CHANGES IN OPERATIONS:

United States

RailAmerica, Inc.: On October 1, 2012, the Company acquired 100% of RailAmerica, Inc.'s (RailAmerica) outstanding shares for cash at a price of $27.50 per share and, in connection with such acquisition, the Company repaid RailAmerica's term loan and revolving credit facility. The calculation of the total consideration for the RailAmerica acquisition is presented below (in thousands, except per share amount):



RailAmerica outstanding common stock as of October 1, 2012	49,934
Cash purchase price per share	$	27.50
Equity purchase price	$	1,373,184
Payment of RailAmerica's outstanding term loan and revolving credit facility	659,198
Cash consideration	2,032,382
Impact of pre-acquisition share-based awards	9,400
Total consideration	$	2,041,782

The Company financed the $1.4 billion cash purchase price for RailAmerica's common stock, the refinancing of $1.2 billion of the Company's and RailAmerica's outstanding debt prior to the acquisition as well as transaction and financing related expenses with approximately $1.9 billion of debt from a new five-year Senior Secured Syndicated Facility Agreement (the New Credit Agreement), $475.5 million of gross proceeds from the Company's public offerings of Class A common stock and Tangible Equity Units (TEUs) and $350.0 million through a private issuance of mandatorily convertible Series A-1 Preferred Stock to affiliates of Carlyle Partners V, L.P. (collectively, Carlyle) (see Note 3, Earnings/(Loss) Per Common Share).

Commencing on October 1, 2012, the shares of RailAmerica were held in an independent voting trust while the United States Surface Transportation Board (STB) considered the Company's control application, which application was approved with an effective date of December 28, 2012. Accordingly, the Company accounted for the earnings of RailAmerica using the equity method of accounting while the shares were held in the voting trust and the Company's preliminary allocation of fair values to the acquired assets and assumed liabilities has been included in the Company's consolidated balance sheets since December 28, 2012.

During the three and nine months ended September 30, 2012, as discussed more fully under Contingent Forward Sale Contract in Note 5, Derivative Financial Instruments, the Company recorded a $50.1 million non-cash mark-to-market expense and corresponding liability related to an investment agreement governing the sale of $350.0 million of Series A-1 Preferred Stock issued to Carlyle in connection with the funding of the RailAmerica acquisition (the Investment Agreement). The expense was a result of the significant increase in G&W's share price between July 23, 2012 (the date the Company entered into the Investment Agreement) and September 30, 2012.

The results from RailAmerica's operations are included in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2013 and are included in the Company's North American & European Operations segment.

Headquartered in Jacksonville, Florida with approximately 2,000 employees, RailAmerica owned and operated 45 short line freight railroads in North America with approximately 7,100 miles of track in 28 U.S. states and three Canadian provinces as of the October 1, 2012 acquisition date.

The Company accounted for the RailAmerica acquisition using the acquisition method of accounting under U.S. GAAP. Under the acquisition method of accounting:

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The assets and liabilities of RailAmerica were recorded at their respective acquisition-date preliminary fair values by RailAmerica as of October 1, 2012, which is referred to as the application of push-down accounting, and were included in G&W's consolidated balance sheet in a single line item following the equity method of accounting as of that date (see As of October 1, 2012 column in the following table).

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Upon approval by the STB for the Company to control RailAmerica, the preliminary allocation of fair value to the acquired assets and assumed liabilities were consolidated with the Company's assets and liabilities as of December 28, 2012 (see As of December 28, 2012 column in the following table). Between October 1, 2012 and December 28, 2012, the Company recognized income from its equity investment in RailAmerica of $15.6 million and other comprehensive loss of $2.0 million primarily resulting from foreign currency translation adjustments. In addition, the Company recognized $21.8 million, representing the change in RailAmerica's cash and cash equivalents from October 1, 2012 to December 28, 2012, as a reduction in net cash paid for the acquisition.

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During the three months ended September 30, 2013, the Company finalized its allocation of fair values to RailAmerica's assets and liabilities (see Final column in the following table). The measurement period adjustments to the allocation of fair values were as follows: 1) property and equipment increased $10.7 million, 2) intangible assets decreased $29.9 million, 3) deferred income tax liabilities, net decreased $11.4 million, 4) noncontrolling interest decreased $5.0 million, 5) all other assets, net increased $1.3 million and 6) goodwill increased $1.5 million as an offset to the above-mentioned changes. This resulted in additional annualized depreciation and amortization expense of approximately $4.0 million, of which $3.0 million was recorded in the third quarter of 2013. The Company does not consider these adjustments material to its financial statements taken as a whole and as such, prior periods were not retroactively adjusted.

