net of debt issuance costs and fair value using Level 2 inputs of the Company's financial instruments carried at historical cost as of ~~March~~June 3130, 2019 and December 31, 2018 (dollars in thousands):

	March 31, 2019				December 31, 2018
	June 30, 2019				December 31, 2018
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial liabilities carried at historical cost:
United States term loan	$	1,296,~~110~~549	$	1,~~296~~294,~~905~~634	$	1,295,672	$	1,296,079
U.K. term loan	~~321~~314,~~703~~078		~~318~~317,~~286~~394		315,524		319,556
Australian credit agreement	~~450~~441,~~542~~768		~~458~~447,~~522~~511		450,252		457,978
Australia subordinated shareholder loan from MIRA	169,082		167,760		167,796		166,974
Australia subordinated shareholder loan from Macquarie Infrastructure and Real Assets	166,962		164,153		167,796		166,974
Revolving credit facility	~~107~~32,~~618~~707		~~111~~36,~~057~~150		160,033		163,662
Other debt	2,~~422~~438		2,~~420~~424		2,356		2,352
Total	$	2,~~347~~254,~~477~~502	$	2,~~354~~262,~~950~~266	$	2,391,633	$	2,406,601

Financial Instruments Carried at Historical Cost: Since the Company's long-term debt is not actively traded, fair value was estimated using a discounted cash flow analysis based on Level 2 valuation inputs, including borrowing rates the Company believes are currently available to it for loans with similar terms and maturities.

8. U.K. PENSION PLAN:

Through its Freightliner subsidiary, the Company has a defined benefit pension plan for Freightliner's eligible U.K. employees through a standalone shared cost arrangement within the Railways Pension Scheme (Pension Program). The Pension Program is managed and administered by a professional pension administration company and is overseen by trustees with professional advice from independent actuaries and other advisers. The Pension Program is a shared cost arrangement with required contributions shared between Freightliner and its participating members, with Freightliner contributing 60% and the remaining 40% contributed by active employees. The Company engages independent actuaries to compute the amounts of liabilities and expenses relating to the Pension Program subject to the assumptions that the Company selects.

1821

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following tables summarize the components of the Pension Program related to the net benefit costs recognized in labor and benefits and other income/(loss), net in the Company's consolidated statements of operations for the three and six months ended ~~March~~June 3130, 2019 and 2018 (dollars in thousands):

		Three Months Ended						Six Months Ended
		March 31,
		June 30,						June 30,
		2019			2018			2019			2018
Operating expense:
	Service cost(a)	$	3,~~440~~397		$	3,~~872~~770		$	6,837		$	7,625
Nonoperating income, net:
	Interest cost	2,~~366~~336			2,~~556~~488			4,702			5,033
	Expected return on plan assets	(4,~~391~~336		)	(4,~~905~~775		)	(8,727		)	(9,659		)
	Amortization of prior year service cost	44			—			88			—
	Total nonoperating income, net(b)	(1,~~981~~956		)	(2,~~349~~287		)	(3,937		)	(4,626		)
Net periodic benefit cost		$	1,~~459~~441		$	1,~~523~~483		$	2,900		$	2,999

(a) Included in labor and benefits within the Company’s consolidated ~~statement~~statements of operations.

(b) Included in other income/(loss), net within the Company’s consolidated ~~statement~~statements of operations.

During the ~~three~~six months ended ~~March~~June 3130, 2019, the Company contributed £13.61 million (or $24.1 million at the exchange rate when the payments were made) to fund the Pension Program. The Company expects to contribute £53.48 million (or $74.09 million at the ~~March~~June 3130, 2019 exchange rate) to the Pension Program for the remainder of 2019. The Pension Program's assets may undergo significant changes over time as a result of market conditions, and its assets and liabilities are formally valued on an independent actuarial basis every three years to assess the adequacy of funding levels. A key element of the valuation process is an assessment of the creditworthiness of the participating employer. In the event that the Pension Program's projected assets and liabilities reveal additional funding requirements, the shared cost arrangement generally means that the Company will be required to pay 60% of any additional contributions, with active members contributing the remaining 40%, in each case over an agreed recovery period. If the Pension Program was to be terminated and wound up, any deficit would fall entirely on the Company and could not be shared with active members. Currently, the Company has no intention of terminating the Pension Program.

9. INCOME TAXES:

The Company's provision for income taxes for the three months ended ~~March~~June 3130, 2019 was $1418.39 million, compared with ~~a benefit from income taxes of~~ $1526.94 million for the three months ended ~~March~~June 3130, 2018. The Company's ~~effective~~provision for income ~~tax~~taxes ~~rate~~ for the ~~three~~six months ended ~~March~~June 3130, 2019 was 26$33.~~9%.~~1 ~~The~~million ~~Company's~~compared ~~provision~~with $10.6 million for ~~income~~the ~~taxes~~six ~~for~~months ended June 30, 2018. Based on developments during the three and six months ended ~~March~~June 3130, 2018, ~~included~~the Company recorded a reserve for uncertain tax positions of $314.6 8 million ~~benefit~~related ~~from~~to ~~the~~tax ~~retroactive~~deductions ~~extension~~on ofintercompany financing arrangements in the ~~United~~U.K., ~~States~~of ~~Short~~which ~~Line~~$0.7 ~~Tax~~million ~~Credit~~related ~~for~~to ~~fiscal~~the ~~year~~three ~~2017~~months ended June 30, ~~which~~2018, ~~was~~$0.4 ~~enacted~~million inrelated ~~February~~to the three months ended March 31, 2018 and $3.7 ~~Excluding~~million related to the ~~benefit~~period from ~~the~~March ~~retroactive~~25, ~~extension~~2015, the ~~effective~~date ~~income~~of ~~tax~~the ~~rate~~Freightliner acquisition when the arrangements were established, through December 31, 2017. The provision for income taxes for the ~~three~~six months ended ~~March~~June 3130, 2018 ~~was~~also 26included an income tax benefit of $31.~~2%.~~6 million associated with the retroactive extension of the United States Short Line Tax Credit for fiscal year 2017, which was enacted in February 2018.

The Company's effective income tax rate for the three and six months ended June 30, 2019 was 26.9%. Excluding the prior period portion of the reserve for uncertain tax positions, the Company's effective income tax rate for the three months ended June 30, 2018 was 29.8%. Excluding the benefit from the retroactive extension and the prior period portion of the reserve for uncertain tax positions, the Company's effective income tax rate for the six months ended June 30, 2018 was 28.5%.

The United States Short Line Tax Credit is an income tax track maintenance credit for Class II and Class III railroads to reduce their federal income tax based on qualified railroad track maintenance expenditures. Qualified expenditures include amounts incurred for maintaining track, including roadbed, bridges and related track structures owned or leased by a Class II or Class III railroad. The credit is equal to 50% of the qualified expenditures, subject to an annual limitation of $3,500 multiplied by the number of miles of railroad track owned or leased by the Class II or Class III railroad as of the end of its tax year. The United States Short Line Tax Credit was initially enacted for a three-year period, 2005 through 2007, and was subsequently extended a series of times with the last extension enacted in February 2018. The February 2018 extension provided a retroactive credit, solely for fiscal year 2017. Legislation is currently pending that seeks to make the United States Short Line Tax Credit permanent for fiscal year 2018 and beyond.

1922

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

10. COMMITMENTS AND CONTINGENCIES:

From time to time, the Company is a defendant in certain lawsuits and a party to certain arbitrations resulting from the Company's operations in the ordinary course as the nature of the Company's business exposes it to the potential for various claims and litigation, including those related to property damage, personal injury, freight loss, labor and employment, environmental and other matters. The Company maintains insurance policies to mitigate the financial risk associated with such claims. Management believes there are adequate provisions in the financial statements for any probable liabilities that may result from disposition of the pending lawsuits and arbitrations. However, any material changes to pending litigation or a catastrophic rail accident or series of accidents involving material freight loss or property damage, personal injuries or environmental liability or other claims or disputes that are not covered by insurance could have a material adverse effect on the Company's results of operations, financial condition and liquidity.

In November 2014, the Company received a notice from the United States Environmental Protection Agency (EPA) requesting information under the Clean Water Act related to the discharge of crude oil as a result of a derailment of an Alabama & Gulf Coast Railway LLC (AGR) freight train in November 2013 in the vicinity of Aliceville, Alabama. In May 2018, the EPA notified the AGR of a maximum civil payment of up to $14.1 million, based on the amount of oil allegedly discharged and other relevant factors considered under the applicable regulation. The Company's evaluation of its defenses, settlement options and insurance coverage is ongoing. Although the cleanup associated with this derailment is substantially complete, the civil penalty associated with the contamination is subject to further discussion and potential litigation.

11. ACCUMULATED OTHER COMPREHENSIVE LOSS:

The following tables set forth the components of AOCL attributable to Genesee & Wyoming Inc. included in the consolidated balance sheets and consolidated statements of comprehensive income (dollars in thousands):

	Foreign Currency Translation Adjustment			Defined Benefit Plans				Net Unrealized Gain/(Loss) on ~~Cash Flow~~ Hedges				Accumulated Other Comprehensive Loss
Balance, December 31, 2018	$	(144,503	)	$	11,120			$	(13,073	)		$	(146,456	)
Other comprehensive income/(loss) before reclassifications	5,~~432~~835			—				(1131,~~990~~995		)		(626,~~558~~160		)
Amounts reclassified from accumulated other comprehensive loss, net of tax benefit of $89 and $91, respectively	—			(216		)	(a)	(215		)	(b)	(431		)
Amounts reclassified from accumulated other comprehensive loss, net of tax benefit of $82 and $233, respectively	—			(154		)	(a)	(1,027		)	(b)	(1,181		)
Current period change	5,~~432~~835			(~~216~~154		)		(1233,~~205~~022		)		(627,~~989~~341		)
Balance, March 31, 2019	$	(139,071	)	$	10,904			$	(25,278	)		$	(153,445	)
Balance, June 30, 2019	$	(138,668	)	$	10,966			$	(46,095	)		$	(173,797	)

	Foreign Currency Translation Adjustment			Defined Benefit Plans				Net Unrealized Gain/(Loss) on ~~Cash Flow~~ Hedges				Accumulated Other Comprehensive Loss
Balance, December 31, 2017	$	(74,617	)	$	(19,601	)		$	(11,316	)		$	(105,534	)
Other comprehensive income before reclassifications	3(36,~~401~~698		)	—				79,~~149~~736				10(26,~~550~~962		)
Amounts reclassified from accumulated other comprehensive loss, net of tax (provision)/benefit of ($14) and $89, respectively	—			43			(a)	(248		)	(b)	(205		)
Amounts reclassified from accumulated other comprehensive loss, net of tax (provision)/benefit of ($28) and $115, respectively	—			86			(a)	(290		)	(b)	(204		)
Current period change	3(36,~~401~~698		)	4386				69,~~901~~446				10(27,~~345~~166		)
Amounts reclassified from accumulated other comprehensive loss to retained earnings related to the United States Tax Cuts and Jobs Act	—			(132		)		(2,838		)		(2,970		)
Balance, March 31, 2018	$	(71,216	)	$	(19,690	)		$	(7,253	)		$	(98,159	)
Balance, June 30, 2018	$	(111,315	)	$	(19,647	)		$	(4,708	)		$	(135,670	)

(a) ~~Existing~~Net ~~net gains/~~(losses)/gains realized were recorded in labor and benefits on the consolidated statements of operations.

(b) ~~Existing~~For the six months ended June 30, 2019, $0.5 million and $0.5 million of net ~~gains~~losses were recorded in interest expense and other income/(~~losses~~loss), net, respectively, within the consolidated statements of operations. For the six months ended June 30, 2018, net losses realized were recorded in interest expense on the consolidated statements of operations. ~~(see~~See Note 6, Derivative Financial Instruments).

2023

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Comprehensive ~~Income/(~~Loss) Attributable to Noncontrolling Interest

The following table sets forth comprehensive ~~income~~loss attributable to noncontrolling interest for the three and six months ended ~~March~~June 3130, 2019 and 2018 (dollars in thousands):

	Three Months Ended						Six Months Ended
	March 31,
	June 30,						June 30,
	2019			2018			2019			2018
Net income attributable to noncontrolling interest	$	100		$	927
Net (loss)/income attributable to noncontrolling interest	$	(68	)	$	4,443		$	32		$	5,370
Other comprehensive income/(loss):
Foreign currency translation adjustment	1(2,~~587~~594		)	(48,~~018~~825		)	(1,007		)	(12,843		)
Net unrealized loss on qualifying cash flow hedges, net of tax benefit of $330	(769		)	—
Net unrealized (loss)/gain on qualifying cash flow hedges, net of tax benefit/(provision) of $303, ($67), $633 and ($67), respectively	(708		)	157			(1,477		)	157
Comprehensive income/(loss) attributable to noncontrolling interest	$	918		$	(3,091	)
Comprehensive loss attributable to noncontrolling interest	$	(3,370	)	$	(4,225	)	$	(2,452	)	$	(7,316	)

12. SIGNIFICANT NON-CASH INVESTING AND FINANCING ACTIVITIES:

As of ~~March~~June 3130, 2019 and 2018, the Company had outstanding accounts receivable from outside parties for the funding of capital expenditures of $1718.37 million and $1610.19 million, respectively. As of ~~March~~June 3130, 2019 and 2018, the Company also had $2122.13 million and $89.82 million, respectively, of purchases of property and equipment that were not paid and, accordingly, were accrued in accounts payable in the normal course of business. See Note 5, Leases, for ~~right-of-use~~ROU assets obtained during the reporting period in exchange for lease liabilities.

13. SEGMENT INFORMATION:

The Company presents the financial results of its eight operating regions as three reportable segments: North American Operations, Australian Operations and U.K./European Operations. During the three months ended March 31, 2019, the Company's Central Region railroads were consolidated into the Company's Midwest and Southern regions. The Company's remaining six North American regions are aggregated into one segment as a result of having similar economic and operating characteristics. Each of the Company's segments generates the following three categories of revenues from external customers: freight revenues, freight-related revenues and all other revenues.

The Company's Australian business underwent a transformational change on December 1, 2016, with the acquisition of

Glencore Rail (NSW) Pty Limited (GRail) and the formation of a partnership with Macquarie Infrastructure and Real Assets (MIRA) (the Australia Partnership), which the Company controls through its 51.1% interest. The GRail acquisition significantly expanded the Company's operations in New South Wales. In conjunction with the GRail acquisition, the Company issued a 48.9% equity stake in its Australian subsidiary, GWAHLP, to MIRA. The Company retained a 51.1% controlling interest in GWAHLP and continues to consolidate 100% of its Australian Operations in the Company's financial statements and reports a noncontrolling interest for MIRA's 48.9% equity ownership. As a result, (1) 100% of the assets and liabilities of the Company's Australian Operations, after the elimination of intercompany balances, were included in the Company's consolidated balance sheets as of ~~March~~June 3130, 2019 and December 31, 2018, with MIRA's 48.9% noncontrolling interest reflected in the equity section, (2) the Company's operating revenues and operating income for the three months ended ~~March~~June 3130, 2019 and 2018 included 100% of the Australian Operations, while net income attributable to G&W reflected the Company's 51.1% ownership position in the Australian Operations and (3) 100% of the cash flows of the Australian Operations, after the elimination of intercompany items, were included in the Company's consolidated statements of cash flows for the ~~three~~six months ended ~~March~~June 3130, 2019 and 2018. Accordingly, any payments between the Company's Australian Operations and its other businesses are eliminated in consolidation, while the Company's cash flows reflect 100% of any cash flows between the Australian Operations and MIRA.

In accordance with the Company's Australian Partnership agreement with MIRA, the cash and cash equivalents of the Company's Australian Operations can be used to make payments in the ordinary course of business, to pay down debt of the Australia Partnership and to make distributions to the partners in proportion to their investments. No such distributions were made during the ~~three~~six months ended ~~March~~June 3130, 2019. During the six months ended June 30, 2018, the Australia Partnership made an A$40.0 million distribution, of which A$20.4 million (or $15.6 million at the exchange rate on June 5, 2018) and A$19.6 million (or $14.9 million at the exchange rate on June 5, 2018) were distributed to the Company and MIRA, respectively.

~~The~~ results of operations of the Company's foreign entities are maintained in the respective local currency (the Australian dollar, the British pound, the Canadian dollar and the Euro) and then translated into United States dollars at the exchange rate at the end of the period for balance sheet items and, for the statement of operations, at the average rate for the period. Currency translation adjustments are reflected within the equity section of the balance sheet and are included in other comprehensive income. Upon complete or substantially complete liquidation of the underlying investment in the foreign subsidiary, cumulative translation adjustments are recognized in the consolidated statements of operations. As a result, any appreciation or depreciation of these currencies against the United States dollar will impact the Company's results of operations.24

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The ~~following~~results ~~table~~of ~~reflects~~operations of the ~~balance~~Company's ~~sheet~~foreign ~~exchange~~entities ~~rates~~are ~~used~~maintained toin ~~translate~~the ~~each foreign entity's~~ respective local currency ~~balance~~(the ~~sheet~~Australian dollar, the British pound, the Canadian dollar and the Euro) and then translated into United States dollars asat the exchange rate at the end of ~~March 31~~the period for balance sheet items and, ~~2019~~for the statement of operations, at the average rate for the period. Currency translation adjustments are reflected within the equity section of the balance sheet and ~~December 31~~are included in OCI. Upon complete or substantially complete liquidation of the underlying investment in the foreign subsidiary, ~~2018:~~cumulative translation adjustments are recognized in the consolidated statements of operations. As a result, any appreciation or depreciation of these currencies against the United States dollar will impact the Company's results of operations.

	March 31, 2019		December 31, 2018
United States dollar per Australian dollar	$	0.71	$	0.70
United States dollar per British pound	$	1.30	$	1.28
United States dollar per Canadian dollar	$	0.75	$	0.73
United States dollar per Euro	$	1.12	$	1.15

The following table reflects the balance sheet exchange rates used to translate each foreign entity's respective local currency balance sheet into United States dollars as of June 30, 2019 and December 31, 2018:

The following table reflects the average exchange rates used to translate each foreign entity's respective local currency results of operations into United States dollars for the three months ended March 31, 2019 and 2018:



	June 30, 2019		December 31, 2018
United States dollar per Australian dollar	$	0.70	$	0.70
United States dollar per British pound	$	1.27	$	1.28
United States dollar per Canadian dollar	$	0.76	$	0.73
United States dollar per Euro	$	1.14	$	1.15

	Three Months Ended
	March 31,
	2019		2018
United States dollar per Australian dollar	$	0.71	$	0.79
United States dollar per British pound	$	1.30	$	1.39
United States dollar per Canadian dollar	$	0.75	$	0.79
United States dollar per Euro	$	1.14	$	1.23



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
United States dollar per Australian dollar	$	0.70	$	0.76	$	0.71	$	0.77
United States dollar per British pound	$	1.29	$	1.36	$	1.29	$	1.38
United States dollar per Canadian dollar	$	0.75	$	0.77	$	0.75	$	0.78
United States dollar per Euro	$	1.12	$	1.19	$	1.13	$	1.21

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

The following tables set forth select financial data for the Company's reportable segments, including operating revenues by commodity group, for the three and six months ended ~~March~~June 3130, 2019 and 2018 (dollars in thousands):

Three Months Ended

March 31, 2019

June 30, 2019

North American Operations

Australian Operations

U.K./European Operations

TotalOperations

Operating revenues:

Freight revenues by commodity group:

Agricultural Products

3132,~~963~~846

32,~~054~~999

~~736~~512

3536,~~753~~357

Autos & Auto Parts

56,~~482~~084

—

56,~~482~~084

Chemicals & Plastics

3739,~~173~~813

—

3739,~~173~~813

Coal & Coke

1918,~~190~~563

2928,~~171~~965

~~4,693~~896

5348,~~054~~424

Food & Kindred Products

8,~~403~~801

—

8,~~403~~801

Intermodal

~~455~~523

1315,~~800~~459

5958,~~205~~297

7374,~~460~~279

Lumber & Forest Products

2123,~~857~~519

—

2123,~~857~~519

Metallic Ores

2,~~793~~865

7,~~618~~523

—

10,~~411~~388

Metals

29,~~862~~055

—

29,~~862~~055

Minerals & Stone

3138,~~810~~597

21,~~038~~817

1521,~~882~~155

4961,~~730~~569

Petroleum Products

2017,~~699~~053

~~138~~160

~~691~~717

2117,~~528~~930

Pulp & Paper

3028,~~279~~013

—

3028,~~279~~013

Waste

67,~~862~~964

—

67,~~862~~964

Other

45,~~935~~485

—

45,~~935~~485

Total freight revenues

~~251~~259,~~763~~181

5556,~~819~~923

81,~~207~~577

~~388~~397,~~789~~681

Freight-related revenues

6466,~~476~~135

78,~~855~~036

6368,~~931~~225

~~136~~142,~~262~~396

All other revenues

16,~~207~~531

1,~~433~~572

1513,~~398~~300

3331,~~038~~403

Total operating revenues

~~332~~341,~~446~~847

6566,~~107~~531

~~160~~163,~~536~~102

~~558~~571,~~089~~480

Operating income/(loss)

6984,~~315~~261

1211,~~503~~655

(21,~~108~~716

)

7994,~~710~~200

Depreciation and amortization

38,~~431~~738

14,~~411~~192

9,~~784~~587

62,~~626~~517

Interest expense, net

1211,~~401~~872

1211,~~123~~800

2,~~539~~903

2726,~~063~~575

Provision for income taxes

14,087

114

14,260

Provision for/(benefit from) income taxes

18,140

(44

)

770

18,866

Cash expenditures for additions to property & equipment, net of grants from outside parties

4852,~~071~~649

29,~~849~~103

106,~~373~~814

6168,~~293~~566

2326

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Three Months Ended

March 31, 2018

June 30, 2018

North American Operations

Australian Operations

U.K./European Operations

TotalOperations

Operating revenues:

Freight revenues by commodity group:

Agricultural Products

3129,~~372~~693

56,~~483~~006

~~1,235~~785

3836,~~090~~484

Autos & Auto Parts

5,~~367~~806

—

5,~~367~~806

Chemicals & Plastics

3638,~~217~~972

—

3638,~~217~~972

Coal & Coke

19,~~945~~087

3132,~~579~~570

32,~~476~~687

5554,~~000~~344

Food & Kindred Products

8,~~350~~476

—

8,~~350~~476

Intermodal

~~309~~380

1517,~~973~~102

6766,~~321~~483

83,~~603~~965

Lumber & Forest Products

2223,~~439~~810

—

2223,~~439~~810

Metallic Ores

3,~~573~~670

78,~~731~~125

—

11,~~304~~795

Metals

2832,~~394~~493

—

2832,~~394~~493

Minerals & Stone

3038,~~518~~034

2,~~094~~087

1922,~~179~~326

5162,~~791~~447

Petroleum Products

1816,~~483~~151

~~151~~185

—8

1816,~~634~~344

Pulp & Paper

2829,~~871~~514

—

2829,~~871~~514

Waste

57,~~888~~339

—

57,~~888~~339

Other

56,~~691~~443

—

56,~~691~~443

Total freight revenues

~~245~~259,~~417~~868

6366,~~011~~075

9192,~~211~~289

~~399~~418,~~639~~232

Freight-related revenues

63,~~832~~467

1011,~~563~~515

6667,~~802~~420

~~141~~142,~~197~~402

All other revenues

16,~~381~~222

1,~~260~~439

16,~~184~~695

3334,~~825~~356

Total operating revenues

~~325~~339,~~630~~557

7479,~~834~~029

~~174~~176,~~197~~404

~~574~~594,~~661~~990

Operating income/(loss)

7380,~~160~~274

1525,~~976~~896

(23,~~223~~045

)

86103,~~913~~125

Depreciation and amortization

4041,~~631~~247

1615,~~007~~288

9,~~352~~210

65,~~990~~745

Interest expense, net

811,~~455~~778

1312,~~241~~893

3,~~042~~685

2428,~~738~~356

(Benefit from)/provision for income taxes

(19,485

)

821

2,774

(15,890

)

Provision for income taxes

20,091

3,901

2,454

26,446

Cash expenditures for additions to property & equipment, net of grants from outside parties

3848,~~563~~924

514,~~262~~489

84,~~463~~726

5268,~~288~~139

~~The~~ ~~following tables set forth select balance sheet data for the Company's reportable segments as of March 31, 2019 and December 31, 2018 (dollars in thousands):~~ 27

	March 31, 2019
	North American Operations		Australian Operations		U.K./European Operations		Total Operations
Cash and cash equivalents	$	11,367	$	39,782	$	18,959	$	70,108
Property and equipment, net	$	3,702,660	$	606,947	$	334,329	$	4,643,936

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



	Six Months Ended
	June 30, 2019
	North American Operations		Australian Operations		U.K./European Operations			Total Operations
Operating revenues:
Freight revenues by commodity group:
Agricultural Products	$	64,809	$	6,053	$	1,248		$	72,110
Autos & Auto Parts	11,566		—		—			11,566
Chemicals & Plastics	76,986		—		—			76,986
Coal & Coke	37,753		58,136		5,589			101,478
Food & Kindred Products	17,204		—		—			17,204
Intermodal	978		29,259		117,502			147,739
Lumber & Forest Products	45,376		—		—			45,376
Metallic Ores	5,658		15,141		—			20,799
Metals	58,917		—		—			58,917
Minerals & Stone	70,407		3,855		37,037			111,299
Petroleum Products	37,752		298		1,408			39,458
Pulp & Paper	58,292		—		—			58,292
Waste	14,826		—		—			14,826
Other	10,420		—		—			10,420
Total freight revenues	510,944		112,742		162,784			786,470
Freight-related revenues	130,611		15,891		132,156			278,658
All other revenues	32,738		3,005		28,698			64,441
Total operating revenues	$	674,293	$	131,638	$	323,638		$	1,129,569
Operating income/(loss)	$	153,576	$	24,158	$	(3,824	)	$	173,910
Depreciation and amortization	$	77,169	$	28,603	$	19,371		$	125,143
Interest expense, net	$	24,273	$	23,923	$	5,442		$	53,638
Provision for income taxes	$	32,227	$	70	$	829		$	33,126
Cash expenditures for additions to property & equipment, net of grants from outside parties	$	100,720	$	11,952	$	17,187		$	129,859

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



	Six Months Ended
	June 30, 2018
	North American Operations		Australian Operations		U.K./European Operations			Total Operations
Operating revenues:
Freight revenues by commodity group:
Agricultural Products	$	61,065	$	11,489	$	2,020		$	74,574
Autos & Auto Parts	11,173		—		—			11,173
Chemicals & Plastics	75,189		—		—			75,189
Coal & Coke	39,032		64,149		6,163			109,344
Food & Kindred Products	16,826		—		—			16,826
Intermodal	689		33,075		133,804			167,568
Lumber & Forest Products	46,249		—		—			46,249
Metallic Ores	7,243		15,856		—			23,099
Metals	60,887		—		—			60,887
Minerals & Stone	68,552		4,181		41,505			114,238
Petroleum Products	34,634		336		8			34,978
Pulp & Paper	58,385		—		—			58,385
Waste	13,227		—		—			13,227
Other	12,134		—		—			12,134
Total freight revenues	505,285		129,086		183,500			817,871
Freight-related revenues	127,299		22,078		134,222			283,599
All other revenues	32,603		2,699		32,879			68,181
Total operating revenues	$	665,187	$	153,863	$	350,601		$	1,169,651
Operating income/(loss)	$	153,434	$	41,872	$	(5,268	)	$	190,038
Depreciation and amortization	$	81,878	$	31,295	$	18,562		$	131,735
Interest expense, net	$	20,233	$	26,134	$	6,727		$	53,094
Provision for income taxes	$	606	$	4,722	$	5,228		$	10,556
Cash expenditures for additions to property & equipment, net of grants from outside parties	$	87,487	$	19,751	$	13,189		$	120,427

The following tables set forth select balance sheet data for the Company's reportable segments as of June 30, 2019 and December 31, 2018 (dollars in thousands):



	June 30, 2019
	North American Operations		Australian Operations		U.K./European Operations		Total Operations
Cash and cash equivalents	$	23,624	$	41,325	$	17,434	$	82,383
Property and equipment, net	$	3,727,668	$	601,130	$	340,906	$	4,669,704



	December 31, 2018
	North American Operations		Australian Operations		U.K./European Operations		Total Operations
Cash and cash equivalents	$	33,996	$	26,902	$	29,489	$	90,387
Property and equipment, net	$	3,679,279	$	609,450	$	324,285	$	4,613,014

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Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

14. RECENTLY ISSUED ACCOUNTING STANDARDS:

Accounting Standards Not Yet Effective

In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Measurement of Credit Losses on Financial Instruments, which requires assessment of credit losses on an expected model rather than an incurred loss model. The guidance requires the consideration of all available relevant information when estimating expected credit losses, including past events, current conditions and forecasts. The amendment will become effective for the Company beginning January 1, 2020. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles–Goodwill and Other (Topic 350), Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. The amendments will become effective for the Company beginning January 1, 2020. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework–Changes to the Disclosure for Fair Value Measurement. The amendments modify the disclosure requirements for fair value measurements in FASB Accounting Standards Codification (ASC) 820 based on revisions to the FASB Concepts Statement, Conceptual Framework for Financial Reporting (Concepts Statement), and cost/benefit considerations. The amendments will become effective for the Company beginning January 1, 2020. Early adoption is permitted. The Company does not expect the adoption of this guidance to have a material impact on its disclosure requirements.

In August 2018, the FASB issued ASU 2018-14, Compensation–Retirement Benefits–Defined Benefit Plans–General (Subtopic 715-20): Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension plans or other postretirement benefit plans to make disclosure requirements more consistent with the revisions to the Concepts Statement. The amendments will become effective for the Company beginning January 1, 2021. Early adoption is permitted on a retrospective basis to all periods presented. The Company is still evaluating the potential impact of this guidance on its disclosure requirements.

15. SUBSEQUENT 25EVENTS:

Proposed Merger

On July 1, 2019, the Company, together with Brookfield Infrastructure, GIC and Brookfield Infrastructure's institutional partners, announced an agreement pursuant to which affiliates of Brookfield Infrastructure and GIC will acquire G&W for a transaction price of $112.00 per share of common stock valued at approximately $8.4 billion including debt (the Merger). The proposed Merger is expected to close by year end 2019 or early 2020 and is subject to customary closing conditions and regulatory approvals, including approval by the Company's stockholders, described in more detail below.

The Merger will be effected pursuant to the Agreement and Plan of Merger (the Merger Agreement), by and among the Company, DJP XX, LLC, a Delaware limited liability company (Parent), and MKM XXII Corp., a Delaware corporation and a wholly owned subsidiary of Parent (Merger Sub), Merger Sub will be merged with and into G&W with G&W surviving the Merger as a wholly-owned subsidiary of Parent. The proposed Merger will result in G&W becoming a privately held company.

Completion of the proposed Merger is subject to various closing conditions, including, among others, (i) the adoption of the Merger Agreement by holders of 66 2/3% of the voting power of the outstanding shares of G&W’s common stock, (ii) the absence of any law, injunction or other order that prohibits the consummation of the Merger, (iii) the approval or authorization of, or exemption by, the Surface Transportation Board (or approval of the use of a voting trust structure), (iv) receipt of other antitrust and regulatory approvals, including approval of the Committee on Foreign Investment in the United States, and (v) other customary closing conditions, including the accuracy of each party’s representations and warranties and each party’s compliance with its covenants and agreements contained in the Merger Agreement (subject in the case of this clause (v) to certain materiality qualifiers).

Table of Contents GENESEE & WYOMING INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Divestiture of 51.1% Interest in G&W Australia Holdings LP(GWAHLP)

Under the Merger Agreement (as described in more detail above), the Company agreed to use reasonable best efforts to assist and cooperate with Parent in Parent’s efforts to consummate any planned divestiture by Parent of G&W's interests in GWAHLP, the holding company for all of the Company's Australian businesses, to a third party (the GWA Divestiture), provided that (1) such cooperation would not unreasonably interfere with the Company's business or operations and (2) the Company would not be required to take any action that would subject it to actual or potential liability, to bear any cost or expense or to pay any fee or make any other payment or agree to provide any indemnity in connection with the GWA Divestiture prior to the effective time of the Merger. Following the execution of the Merger Agreement, Parent requested that G&W cause certain of its subsidiaries to enter into a Definitive Interest Sale Agreement for the GWA Divestiture (the GWA Divestiture Agreement), and, on August 4, 2019, G&W's board of directors and the governing bodies of such subsidiaries approved the GWA Divestiture Agreement and such subsidiaries entered into the GWA Divestiture Agreement.

Under the GWA Divestiture Agreement, certain entities affiliated with MIRA that currently own 48.9% of GWAHLP will acquire, directly or indirectly, the remaining interests in GWAHLP from certain subsidiaries of G&W in exchange for A$627.4 million, subject to adjustment. The GWA Divestiture is subject to customary closing conditions, including the satisfaction of the closing conditions set forth in the Merger Agreement. Neither the Company nor any of its subsidiaries will have any liability under the GWA Divestiture Agreement prior to the consummation of the Merger. The GWA Divestiture Agreement may be terminated under certain circumstances, including by any party thereto if the transactions contemplated by the GWA Divestiture Agreement have not been consummated on or before July 1, 2020.

The consideration to be received by the subsidiaries of the Company that are parties to the GWA Divestiture Agreement will not be distributed to any of the Company’s stockholders prior to consummation of the Merger, and the sole consideration that the Company's stockholders will receive in the Merger is $112.00 in cash per share of G&W common stock on the terms and conditions set forth in the Merger Agreement.

The consummation of the GWA Divestiture is not a condition to the closing of the Merger or any of Parent’s other obligations under the Merger Agreement.

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

The following discussion should be read in conjunction with our consolidated financial statements and related notes set forth in this Quarterly Report on Form 10-Q and our 2018 Annual Report on Form 10-K. Our consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP).

When comparing our results of operations from one reporting period to another, it is important to consider that we have historically experienced fluctuations in revenues and expenses due to acquisitions and divestitures, changing economic conditions, commodity prices, competitive forces, changes in foreign currency exchange rates, rail network issues and congestion, the ability to attract and retain skilled workers, one-time freight moves, fuel price fluctuations, customer plant expansions and shutdowns, sales of property and equipment, derailments and weather-related conditions, such as hurricanes, cyclones, tornadoes, high winds, droughts, heavy snowfall, unseasonably hot or cold weather, freezing and flooding, among other factors. In periods when these events occur, our results of operations are not easily comparable from one period to another. Finally, certain of our railroads have commodity shipments that are sensitive to general economic conditions, global commodity prices and foreign exchange rates, such as steel products, iron ore, paper products, lumber and forest products and agricultural products, as well as product specific market conditions, such as the availability of lower priced alternative sources of power generation (coal) and energy commodity price differentials (crude oil and natural gas liquids) or congestion at ports (intermodal). Other shipments are relatively less affected by economic conditions and are more closely affected by other factors, such as winter weather (salt) and seasonal rainfall (agricultural products). As a result of these and other factors, our results of operations in any reporting period may not be directly comparable to our results of operations in other reporting periods.

When we discuss foreign exchange impact, we are referring to the change in our results due to the change in foreign currency exchange rates. We calculate foreign exchange impact by comparing the prior period results translated from local currency to United States dollars using current period exchange rates to the prior period results in United States dollars as reported. Constant currency, which is a non-GAAP measure, reflects the prior period results translated at the current period exchange rates. When we discuss results from existing operations or same railroad operations, we are referring to the change in our results, period-over-period, associated with operations that we managed in both periods (i.e., excluding the impact of acquisitions and divestitures).

Overview

We own or lease 120 freight railroads worldwide that are organized in eight operating regions with approximately 8,000 employees and 3,000 customers. The financial results of our eight operating regions are reported in the following three distinct segments:

• Our North American Operations segment includes six regions (Coastal, Midwest, Northeast, Southern, Western and Canada) that serve 41 U.S. states and four Canadian provinces and include 114 short line and regional freight railroads with more than 13,000 track-miles. ~~During the three months ended March 31, 2019, our railroads that previously comprised our Central Region were consolidated into our Midwest and Southern regions.~~


•	Our Australian Operations segment serves New South Wales, the Northern Territory and South Australia and operates the 1,400-mile Tarcoola-to-Darwin rail line. Since December 1, 2016, the Australia Region has been 51.1% owned by us and 48.9% owned by a consortium of funds and clients managed by Macquarie Infrastructure and Real Assets (MIRA).


•	Our U.K./European Operations segment is led by Freightliner Group Limited (Freightliner), the United Kingdom's (U.K.) largest rail maritime intermodal operator and second-largest freight rail provider, as well as regional rail services in Continental Europe.

Our subsidiaries and joint ventures also provide rail service at more than 40 major ports, rail-ferry service between the U.S. Southeast and Mexico, transload services, contract coal loading, and industrial railcar switching and repair. As more fully described in Note 13, Segment Information, to our Consolidated Financial Statements set forth in "Part I Item 1. Financial Statements" of this quarterly report, the results of operations of the foreign entities are maintained in the respective local currency and then translated into United States dollars at the applicable exchange rates for inclusion in the consolidated financial statements. As a result, any appreciation or depreciation of these currencies against the United States dollar will impact our results of operations.

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Subsequent Events

Proposed Merger

On July 1, 2019, G&W, together with Brookfield Infrastructure, GIC and Brookfield Infrastructure's institutional partners, announced an agreement pursuant to which affiliates of Brookfield Infrastructure and GIC will acquire G&W for a transaction price of $112 per share of common stock valued at approximately $8.4 billion including debt (the Merger). The proposed Merger is expected to close by year-end 2019 or early 2020 and is subject to customary closing conditions and regulatory approvals, including approval by our stockholders, described in more detail below.

Divestiture of 51.1% Interest in G&W Australia Holdings LP(GWAHLP)

Under the Merger Agreement (as described in more detail above), we agreed to use reasonable best efforts to assist and cooperate with Parent in Parent’s efforts to consummate any planned divestiture by Parent of our interests in GWAHLP, the holding company for all of our Australian businesses, to a third party (the GWA Divestiture), provided that (1) such cooperation would not unreasonably interfere with our business or operations and (2) we would not be required to take any action that would subject us to actual or potential liability, to bear any cost or expense or to pay any fee or make any other payment or agree to provide any indemnity in connection with the GWA Divestiture prior to the effective time of the Merger. Following the execution of the Merger Agreement, Parent requested that we cause certain of our subsidiaries to enter into a Definitive Interest Sale Agreement for the GWA Divestiture (the GWA Divestiture Agreement), and, on August 4, 2019, our board of directors and the governing bodies of such subsidiaries approved the GWA Divestiture Agreement and such subsidiaries entered into the GWA Divestiture Agreement.

Under the GWA Divestiture Agreement, certain entities affiliated with MIRA that currently own 48.9% of GWAHLP will acquire, directly or indirectly, the remaining interests in GWAHLP from certain subsidiaries of G&W in exchange for A$627.4 million, subject to adjustment. The GWA Divestiture is subject to customary closing conditions, including the satisfaction of the closing conditions set forth in the Merger Agreement. Neither G&W nor any of its subsidiaries will have any liability under the GWA Divestiture Agreement prior to the consummation of the Merger. The GWA Divestiture Agreement may be terminated under certain circumstances, including by any party thereto if the transactions contemplated by the GWA Divestiture Agreement have not been consummated on or before July 1, 2020.

The consideration to be received by our subsidiaries that are parties to the GWA Divestiture Agreement will not be distributed to any of our stockholders prior to consummation of the Merger, and the sole consideration that our stockholders will receive in the Merger is $112.00 in cash per share of G&W common stock on the terms and conditions set forth in the Merger Agreement.

The consummation of the GWA Divestiture is not a condition to the closing of the Merger or any of Parent's other obligations under the Merger Agreement.

Overview of Three-Month Results

Consolidated Results

Our operating revenues decreased $1623.65 million, or 24.90%, to $~~558~~571.15 million for the three months ended ~~March~~June 3130, 2019, compared with $~~574~~595.70 million for the three months ended ~~March~~June 3130, 2018. Operating income for the three months ended ~~March~~June 3130, 2019 was $7994.72 million, compared with $86103.91 million for the three months ended ~~March~~June 3130, 2018, a decrease of $78.29 million, or 8.37%. Our operating ratio, defined as operating expenses divided by operating revenues, was 8583.75% for the three months ended ~~March~~June 3130, 2019, compared with 8482.97% for the three months ended ~~March~~June 3130, 2018.

~~Our~~ provision for income taxes for three months ended March 31, 2019 was $14.3 million, while our benefit from income taxes for the three months ended March 31, 2018 was $15.9 million. Our effective income tax rate for the three months ended March 31, 2019 was 26.9%. The benefit from income taxes for the three months ended March 31, 2018 included a $31.6 million benefit from the retroactive extension of the United States Short Line Tax Credit for 2017 that was enacted in February 2018. Excluding the benefit from the retroactive extension, our effective income tax rate for the three months ended March 31, 2018 was 26.2%. 33

~~Net~~Table income attributable to G&W for the three months ended March 31, 2019 was $38.7 million, compared with $75.1 million for the three months ended March 31, 2018. Our diluted earnings per common share (EPS) for the three months ended March 31, 2019 were $0.68 with 57.1 million weighted average shares outstanding, compared with diluted EPS of ~~$1.19 with 62.9 million weighted average shares outstanding for the three months ended March 31, 2018.~~Contents

Net income attributable to G&W for the three months ended June 30, 2019 was $51.4 million, compared with $44.2 million for the three months ended June 30, 2018. Our diluted earnings per common share (EPS) for the three months ended June 30, 2019 were $0.90 with 57.3 million weighted average shares outstanding, compared with diluted EPS of $0.73 with 60.9 million weighted average shares outstanding for the three months ended June 30, 2018.

Our provision for income taxes for the three months ended June 30, 2019 was $18.9 million compared with $26.4 million for the three months ended June 30, 2018. Our effective income tax rate for the three months ended June 30, 2019 was 26.9%. Based on developments during the three months ended June 30, 2018, we recorded a reserve for uncertain tax positions of $4.8 million related to tax deductions on intercompany financing arrangements in the U.K., of which $0.7 million related to the three months ended June 30, 2018, $0.4 million related to the three months ended March 31, 2018 and $3.7 million related to the period from March 25, 2015, the date of the Freightliner acquisition when the arrangements were established, through December 31, 2017. The reserve for uncertain tax positions was included in our provision for income taxes for the three months ended June 30, 2018. Excluding the prior period portion of the reserve for uncertain tax positions, our effective income tax rate for the three months ended June 30, 2018 was 29.8%.

Items Affecting Comparability

Our results for the three months ended ~~March~~June 3130, 2019 and 2018 included certain items affecting comparability between the periods that are set forth below (dollars in millions, except per share amounts):

	Income/(Loss) Before Taxes Impact			After-Tax Net Income/(Loss) Attributable to G&W Impact			Diluted Earnings/(Loss) Per Common Share Impact
Three Months Ended March 31, 2019
Three Months Ended June 30, 2019
Corporate development and related costs	$	(02.4	)	$	(01.37	)	$	(0.0103	)
Restructuring and related costs	$	(7.6	)	$	(56.40	)	$	(0.10	)
Three Months Ended March 31, 2018
Net loss on sale and impairment of certain assets in North America	$	(1.0	)	$	(0.8	)	$	(0.01	)
Corporate development and related costs	$	(0.2	)	$	(0.1	)	$	—
Australia enterprise bargaining agreement amendment	$	(2.6	)	$	(0.9	)	$	(0.02	)
Restructuring and related costs	$	(0.3	)	$	(0.2	)	$	—
Three Months Ended June 30, 2018
2017 Short Line Tax Credit	$	—		$	31.6		$	0.50
Corporate development and related costs	$	(0.4	)	$	(0.3	)	$	—
Restructuring and related costs	$	(9.4	)	$	(7.6	)	$	(0.12	)
Loss on sale of ERS	$	(1.4	)	$	(1.4	)	$	(0.02	)
Gain on settlement	$	6.3		$	2.3		$	0.04
Credit facility refinancing-related costs	$	(2.7	)	$	(2.0	)	$	(0.03	)
Prior period portion of tax adjustment	$	—		$	(4.1	)	$	(0.07	)

For the three months ended ~~March~~June 3130, 2019, our results included restructuring and related costs of $7.6 million, primarily ~~driven~~associated bywith our optimization activities in the U.K., ~~and~~$2.6 million of expense associated with amending an enterprise bargaining agreement in Australia, corporate development and related costs of $02.4 million and a $1.0 million net loss on the sale and impairment of assets in North America resulting from the impairment of assets associated with the expiration of a lease of a rail line in the southeastern United States, partially offset by a gain on the sale of land in the northeastern United States.

For the three months ended ~~March~~June 3130, 2018, our results included arestructuring and related costs of $319.64 million, ~~income~~primarily ~~tax benefit~~ associated with our optimization activities in the ~~retroactive~~U.K., ~~extension~~credit facility refinancing-related costs of $2.7 million, a $1.4 million loss on the ~~United~~sale ~~States~~of ~~Short~~our ~~Line~~Continental ~~Tax~~Europe ~~Credit~~intermodal ~~for~~business, ~~fiscal~~ERS ~~year~~Railways ~~2017~~B.V. (ERS), ~~which~~and ~~was~~a ~~enacted~~gain inon ~~February~~settlement ~~2018~~of $6.3 ~~The~~million ~~results~~from ~~for~~the recovery of pre-petition claims associated with Arrium Limited's voluntary administration (bankruptcy) in the second quarter of 2016. The three months ended ~~March~~June 3130, 2018 also included ~~restructuring~~a ~~and~~$4.1 ~~related~~million ~~costs~~income oftax $0expense associated with uncertain tax deductions on intercompany financing arrangements in the U.3K. ~~million~~previously ~~and~~recorded ~~corporate~~from ~~development~~March ~~and~~25, ~~related~~2015, ~~costs~~the date of ~~$0.2~~the ~~million~~Freightliner acquisition when the arrangements were established, through March 31, 2018.

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Results by Segment

North America

Operating revenues from our North American Operations increased $62.83 million, or 20.17%, to $~~332~~341.48 million for the three months ended ~~March~~June 3130, 2019, compared with $~~325~~339.6 million for the three months ended ~~March~~June 3130, 2018. Excluding $5.26 million of revenues in 2018 from two leased railroads in Canada, ~~for~~that ~~which~~we ~~the~~ceased ~~leases~~operating ~~expired~~ at the end of 2018, and a $10.38 million decrease due to the impact of foreign currency depreciation, North American existing operations revenues increased $138.37 million, or 4.2.6%, primarily due to increases in freight and freight-related revenues.

Total 27traffic from our North American Operations decreased 23,458 carloads, or 5.5%, to 406,895 carloads for the three months ended June 30, 2019, compared with the three months ended June 30, 2018. Excluding traffic from the two railroad leases in Canada that expired at the end of 2018, existing operations traffic decreased 14,779 carloads, or 3.5%. The decrease in traffic from existing operations included decreases of 11,206 carloads of coal and coke traffic, 4,221 carloads of metals traffic, 3,734 carloads of pulp and paper traffic, 2,307 carloads of lumber and forest products traffic and 1,683 carloads of other commodity traffic, partially offset by increases of 5,418 carloads of agricultural products traffic and 1,015 carloads of chemicals and plastics traffic. All remaining traffic increased by a net 1,939 carloads.

~~Table~~Operating income from our North American Operations was $84.3 million for the three months ended June 30, 2019, compared with $80.3 million for the three months ended June 30, 2018. Operating income for the three months ended June 30, 2019 included corporate development and related costs of ~~Contents~~$2.3 million, a $1.0 million net loss on the sale and impairment of certain assets in the United States and restructuring and related costs of $0.6 million. Operating income for the three months ended June 30, 2018 included credit facility refinancing-related costs of $0.4 million and corporate development and related costs of $0.3 million. The operating ratio was 75.4% for the three months ended June 30, 2019, compared with 76.4% for the three months ended June 30, 2018.

Total traffic from our North American Operations decreased 12,156 carloads, or 3.0%, to 393,857 carloads for the three months ended March 31, 2019, compared with the three months ended March 31, 2018. Excluding traffic from the two railroad leases in Canada that expired at the end of 2018, existing operations traffic decreased 4,690 carloads, or 1.2%, primarily due to the impact of severe winter weather and flooding in the midwestern United States and Canada. The decrease in traffic from existing operations included decreases of 7,896 carloads of coal and coke traffic, 3,097 carloads of lumber and forest products traffic and 1,460 carloads of other commodity traffic, partially offset by increases of 3,168 carloads of metals traffic, 2,276 carloads of petroleum products traffic, 1,773 carloads of agricultural products traffic and 1,072 carloads of waste traffic. All remaining traffic decreased by a net 526 carloads.

Operating income from our North American Operations, which was negatively impacted by severe winter weather in the United States and Canada and flooding in the Midwestern United States, was $69.3 million for the three months ended March 31, 2019, compared with $73.2 million for the three months ended March 31, 2018. Operating income for the three months ended March 31, 2019 included restructuring and related costs of $0.6 million and corporate development and related costs of $0.4 million. Operating income for the three months ended March 31, 2018 included corporate development and related costs of $0.2 million. The operating ratio was 79.1% for the three months ended March 31, 2019, compared with 77.5% for the three months ended March 31, 2018.

Australia

Operating revenues from our Australian Operations decreased $912.75 million, or 1315.08%, to $6566.15 million for the three months ended ~~March~~June 3130, 2019, compared with $7479.80 million for the three months ended ~~March~~June 3130, 2018. Excluding a $75.09 million decrease due to the impact of foreign currency depreciation, Australian Operations' operating revenues decreased $26.76 million, or 49.0%, primarily due to decreases in drought impacted agricultural products freight ~~revenues~~ and freight-related revenues.

Total traffic from our Australian Operations decreased 613,~~137~~570 carloads, or 49.32%, to ~~137~~134,~~378~~395 carloads for the three months ended ~~March~~June 3130, 2019, compared with the three months ended ~~March~~June 3130, 2018. The traffic decrease was primarily due to decreases of 89,~~852~~951 carloads of agricultural products traffic and ~~1,053 carloads of intermodal traffic, partially offset by an increase of~~ 2,~~646~~100 carloads of ~~coal~~minerals and ~~coke~~stone traffic. All remaining traffic ~~increased~~decreased by a net 1,~~122~~519 carloads.

Operating income from our Australian Operations was $1211.57 million for the three months ended ~~March~~June 3130, 2019, compared with $1625.09 million for the three months ended ~~March~~June 3130, 2018. The operating ~~ratio~~income for ~~our Australian Operations was 80.8% for~~ the three months ended ~~March~~June 3130, 2019, ~~compared with an operating ratio of 78.7% for the three months ended March 31, 2018. Operating income from our Australian Operations~~ was negatively impacted by $1.59 million from foreign currency depreciation, a $12.56 million ~~from~~decrease in grain volumes due to drought conditions in South Australia and New South Wales ~~and~~as well as $12.56 million of expense associated with amending an enterprise bargaining agreement. The operating income for the three months ended June 30, 2018 included a gain on settlement of $6.3 million from ~~severance~~the ~~costs~~recovery ~~related~~of topre-petition claims associated with Arrium Limited's voluntary administration (bankruptcy) in the ~~pending~~second ~~termination~~quarter of ~~grain~~2016. ~~service~~The onoperating ratio for our Australian Operations was 82.5% for the ~~Eyre~~three ~~Peninsula,~~months ~~which~~ended ~~were~~June 30, ~~partially~~2019, ~~offset~~compared bywith ~~lower~~an operating ~~expenses~~ratio of 67.2% for the three months ended June 30, 2018.

U.K./Europe

Operating revenues from our U.K./European Operations decreased $13.73 million, or 7.85%, to $~~160~~163.51 million for the three months ended ~~March~~June 3130, 2019, compared with $~~174~~176.24 million for the three months ended ~~March~~June 3130, 2018. Excluding $138.7 million of revenues for 2018 from our Continental Europe intermodal business, ERS Railways B.V. (ERS), which was sold in June 2018, and a $1210.10 million decrease due to the impact of foreign currency depreciation, U.K./European existing operations revenues increased $125.14 million, or 83.14%, primarily due to increases in ~~U.K. intermodal and bulk~~ freight-related revenues asin ~~well~~the as U.K. ~~freight-related~~and ~~revenues~~Poland.

Total traffic from our U.K./European Operations decreased 3130,~~507~~980 carloads, or 12.01%, to ~~230~~225,~~278~~065 carloads for the three months ended ~~March~~June 3130, 2019, compared with ~~261~~256,~~785~~045 carloads for the three months ended ~~March~~June 3130, 2018. Excluding traffic from our divested ERS operations for 2018, existing operations traffic decreased 110,~~381~~157 carloads, or 04.63%. The decrease in traffic from existing operations was primarily due to a decrease of 67,~~671~~269 carloads of intermodal traffic, 3,805 carloads of minerals and stone traffic ~~(primarily~~and ~~in Poland)~~2,383 ~~partially~~carloads ~~offset~~of bycoal ~~increases~~and ofcoke 2traffic,~~986~~ ~~carloads~~partially ofoffset ~~petroleum~~by ~~products~~an ~~traffic~~increase ~~and~~of 23,~~389~~514 carloads of ~~coal~~petroleum ~~and~~products ~~coke~~ traffic. All remaining traffic decreased by a net 85214 carloads.

~~Operating~~ loss from our U.K./European Operations was $2.1 million for the three months ended March 31, 2019, compared with an operating loss of $2.2 million for the three months ended March 31, 2018. The operating loss for the three months ended March 31, 2019 included $5.5 million of restructuring and related costs primarily driven by our optimization activities in the U.K. The operating loss for the three months ended March 31, 2018 included $0.2 million of restructuring and related costs and $0.1 million of corporate development and related costs. The operating ratio remained flat at 101.3% for the three months ended March 31, 2019, compared with the three months ended March 31, 2018.35

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Operating loss from our U.K./European Operations was $1.7 million for the three months ended June 30, 2019, compared with an operating loss of $3.0 million for the three months ended June 30, 2018. The operating loss for the three months ended June 30, 2019 included $6.8 million of restructuring and related costs primarily driven by our optimization activities in the U.K. The operating loss for the three months ended June 30, 2018 included $9.4 million of restructuring and related costs. The operating ratio was 101.1% for the three months ended June 30, 2019, compared with 101.7% for the three months ended June 30, 2018.

Overview of Six-Month Results

Our operating revenues decreased $40.1 million, or 3.4%, to $1,129.6 million for the six months ended June 30, 2019, compared with $1,169.7 million for the six months ended June 30, 2018. Operating income for the six months ended June 30, 2019 was $173.9 million, compared with $190.0 million for the six months ended June 30, 2018, a decrease of $16.1 million, or 8.5%. Our operating ratio was 84.6% for the six months ended June 30, 2019, compared with 83.8% for the six months ended June 30, 2018.

Net income for the six months ended June 30, 2019 was $90.2 million, compared with net income of $124.6 million for the six months ended June 30, 2018. Our diluted EPS for the six months ended June 30, 2019 was $1.58 with 57.2 million weighted average shares outstanding, compared with diluted EPS of $1.93 with 61.8 million weighted average shares outstanding for the six months ended June 30, 2018.

Our provision for income taxes for the six months ended June 30, 2019 was $33.1 million compared with $10.6 million for the six months ended June 30, 2018. Our effective income tax rate for the six months ended June 30, 2019 was 26.9%. Our results for the six months ended June 30, 2018 included an income tax benefit of $31.6 million associated with the retroactive extension of the United States Short Line Tax Credit for fiscal year 2017, which was enacted in February 2018. Based on developments during the six months ended June 30, 2018, we recorded a reserve for uncertain tax positions of $4.8 million related to tax deductions on intercompany financing arrangements in the U.K., of which $3.7 million related to the period from March 25, 2015, the date of the Freightliner acquisition when the arrangements were established, through December 31, 2017. Excluding the benefit from the retroactive extension and the prior period portion of the reserve for uncertain tax positions, our effective income tax rate for the six months ended June 30, 2018 was 28.5%.

During the six months ended June 30, 2019, we generated $223.1 million in cash flows from operating activities. During the same period, we purchased $144.7 million of property and equipment, including $7.3 million for new business investments, partially offset by $14.9 million in cash received from government grants and other outside parties for capital spending. We also paid $140.6 million in cash from the net decrease in outstanding debt and received cash of $45.4 million from the settlement of derivative transactions.

During the six months ended June 30, 2018, we generated $231.3 million in cash flows from operating activities. During the same period, we purchased $133.3 million of property and equipment, including $22.7 million for new business investments, partially offset by $12.9 million in cash received from government grants and other outside parties for capital spending. We also repurchased 2.7 million shares of our Class A common stock for $192.3 million and received $88.3 million in cash from the net increase in outstanding debt. In addition, Genesee & Wyoming Australia (GWA) made a distribution of $14.9 million to its noncontrolling interest holders.

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Items Affecting Comparability

Our results for the six months ended June 30, 2019 and 2018 included certain items affecting comparability between the periods that are set forth below (dollars in millions, except per share amounts):



	Income/(Loss) Before Taxes Impact			After-Tax Net Income/(Loss) Attributable to G&W Impact			Diluted Earnings/(Loss) Per Common Share Impact
Six Months Ended June 30, 2019
Restructuring and related costs	$	(15.2	)	$	(11.5	)	$	(0.20	)
Corporate development and related costs	$	(2.9	)	$	(2.0	)	$	(0.04	)
Net loss on sale and impairment of certain assets in North America	$	(1.0	)	$	(0.8	)	$	(0.01	)
Australia enterprise bargaining agreement amendment	$	(2.6	)	$	(0.9	)	$	(0.02	)

Six Months Ended June 30, 2018
Corporate development and related costs	$	(0.5	)	$	(0.4	)	$	(0.01	)
Restructuring costs	$	(9.6	)	$	(7.8	)	$	(0.13	)
Loss on sale of ERS	$	(1.4	)	$	(1.4	)	$	(0.02	)
Gain on settlement	$	6.3		$	2.3		$	0.04
Credit facility refinancing-related costs	$	(2.7	)	$	(2.0	)	$	(0.03	)
2017 Short Line Tax Credit	$	—		$	31.6		$	0.51
Prior period portion of tax adjustment	$	—		$	(3.7	)	$	(0.06	)

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Changes in Operations

North American Operations

Canada Lease Expirations: Two of our short line railroad leases in Canada (Goderich-Exeter Railway (GEXR) and Southern Ontario Railway (SORR)) expired at the end of 2018. Our results for the three and six months ended ~~March 31~~June 30, 2018 included $5.56 million and $11.1 million, respectively, of revenues ~~and~~from nothese ~~material~~leased ~~impact~~railroads. onOur results included no material operating income from these leased railroads for the three and six months ended June 30, 2018.

U.K./European Operations

U.K. Operations Optimization: In May 2018, we began a program to restructure and further optimize our operations in the U.K., which we intend to complete by 2020. The program includes the rationalization of the locomotive and railcar fleet, management restructuring (following the U.K. consultative process) and technology investments to upgrade systems to enhance productivity and service quality.

~~During~~We recorded restructuring and related costs associated with the optimization of $6.8 million and $12.3 million for the three and six months ended ~~March~~June 3130, 2019, werespectively. ~~incurred~~Restructuring and related costs of $59.54 million ofand ~~restructuring~~$9.6 ~~and~~million ~~related~~were ~~costs~~recorded associated with the optimization for the three and six months ended June 30, 2018, respectively. For additional information regarding the optimization of our U.K. operations, see Note 2, Changes in Operations, to our Consolidated Financial Statements set forth in "Part I Item 1. Financial Statements" of this quarterly report.

Continental Europe Intermodal Business: On June 5, 2018, we sold our Continental Europe intermodal business, ERS, for gross cash proceeds of €11.2 million (or $13.1 million at the exchange rate on June 5, 2018) or €6.8 million (or $7.9 million at the exchange rate on June 5, 2018) net of €4.4 million (or $5.2 million at the exchange rate on June 5, 2018) of cash on hand that transferred to the buyer. Our results for the three and six months ended ~~March~~June 3130, 2018 included $149.74 million and $24.1 million of revenues, respectively, from ERS. Our results for the three and nosix ~~material~~months ~~impact~~ended onJune 30, 2018 included no material operating income from ERS.

Three Months Ended ~~March~~June 3130, 2019 Compared with Three Months Ended ~~March~~June 3130, 2018

Consolidated Operating Results

Operating Revenues

The following table sets forth our total operating revenues and carloads for the three months ended ~~March~~June 3130, 2019 and 2018. The table below also reflects the calculation of our existing operations by subtracting the 2018 revenues and carloads of the divested operations of ERS and the leased railroads in Canada, ~~for~~that ~~which~~we ~~the~~ceased ~~leases~~operating ~~expired~~ at the end of 2018, from our total operations for the three months ended ~~March~~June 3130, 2018 (dollars in thousands):

	Three Months Ended March 31,								Increase/(Decrease) in Total Operations					Increase/(Decrease) in Existing Operations					Currency Impact on 2018 Total Operations*			Currency Impact on 2018 Existing Operations*
	Three Months Ended June 30,								Increase/(Decrease) in Total Operations					Increase/(Decrease) in Existing Operations					Currency Impact on 2018 Total Operations*			Currency Impact on 2018 Existing Operations*
	2019		2018
			Total Operations		Divested Operations		Existing Operations		Amount			%		Amount			%
Freight revenues	$	~~388~~397,~~789~~681	$	~~399~~418,~~639~~232	$	1310,~~498~~407	$	~~386~~407,~~141~~825	$	(1020,~~850~~551	)	(24.79	)%	$	2(10,~~648~~144	)	0(2.75	)%	$	(1310,~~373~~885	)	$	(1210,~~434~~286	)
Freight-related revenues	~~136~~142,~~262~~396		~~141~~142,~~197~~402		64,~~173~~152		~~135~~138,~~024~~250		(~~4,935~~6		)	~~(3.5~~—	)%	14,~~238~~146			03.90	%	(54,~~687~~876		)	(54,~~302~~646		)
All other revenues	3331,~~038~~403		3334,~~825~~356		~~526~~432		33,~~299~~924		(~~787~~2,953		)	(28.36	)%	(~~261~~2,521		)	(07.84	)%	(1,~~331~~143		)	(1,~~304~~128		)
Total operating revenues	$	~~558~~571,~~089~~480	$	~~574~~594,~~661~~990	$	2014,~~197~~991	$	~~554~~579,~~464~~999	$	(1623,~~572~~510	)	(24.90	)%	$	3(8,~~625~~519	)	0(1.75	)%	$	(2016,~~391~~904	)	$	(1916,~~040~~060	)
Carloads	~~761~~766,~~513~~355		~~811~~834,~~313~~363		3729,~~592~~502		~~773~~804,~~721~~861		(4968,~~800~~008		)	(68.12	)%	(1238,~~208~~506		)	(14.68	)%

* Currency impact was calculated by comparing the 2018 results translated from local currency to United States dollars using 2019 exchange rates to the 2018 results in United States dollars as reported.

~~Operating~~ ~~Expenses~~38

Total operating expenses for the three months ended March 31, 2019 decreased $9.4 million, or 1.9%, to $478.4 million, compared with $487.7 million for the three months ended March 31, 2018. The decrease consisted of $19.8 million from divested operations, partially offset by an increase of $10.5 million from existing operations. Excluding a $17.7 million benefit from the net depreciation of foreign currencies relative to the United States dollar, operating expenses from existing operations increased $28.1 million. The increase from existing operations included increases of $7.5 million in labor and benefits expense, $7.4 million in restructuring and related costs, $3.3 million in purchased services expense, $2.5 million in other expense, $2.4 million in depreciation and amortization expense, $1.8 million in casualties and insurance expense, $1.6 million in trackage rights expense and $1.1 million in cost of diesel fuel used in train operations.

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~~The~~Operating ~~following table sets forth our total operating expenses for the three months ended March 31, 2019 and 2018 (dollars in thousands):~~Expenses

	Three Months Ended March 31,										Increase/(Decrease)			CurrencyImpact			2018 Constant Currency*			Increase/(Decrease)Constant Currency*
	2019					2018
	Amount			% ofOperatingRevenues		Amount			% ofOperatingRevenues
Labor and benefits	$	184,308		33.0	%	$	183,716		32.0	%	$	592		$	(5,756	)	$	177,960		$	6,348
Equipment rents	32,233			5.8	%	34,087			5.9	%	(1,854		)	(1,681		)	32,406			(173		)
Purchased services	51,248			9.2	%	64,102			11.2	%	(12,854		)	(3,686		)	60,416			(9,168		)
Depreciation and amortization	62,626			11.2	%	65,990			11.5	%	(3,364		)	(2,447		)	63,543			(917		)
Diesel fuel used in train operations	44,637			8.0	%	46,151			8.0	%	(1,514		)	(1,831		)	44,320			317
Electricity used in train operations	2,324			0.4	%	2,234			0.4	%	90			(170		)	2,064			260
Casualties and insurance	11,372			2.0	%	9,966			1.7	%	1,406			(322		)	9,644			1,728
Materials	31,220			5.6	%	32,469			5.7	%	(1,249		)	(1,404		)	31,065			155
Trackage rights	21,640			3.9	%	20,978			3.7	%	662			(949		)	20,029			1,611
Net gain on sale and impairment of assets	(1,490		)	(0.3	)%	(1,036		)	(0.2	)%	(454		)	12			(1,024		)	(466		)
Restructuring and related costs	7,634			1.4	%	283			—	%	7,351			(16		)	267			7,367
Other expenses, net	30,627			5.5	%	28,808			5.0	%	1,819			(740		)	28,068			2,559
Total operating expenses	$	478,379		85.7	%	$	487,748		84.9	%	$	(9,369	)	$	(18,990	)	$	468,758		$	9,621

Total operating expenses for the three months ended June 30, 2019 decreased $14.6 million, or 3.0%, to $477.3 million, compared with $491.9 million for the three months ended June 30, 2018. The decrease consisted of $14.2 million from divested operations and $0.4 million from existing operations. Excluding a $14.3 million benefit from the net depreciation of foreign currencies relative to the United States dollar, operating expenses from existing operations increased $13.9 million, or 3.0%. The increase from existing operations included increases of $5.9 million in other expense, $5.8 million in labor and benefits expense, $3.9 million in purchased services expense, $2.1 million in depreciation and amortization expense and $1.7 million in net gain on the sale and impairment of assets, partially offset by decreases of $1.9 million in the cost of diesel fuel used in train operations, $1.3 million in restructuring and related costs and $1.1 million in equipment rents expense.

The following table sets forth our total operating expenses for the three months ended June 30, 2019 and 2018 (dollars in thousands):



	Three Months Ended June 30,									Increase/(Decrease)			Currency Impact			2018 Constant Currency*			Increase/(Decrease)Constant Currency*
	2019				2018
	Amount		% of Operating Revenues		Amount			% of Operating Revenues
Labor and benefits	$	179,943	31.4	%	$	179,838		30.2	%	$	105		$	(4,637	)	$	175,201		$	4,742
Equipment rents	32,010		5.6	%	34,802			5.9	%	(2,792		)	(1,263		)	33,539			(1,529		)
Purchased services	54,034		9.5	%	61,045			10.3	%	(7,011		)	(2,875		)	58,170			(4,136		)
Depreciation and amortization	62,517		10.9	%	65,745			11.0	%	(3,228		)	(1,889		)	63,856			(1,339		)
Diesel fuel used in train operations	41,504		7.3	%	45,623			7.7	%	(4,119		)	(1,513		)	44,110			(2,606		)
Electricity used in train operations	2,226		0.4	%	2,044			0.3	%	182			(113		)	1,931			295
Casualties and insurance	11,839		2.1	%	12,984			2.2	%	(1,145		)	(206		)	12,778			(939		)
Materials	31,294		5.5	%	32,376			5.4	%	(1,082		)	(1,185		)	31,191			103
Trackage rights	21,727		3.8	%	23,303			3.9	%	(1,576		)	(775		)	22,528			(801		)
Net gain on sale and impairment of assets	980		0.2	%	(823		)	(0.1	)%	1,803			(14		)	(837		)	1,817
Restructuring and related costs	7,561		1.3	%	9,362			1.6	%	(1,801		)	(481		)	8,881			(1,320		)
Other expenses, net	31,645		5.5	%	25,566			4.3	%	6,079			(78		)	25,488			6,157
Total operating expenses	$	477,280	83.5	%	$	491,865		82.7	%	$	(14,585	)	$	(15,029	)	$	476,836		$	444

* Constant currency amounts reflect the prior period results translated at the current period exchange rates.

Operating Income/Operating Ratio

Operating income was $7994.72 million for the three months ended ~~March~~June 3130, 2019, compared with $86103.91 million for the three months ended ~~March~~June 3130, 2018. Operating income for the three months ended ~~March~~June 3130, 2019 included restructuring and related costs of $7.6 million, primarily driven by our optimization activities in the U.K., ~~and~~$2.6 million of expense associated with amending an enterprise bargaining agreement in Australia, corporate development and related costs of $02.4 million and a $1.0 million net loss on the sale and impairment of certain assets in North America. Operating income for the three months ended ~~March~~June 3130, 2018 included restructuring and related costs of $09.34 million and corporate development and related costs of $0.24 million. Our operating ratio was 8583.75% for the three months ended ~~March~~June 3130, 2019, compared with 8482.97% for the three months ended ~~March~~June 3130, 2018.

Interest Expense

Interest expense was $27.64 million for the three months ended ~~March~~June 3130, 2019, compared with $2528.29 million for the three months ended ~~March~~June 3130, 2018. The ~~increase~~decrease in interest expense for the three months ended ~~March~~June 3130, 2019 was primarily driven by anthe ~~increase~~write-off inof ~~interest~~deferred ~~rates~~financing asfees ~~compared~~associated towith ~~the~~our ~~three~~credit ~~months~~facility ~~ended~~refinancing ~~March 31, 2018 and an increase~~ in ~~outstanding~~June ~~borrowings primarily related to fund our share repurchases~~2018.

~~Provision~~ ~~for /Benefit from Income Taxes~~39

Our provision for income taxes for the three months ended March 31, 2019 was $14.3 million, compared with a benefit from income taxes of $15.9 million for the three months ended March 31, 2018. Our benefit from income taxes for the three months ended March 31, 2018 included an income tax benefit of $31.6 million from the retroactive extension of the United States Short Line Tax Credit for fiscal year 2017 that was enacted in February 2018. Our effective income tax rate for the three months ended March 31, 2019 was 26.9%, compared with 26.2% excluding the benefit from the retroactive extension of the Short Line Tax Credit for the three months ended March 31, 2018. For additional information regarding income taxes, see Note 9, Income Taxes, to our Consolidated Financial Statements set forth in "Part I Item 1. Financial Statements" of this quarterly report.

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Provision for Income Taxes

Net Income Attributable to G&W and Earnings Per Common Share

Net income attributable to G&W for the three months ended ~~March~~June 3130, 2019 was $3851.74 million, compared with $7544.12 million for the three months ended ~~March~~June 3130, 2018. Our basic EPS were $0.6991 with 56.45 million weighted average shares outstanding for the three months ended ~~March~~June 3130, 2019, compared with basic EPS of $10.2174 with 6160.90 million weighted average shares outstanding for the three months ended ~~March~~June 3130, 2018. Our diluted EPS for the three months ended ~~March~~June 3130, 2019 were $0.6890 with 57.13 million weighted average shares outstanding, compared with diluted EPS of $10.1973 with 6260.9 million weighted average shares outstanding for the three months ended ~~March~~June 3130, 2018. Our results for the three months ended ~~March~~June 3130, 2019 and 2018 included certain items affecting comparability between the periods as previously presented in the "Overview—Overview of Three-Month Results—Items Affecting Comparability."

Net Loss/Income Attributable to Noncontrolling Interest

We own a 51.1% controlling interest in our Australian Operations. As such, we include 100% of the revenues and expenses from our Australian Operations within our consolidated financial statements and report a noncontrolling interest for MIRA’s 48.9% equity ownership. Net ~~income~~loss attributable to noncontrolling interest for the three months ended ~~March~~June 3130, 2019 was $0.1 million, compared with net income attributable to noncontrolling interest of $04.94 million for three months ended ~~March~~June 3130, 2018.

Operating Results by Segment

Our various rail operations are organized into eight operating regions. We present our financial information as three reportable segments: North American Operations, Australian Operations and U.K./European Operations. Our six North American regions are aggregated into one segment as a result of having similar economic and operating characteristics. Each of our segments generates the following three categories of revenues from external customers: freight revenues, freight-related revenues and all other revenues.

North American Operations

Operating Revenues

The following table sets forth our North American Operations total operating revenues and carloads for the three months ended ~~March~~June 3130, 2019 and 2018. The table also reflects the calculation of our existing operations by subtracting the 2018 revenues and carloads from the Canadian leases that expired at the end of 2018 from our total operations for the three months ended ~~March~~June 3130, 2018 (dollars in thousands):

	Three Months Ended March 31,								Increase/(Decrease) in Total Operations					Increase/(Decrease) in Existing Operations					Currency Impact on 2018 Total Operations*			Currency Impact on 2018 Existing Operations*
	Three Months Ended June 30,								Increase/(Decrease) in Total Operations					Increase/(Decrease) in Existing Operations					Currency Impact on 2018 Total Operations*			Currency Impact on 2018 Existing Operations*
	2019		2018
			Total Operations		Divested Operations		Existing Operations		Amount			%		Amount			%
Freight revenues	$	~~251~~259,~~763~~181	$	~~245~~259,~~417~~868	$	3,~~086~~733	$	~~242~~256,~~331~~135	$	~~6,346~~(687	)	2(0.63	)%	$	93,~~432~~046		31.92	%	$	(~~888~~645	)	$	(~~740~~518	)
Freight-related revenues	6466,~~476~~135		63,~~832~~467		1,~~852~~467		6162,~~980~~000		~~644~~2,668			14.02	%	24,~~496~~135			46.07	%	(~~269~~224		)	(~~181~~171		)
All other revenues	16,~~207~~531		16,~~381~~222		~~514~~423		15,~~867~~799		~~(174~~309		)	(1.19	)%	~~340~~732			24.16	%	(~~165~~91		)	(~~139~~77		)
Total operating revenues	$	~~332~~341,~~446~~847	$	~~325~~339,~~630~~557	$	5,~~452~~623	$	~~320~~333,~~178~~934	$	62,~~816~~290		20.17	%	$	127,~~268~~913		32.84	%	$	(~~1,322~~960	)	$	(~~1,060~~766	)
Carloads	~~393~~406,~~857~~895		~~406~~430,~~013~~353		78,~~466~~679		~~398~~421,~~547~~674		(1223,~~156~~458		)	(35.05	)%	(414,~~690~~779		)	(13.25	)%


*	Currency impact was calculated by comparing the 2018 results translated from local currency to United States dollars using 2019 exchange rates to the 2018 results in United States dollars as reported.

3140

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Freight Revenues

The following table sets forth our North American Operations total freight revenues for the three months ended ~~March~~June 3130, 2019 and 2018. The table below also reflects the calculation of our existing operations by subtracting the 2018 revenues and carloads from the Canadian leases that expired at the end of 2018 from our total operations for the three months ended ~~March~~June 3130, 2018 (dollars in thousands):

	Three Months Ended March 31,								Increase/(Decrease) in Existing Operations			Currency Impact on Existing Operations			2018 Constant Currency Existing Operations*		Increase/(Decrease) in Existing Operations Constant Currency*
	Three Months Ended June 30,								Increase/(Decrease) in Existing Operations			Currency Impact on Existing Operations			2018 Constant Currency Existing Operations*		Increase/(Decrease) in Existing Operations Constant Currency*
	2019		2018
Commodity Group			Total Operations		Divested Operations		Existing Operations
Agricultural Products	$	3132,~~963~~846	$	3129,~~372~~693	$	~~549~~458	$	3029,~~823~~235	$	13,~~140~~611		$	(9924	)	$	3029,~~724~~211	$	13,~~239~~635
Autos & Auto Parts	56,~~482~~084		5,~~367~~806		~~180~~301		5,~~187~~505		~~295~~579			(2726		)	5,~~160~~479		~~322~~605
Chemicals & Plastics	3739,~~173~~813		3638,~~217~~972		~~593~~775		3538,~~624~~197		1,~~549~~616			(~~119~~87		)	3538,~~505~~110		1,~~668~~703
Coal & Coke	1918,~~190~~563		19,~~945~~087		—		19,~~945~~087		(~~755~~524		)	(2834		)	19,~~917~~053		(~~727~~490		)
Food & Kindred Products	8,~~403~~801		8,~~350~~476		~~140~~186		8,~~210~~290		~~193~~511			(32		)	8,~~207~~288		~~196~~513
Intermodal	~~455~~523		~~309~~380		—		~~309~~380		~~146~~143			(1—		)	~~308~~380		~~147~~143
Lumber & Forest Products	2123,~~857~~519		2223,~~439~~810		78109		2223,~~361~~701		(~~504~~182		)	(4840		)	2223,~~313~~661		(~~456~~142		)
Metallic Ores	2,~~793~~865		3,~~573~~670		21		3,~~571~~669		(~~778~~804		)	(4428		)	3,~~527~~641		(~~734~~776		)
Metals	29,~~862~~055		2832,~~394~~493		~~394~~589		2831,~~000~~904		1(2,~~862~~849		)	(9057		)	2731,~~910~~847		1(2,~~952~~792		)
Minerals & Stone	3138,~~810~~597		3038,~~518~~034		~~259~~268		3037,~~259~~766		~~1,551~~831			(3231		)	3037,~~227~~735		~~1,583~~862
Petroleum Products	2017,~~699~~053		1816,~~483~~151		~~640~~717		1715,~~843~~434		21,~~856~~619			(6140		)	1715,~~782~~394		21,~~917~~659
Pulp & Paper	3028,~~279~~013		2829,~~871~~514		4241		2829,~~829~~473		(1,~~450~~460		)	(~~170~~127		)	2829,~~659~~346		(1,~~620~~333		)
Waste	67,~~862~~964		57,~~888~~339		5166		57,~~837~~273		~~1,025~~691			(13		)	57,~~836~~270		~~1,026~~694
Other	45,~~935~~485		56,~~691~~443		~~158~~222		56,~~533~~221		(~~598~~736		)	(1719		)	56,~~516~~202		(~~581~~717		)
Total operating revenues	$	251,763	$	245,417	$	3,086	$	242,331	$	9,432		$	(740	)	$	241,591	$	10,172
Total	$	259,181	$	259,868	$	3,733	$	256,135	$	3,046		$	(518	)	$	255,617	$	3,564

* Constant currency amounts reflect the prior period existing operations translated at the current period exchange rates.

The following table sets forth our North American Operations freight revenues, carloads and average freight revenues per carload for the three months ended June 30, 2019 and 2018 (dollars in thousands, except average freight revenues per carload):

Freight Revenues

Carloads

Average Freight Revenues PerCarload

Three Months Ended March 31,

Three Months Ended June 30,

2019

2018 Constant Currency*

Commodity Group

Amount

% ofTotal

Amount

% ofTotal

2019

2018

2019

2018

2018 Constant Currency*

Agricultural Products

3132,~~963~~846

12.7

3129,~~247~~653

1211.84

5456,~~255~~134

5351,~~764~~762

~~589~~585

~~584~~574

~~581~~573

Autos & Auto Parts

56,~~482~~084

2.23

5,~~332~~769

2.2

89,~~419~~041

89,~~716~~106

~~651~~673

~~616~~638

~~612~~634

Chemicals & Plastics

3739,~~173~~813

1415.83

3638,~~070~~858

1415.80

4044,~~928~~376

4345,~~342~~285

~~908~~897

~~836~~861

~~832~~858

Coal & Coke

1918,~~190~~563

7.62

19,~~917~~053

87.14

5448,~~070~~140

6159,~~966~~346

~~355~~386

322

321

Food & Kindred Products

8,~~403~~801

3.34

8,~~340~~468

3.43

14,~~365~~699

1514,~~183~~907

~~585~~599

~~550~~569

~~549~~568

Intermodal

~~455~~523

0.2

~~308~~380

0.1

3,~~809~~984

3,~~084~~816

~~119~~131

100

Lumber & Forest Products

2123,~~857~~519

89.71

2223,~~388~~765

9.2

3235,~~945~~140

3637,~~250~~733

~~663~~669

~~619~~631

~~618~~630

Metallic Ores

2,~~793~~865

1.1

3,~~528~~642

1.4

3,~~602~~813

4,~~396~~448

~~775~~751

~~813~~825

~~803~~819

Metals

29,~~862~~055

11.92

2832,~~284~~418

1112.65

3734,~~250~~860

3540,~~238~~806

~~802~~833

~~806~~796

~~803~~794

Minerals & Stone

3138,~~810~~597

1214.69

3037,~~474~~994

1214.57

4762,~~505~~005

4762,~~696~~156

~~670~~622

~~640~~612

~~639~~611

Petroleum Products

2017,~~699~~053

86.26

1816,~~391~~085

76.52

2723,~~068~~811

2524,~~660~~340

~~765~~716

~~720~~664

~~717~~661

Pulp & Paper

3028,~~279~~013

1210.08

2829,~~699~~386

11.73

4137,~~313~~943

41,~~357~~762

~~733~~738

~~698~~707

~~694~~704

Waste

67,~~862~~964

23.71

57,~~884~~334

2.48

1215,~~974~~331

1114,~~981~~837

~~529~~519

~~491~~495

~~491~~494

Other

45,~~935~~485

2.01

56,~~667~~418

2.35

1517,~~354~~618

1720,~~380~~049

~~321~~311

~~327~~321

~~326~~320

Total

~~251~~259,~~763~~181

100.0

~~244~~259,~~529~~223

100.0

~~393~~406,~~857~~895

~~406~~430,~~013~~353

~~639~~637

604

602

* Constant currency amounts reflect the prior period results translated at the current period exchange rates.

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Total traffic from our North American Operations decreased 1223,~~156~~458 carloads, or 35.05%, to ~~393~~406,~~857~~895 carloads for the three months ended ~~March~~June 3130, 2019, compared with the three months ended ~~March~~June 3130, 2018. Excluding traffic from the ~~Canadian~~two railroad leases in Canada that expired at the end of 2018, existing operations traffic decreased 414,~~690~~779 carloads, or 13.25%,. ~~primarily~~The ~~due~~decrease toin ~~the~~traffic ~~impact~~from ofexisting ~~severe~~operations ~~winter~~included ~~weather~~decreases ~~and~~of ~~flooding~~11,206 incarloads ~~the~~of ~~midwestern~~coal ~~United States~~ and ~~Canada.~~coke ~~The decrease in~~ traffic, ~~from~~4,221 ~~existing~~carloads ~~operations~~of ~~was~~metals ~~primarily~~traffic, ~~due to decreases of 7~~3,~~896~~734 carloads of ~~coal~~pulp and ~~coke~~paper traffic, 32,~~097~~307 carloads of lumber and forest products traffic and 1,~~460~~683 carloads of other commodity traffic, partially offset by increases of 35,~~168~~418 carloads of ~~metals traffic, 2,276 carloads of petroleum products traffic, 1,773 carloads of~~ agricultural products traffic and 1,~~072~~015 carloads of ~~waste~~chemicals and plastics traffic. All remaining traffic ~~decreased~~increased by a net ~~526~~1,939 carloads.

Changes in average freight revenues per carload in a commodity group may be impacted by changes in customer rates, fuel surcharges, commodity mix and the mix of customer traffic within a commodity group. Excluding a 0.3% impact of foreign currency, average freight revenues per carload from our North American Operations increased 65.18% to $~~639~~637 for the three months ended ~~March~~June 3130, 2019, compared with the same period in 2018. Average freight revenues per carload from existing operations, excluding the impact of foreign currency, increased 5.41% for the three months ended ~~March~~June 3130, 2019, compared with the same period in 2018. The increase in average freight revenues per carload was impacted by ~~higher~~a ~~fuel~~change ~~surcharges~~in the mix of commodities, which increased average freight revenues per carload by 10.27%, and ahigher ~~change~~fuel ~~in the mix of commodities~~surcharges, which increased average freight revenues per carload by 10.16%. Excluding these factors, average freight revenues per carload increased 3.18%.

The following information discusses the significant changes in our North American Operations freight revenues by commodity group excluding the impact of foreign currency and the Canadian leases that expired at the end of 2018.

Agricultural products revenues increased $13.26 million, or 12.4%.0 Agricultural products traffic increased 5,418 carloads, or 10.7%, ~~primarily~~which ~~due~~increased torevenues anby ~~increase~~$3.2 inmillion, ~~traffic~~and ofaverage freight revenues per carload increased 1.6%,~~773~~ ~~carloads,~~which orincreased 3revenues by $0.4% million. The ~~carload~~ increase in carloads was primarily due to increased ~~soybean~~farm products shipments in the western United States and ~~dried~~grain ~~distillers' grains~~ shipments in the midwestern United States~~, partially offset by a decrease in grain shipments in Canada~~.

Chemicals and plastics revenues increased $1.7 million, or 4.75%. Chemicals and plastics ~~average~~traffic ~~freight~~increased ~~revenues~~1,015 ~~per~~carloads, ~~carload~~or ~~increased 6~~2.83%, which increased revenues by $20.49 million, ~~while~~and ~~traffic~~average ~~decreased~~freight ~~844~~revenues ~~carloads~~per carload increased 2.0%, which ~~decreased~~increased revenues by $0.8 million. The ~~decrease~~increase in carloads was primarily due to ~~decreases in ethanol shipments in the midwestern and northeastern United States as well as a decrease in plastics shipments in the southeastern United States and Canada, partially offset by~~ an increase in industrial chemical shipments in the western United States.

~~Lumber~~Coal and ~~forest~~coke ~~products~~ revenues decreased $0.5 million, or 2.06%. ~~Lumber~~Coal and ~~forest~~coke ~~products~~ traffic decreased 311,~~097~~206 carloads, or 818.69%, which decreased revenues by $24.13 million, while average freight revenues per carload increased 720.12%, which increased revenues by $13.68 million. The decrease in carloads was primarily due to decreased ~~lumber~~demand in the southern United States primarily associated with low natural gas prices, high inventory levels and ~~wood~~mild ~~chip~~temperatures as well as decreased coal shipments in the ~~southeastern~~midwestern United States ~~and~~due ~~decreased~~to ~~log~~flooding, ~~exports~~partially offset by increased demand in the ~~western~~northeastern United States primarily associated with new business. The increase in average freight revenues per carload was primarily due to stronger pricing and a change in the mix of business.

Metals revenues ~~increased~~decreased $2.08 million, or 78.08%. Metals traffic ~~increased~~decreased 34,~~168~~221 carloads, or 910.38%, which ~~increased~~decreased revenues by $23.5 million, while average freight revenues per carload ~~decreased~~increased 2.12%, which ~~decreased~~increased revenues by $0.67 million. The ~~increase~~decrease in ~~revenues~~carloads was primarily due to ~~increased~~decreased scrap and finished steel shipments across ~~most~~the ~~regions~~United States, decreased pipe shipments in the northeastern and midwestern United States and decreased pig iron shipments in the southern and midwestern United States.

Minerals and stone revenues increased $10.69 million, or 5.2.3%. Minerals and stone ~~average~~traffic ~~freight~~increased ~~revenues~~704 ~~per~~carloads, ~~carload~~or ~~increased 3~~1.90%, which increased revenues by $10.14 million, and ~~traffic~~average ~~increased~~freight ~~674~~per ~~carloads,~~carload orincreased 1.40%, which increased revenues by $0.54 million. The increase in ~~carloads~~average freight per carload and traffic was primarily due to ~~increased~~new ~~aggregates~~business ~~shipments~~and strong demand for rock salt and frac sand in the ~~southern~~northeastern United States, ~~and~~partially ~~increased~~offset ~~frac~~by ~~sand~~a decrease in bentonite and clay shipments due to flooding in the ~~northeastern~~midwestern and southern United States.

Petroleum products revenues increased $21.97 million, or 1610.48%. Petroleum products ~~traffic~~average ~~increased~~freight ~~2,276~~revenues ~~carloads,~~per orcarload increased 9.26%, which increased revenues by $1.75 million, and ~~average~~traffic ~~freight~~increased ~~revenues~~233 ~~per~~carloads, ~~carload~~or ~~increased 6~~1.70%, which increased revenues by $10.2 million. The increase in ~~carloads~~average freight revenues per carload was primarily due to ~~increased~~stronger ~~shipments~~pricing ofand ~~liquid~~a ~~petroleum~~change ~~gases~~ in the ~~western~~mix ~~and southern United States and increased shipments~~ of ~~asphalt in the northeastern United States~~business.

Pulp and paper revenues ~~increased~~decreased $1.63 million, or 4.5%.7 Pulp and paper traffic decreased 3,734 carloads, or 9.0%, ~~primarily~~which ~~due~~decreased torevenues anby ~~increase~~$2.8 inmillion, while average freight revenues per carload ofincreased 54.68%., ~~The~~which ~~increase~~increased inrevenues ~~average~~by ~~freight~~$1.5 ~~revenues~~million. ~~per~~The ~~carload~~decrease in carloads was primarily due to ~~stronger~~decreased ~~pricing~~containerboard ~~and~~shipments ~~increased~~across ~~fuel~~North ~~surcharge revenue~~America.

~~Waste~~Freight revenues ~~increased~~from ~~$1.0~~all ~~million,~~remaining orcommodities ~~17.6%.~~combined ~~Waste traffic~~ increased ~~1,072 carloads, or 9.0%, which increased revenues~~ by $0.63 million~~, and average freight revenues per carload increased 8~~.0%, which increased revenues by $0.5 million. The increase in revenues was primarily due to increased waste carloads in the northeastern United States. The increase in average freight revenues per carload was primarily due to stronger pricing and increased fuel surcharge revenue, partially offset by a change in the mix of business.

3342

Table of Contents

Freight revenues from all remaining commodities combined decreased by $1.4 million.

Freight-Related Revenues

Freight-related revenues from our North American Operations, which includes revenues from railcar switching, track access fees, storage and other ancillary revenues related to the movement of freight, were $6466.51 million for the three months ended ~~March~~June 3130, 2019, compared with $63.85 million for the three months ended ~~March~~June 3130, 2018, an increase of $02.67 million, or 14.02%. Excluding a decrease of $1.95 million in revenues from leased railroads in Canada, ~~for~~that ~~which~~we ~~the~~ceased ~~leases~~operating ~~expired~~ at the end of 2018, and a $0.2 million decrease due to the impact of foreign currency depreciation, freight-related revenues from our North American Operations increased $24.73 million, or 47.30%, for the three months ended ~~March~~June 3130, 2019, compared with $61.8 million for the three months ended ~~March~~June 3130, 2018. The increase was primarily due to increased ~~demurrage~~switching and storage revenues in the ~~midwestern~~southeastern ~~and southern~~ United States and increased ~~storage~~demurrage revenues in the ~~southeastern~~midwestern United States.

All Other Revenues

All other revenues from our North American Operations, which includes revenues from third-party railcar and locomotive repairs, property rentals and other ancillary revenues not directly related to the movement of freight, were $16.25 million for the three months ended ~~March~~June 3130, 2019, compared with $16.42 million for the three months ended ~~March~~June 3130, 2018, aan ~~decrease~~increase of $0.23 million, or 1.19%. Excluding a decrease of $0.54 million in revenues from the Canadian leases that expired at the end of 2018 and a $0.1 million decrease due to the impact of foreign currency depreciation, all other revenues from our North American Operations increased $0.58 million, or 35.01%, for the three months ended ~~March~~June 3130, 2019, compared with $15.7 million for the three months ended ~~March~~June 3130, 2018.

Operating Expenses

Total operating expenses from our North American Operations ~~increased~~decreased $101.7 million, or 40.27%, to $~~263~~257.16 million for the three months ended ~~March~~June 3130, 2019, compared with $~~252~~259.53 million for the three months ended ~~March~~June 3130, 2018. The ~~increase~~decrease included ~~$17.3 million from existing operations, partially offset by~~ a $5.37 million decrease in expenses from the two leased railroads in Canada, ~~for~~that ~~which~~we ~~the~~ceased ~~leases~~operating ~~expired~~ at the end of 2018, and a $10.39 million decrease due to the impact of foreign currency depreciation, partially offset by a $4.9 million increase from existing operations. The increase from existing operations included increases of $62.67 million in ~~labor~~purchased ~~and~~services ~~benefits~~ expense, $21.67 million in ~~purchased~~net ~~services~~loss ~~expense~~on sale and impairment of assets, $21.5 million in ~~casualties~~materials expense and ~~insurance~~$1.1 million in depreciation and amortization expense, partially offset by decreases of $2.1.2 million in ~~trackage~~equipment ~~rights~~rent expense and $1.51 million in ~~depreciation~~casualties and ~~amortization~~insurance expense. The following table sets forth operating expenses from our North American Operations for the three months ended ~~March~~June 3130, 2019 and 2018 (dollars in thousands):

	Three Months Ended March 31,																			Increase/(Decrease) Constant Currency*
	Three Months Ended June 30,										Increase/(Decrease)			CurrencyImpact			2018 Constant Currency*			Increase/(Decrease) Constant Currency*
	2019					2018								~~CurrencyImpact~~			2018 Constant Currency*
	Amount			% ofOperatingRevenues		Amount			% ofOperatingRevenues		~~Increase/(Decrease)~~
Labor and benefits	$	~~117~~108,~~352~~458		3531.37	%	$	~~111~~109,~~917~~289		3432.42	%	$	~~5,435~~(831	)	$	(~~474~~326	)	$	~~111~~108,~~443~~963		$	~~5,909~~(505	)
Equipment rents	12,~~277~~257			3.76	%	1213,~~500~~633			34.80	%	(~~223~~1,376		)	(5841		)	1213,~~442~~592			(~~165~~1,335		)
Purchased services	16,~~295~~821			4.9	%	1314,~~930~~652			4.3	%	2,~~365~~169			(5556		)	1314,~~875~~596			2,~~420~~225
Depreciation and amortization	38,~~431~~738			11.63	%	4041,~~631~~247			12.52	%	(2,~~200~~509		)	(~~317~~225		)	4041,~~314~~022			(12,~~883~~284		)
Diesel fuel used in train operations	2521,~~468~~672			7.6.4	%	2523,~~480~~253			76.8	%	(121,581		)	(~~180~~105		)	2523,~~300~~148			~~168~~(1,476		)
Casualties and insurance	8,~~851~~978			2.6	%	610,~~457~~156			23.0	%	2(1,~~394~~178		)	(4311		)	610,~~414~~145			2(1,~~437~~167		)
Materials	1314,~~165~~551			34.93	%	13,~~190~~163			43.09	%	~~(25~~1,388		)	(6051		)	13,~~130~~112			351,439
Trackage rights	1110,~~189~~906			3.42	%	910,~~112~~527			23.81	%	~~2,077~~379			(97		)	910,~~103~~520			~~2,086~~386
Net gain on sale and impairment of assets	(679		)	(0.2	)%	(912		)	(0.3	)%	233			3			(909		)	230
Net loss/(gain) on sale and impairment of assets	1,037			0.3	%	(706		)	(0.2	)%	1,743			—			(706		)	1,743
Restructuring and related costs	~~589~~641			0.2	%	347			—	%	~~555~~634			—			347			~~555~~634
Other expenses, net	2023,~~193~~527			6.19	%	2024,~~131~~062			67.21	%	62(535		)	(8562		)	2024,~~046~~000			~~147~~(473		)
Total operating expenses	$	~~263~~257,~~131~~586		7975.14	%	$	~~252~~259,~~470~~283		7776.54	%	$	10(1,~~661~~697	)	$	(~~1,278~~884	)	$	~~251~~258,~~192~~399		$	~~11,939~~(813	)

* Constant currency amounts reflect the prior period results translated at the current period exchange rates.

The 34following information discusses the significant changes in operating expenses of our North American Operations excluding a decrease of $0.9 million due to the impact from foreign currency depreciation.

Equipment rents expense was $12.3 million for the three months ended June 30, 2019, compared with $13.6 million for the three months ended June 30, 2018, a decrease of $1.3 million, or 9.8%. The decrease was primarily due to decreased car hire expense from existing operations.

Table of Contents

~~The~~Purchased ~~following~~services ~~information~~expense ~~discusses~~was $16.8 million for the ~~significant~~three ~~changes~~months inended ~~operating~~June 30, ~~expenses~~2019, compared with $14.6 million for the three months ended June 30, 2018, an increase of ~~our~~$2.2 ~~North~~million, ~~American~~or ~~Operations~~15.2%. ~~excluding~~The increase consisted of $2.7 million from existing operations, partially offset by a decrease of $10.35 million from the expired Canadian leases. The increase in existing operations was primarily due to ~~the~~increases ~~impact~~in ~~from~~track ~~foreign~~maintenance ~~currency~~expense ~~depreciation~~in 2019.

~~Labor~~Depreciation and ~~benefits~~amortization expense was $~~117~~38.47 million for the three months ended ~~March~~June 3130, 2019, compared with $~~111~~41.40 million for the three months ended ~~March~~June 3130, 2018, ana ~~increase~~decrease of $52.93 million, or 5.36%. The ~~increase~~decrease consisted of $63.64 million from ~~existing~~the ~~operations~~expired Canadian leases, partially offset by aan ~~decrease~~increase of $01.71 million from ~~the~~existing ~~expired Canadian leases~~operations. The increase from existing operations was primarily ~~due~~attributable to ~~annual~~a ~~wage~~larger ~~increases~~depreciable ~~and~~asset ~~$1.6~~base ~~million~~in of2019 ~~expense~~compared ~~representing the mark-to-market impact on our deferred compensation plan liabilities. This expense was offset by $1.6 million of mark-to-market earnings on investment assets associated~~ with ~~the~~2018, ~~deferred~~reflecting ~~compensation~~capital ~~plan~~spending ~~recognized~~ in ~~other non-operating income~~2018.

~~Purchased~~The ~~services~~cost ~~expense~~of diesel fuel used in train operations was $1621.37 million for the three months ended ~~March~~June 3130, 2019, compared with $1323.91 million for the three months ended ~~March~~June 3130, 2018, ana ~~increase~~decrease of $21.45 million, or 176.4%,. ~~primarily~~The ~~due~~decrease toconsisted ~~increases~~of in$0.8 ~~track~~million ~~maintenance~~from ~~expense~~existing operations and ~~snow~~$0.7 ~~removal~~million ~~costs~~from inthe ~~2019~~expired Canadian leases.

~~Depreciation~~Casualties and ~~amortization~~insurance expense was $389.40 million for the three months ended ~~March~~June 3130, 2019, compared with $4010.31 million for the three months ended ~~March~~June 3130, 2018, a decrease of $1.92 million, or 411.75%. The decrease ~~consisted of $3.3 million from the expired Canadian leases, partially offset by an increase of $1.5 million from existing operations. The increase from existing operations~~ was primarily attributable to adecreased ~~larger~~derailment ~~depreciable~~expenses ~~asset base~~ in 2019 ~~compared with 2018, reflecting capital spending in 2018~~.

~~Casualties~~Materials ~~and insurance~~ expense was $814.96 m

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