The final fair values assigned to the acquired net assets of RailAmerica were as follows (dollars in thousands):



	As of		As of December 28, 2012
	October 1, 2012		Preliminary		Final
Cash and cash equivalents	$	86,102	$	107,922	$	107,922
Accounts receivable, net	104,839		91,424		90,659
Materials and supplies	6,406		7,325		7,325
Prepaid expenses and other	15,146		14,815		15,801
Deferred income tax assets, net	49,074		49,074		56,998
Property and equipment	1,579,321		1,588,612		1,599,282
Goodwill	474,115		474,115		475,584
Intangible assets, net	451,100		446,327		416,427
Other assets, net	116		116		116
Total assets	2,766,219		2,779,730		2,770,114
Accounts payable and accrued expenses	143,790		135,117		140,160
Long-term debt	12,158		12,010		12,010
Deferred income tax liabilities, net	542,210		551,856		540,420
Other long-term liabilities	20,754		19,618		21,439
Noncontrolling interest	5,525		5,525		481
Net assets	$	2,041,782	$	2,055,604	$	2,055,604

Pro Forma Financial Results

The following table summarizes the Company's unaudited pro forma financial results for the three and nine months ended September 30, 2012, as if the acquisition of RailAmerica had been consummated as of January 1, 2011. The following pro forma financial results do not include the impact of any potential operating efficiencies, savings from expected synergies, costs to integrate the operations or costs necessary to achieve savings from expected synergies or the impact of derivative instruments that the Company has entered into or may enter into to mitigate interest rate or currency exchange rate risk (dollars in thousands, except per share amounts):



	Three Months Ended		Nine Months Ended
	September 30, 2012		September 30, 2012
Operating revenues	$	373,285	$	1,088,274
Net income attributable to Genesee & Wyoming Inc.	$	28,012	$	55,182
Less: Series A-1 Preferred Stock dividend	4,375		13,125
Net income available to common stockholders	$	23,637	$	42,057
Income per common share attributable to Genesee & Wyoming Inc. common stockholders:
Basic income per common share from continuing operations	$	0.49	$	0.88
Diluted income per share from continuing operations	$	0.47	$	0.83

The unaudited pro forma financial results include the acquisition of RailAmerica adjusted, net of tax, for depreciation and amortization expense resulting from the property and equipment and amortizable intangible assets based on the allocation of fair values, the inclusion of interest expense related to borrowings used to fund the acquisition, the amortization of debt issuance costs related to amendments to the Company's prior credit agreement, the elimination of RailAmerica's interest expense related to debt not assumed in the acquisition and the elimination of the $50.1 million mark-to-market expense related to the Investment Agreement in connection with the funding of the acquisition. The unaudited pro forma financial results for the three and nine months ended September 30, 2012 were based upon the Company's and RailAmerica's historical consolidated statements of operations for the three and nine months ended September 30, 2012. The pro forma results for the nine months ended September 30, 2012 included approximately $55 million, net of tax, of costs incurred by RailAmerica associated with the redemption of senior secured notes in January 2012.

Australia

Arrium Limited: In July 2012, the Company's subsidiary, Genesee & Wyoming Australia Pty Ltd (GWA), announced that it had expanded two existing rail haulage contracts with Arrium Limited (formerly OneSteel) to transport an additional 2.7 million tons per year of export iron ore in South Australia. In 2012, GWA invested A$52.1 million (or $54.1 million at the exchange rate on December 31, 2012) to purchase narrow gauge locomotives and rail cars, as well as to construct a standard gauge rolling-stock maintenance facility in order to support the increased shipments under the two contracts. During the nine months ended September 30, 2013, GWA spent A$19.5 million (or $18.2 million at the exchange rate on September 30, 2013) on these projects and expects to invest an additional A$2.6 million (or $2.4 million at the exchange rate on September 30, 2013) over the remainder of 2013 to support the increased shipments.

Alice Springs and Cook: In May 2012, GWA entered into an agreement with Asciano Services Pty Ltd (AIO), a subsidiary of Asciano Pty Ltd, whereby GWA agreed to purchase an intermodal and freight terminal in Alice Springs, Northern Territory from AIO and GWA agreed to sell AIO certain assets in the township of Cook, South Australia that included its third-party fuel-sales business. GWA completed the purchase of the Alice Springs intermodal and freight terminal in June 2012 for A$9.0 million (or $9.2 million at the exchange rate on June 30, 2012) plus A$0.5 million (or $0.6 million at the exchange rate on June 30, 2012) tax liability for stamp duty (an Australian asset transfer tax). Previously, GWA had leased the facility from AIO. The sale of the assets in Cook closed in September 2012. The Company received A$4.0 million (or $4.1 million at the exchange rate on September 30, 2012) in pre-tax cash proceeds from the sale and recognized an after-tax book gain of A$1.3 million (or $1.3 million at the exchange rate on September 30, 2012), or approximately $0.03 per share.

Canada

Tata Steel Minerals Canada Ltd.: On August 2, 2012, the Company announced that its newly formed subsidiary, KeRail Inc. (KeRail), entered into a long-term agreement with Tata Steel Minerals Canada Ltd. (TSMC), for KeRail to provide rail transportation services to the direct shipping iron ore mine TSMC is developing near Schefferville, Quebec in the Labrador Trough (the Mine). In addition, KeRail plans to construct an approximately 21-kilometer rail line that will connect the Mine to the Tshiuetin Rail Transportation (TSH) interchange point in Schefferville. Operated as part of the Company's Canada Region, KeRail is expected to haul unit trains of iron ore from its rail connection with the Mine, which will then travel over three privately-owned railways to the Port of Sept-Îles for export primarily to Tata Steel's European operations. The agreement and construction are contingent on certain conditions being met, including the receipt of necessary governmental permits and approvals. Once the track construction has commenced, the rail line is expected to be completed three to six months thereafter, weather conditions permitting.

Results from Continuing Operations

When comparing the Company's results from continuing 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, changing economic conditions, competitive forces, changes in foreign currency exchange rates, one-time freight moves, fuel price fluctuations, customer plant expansions and shut-downs, sales of property and equipment, derailments and weather-related conditions, such as hurricanes, cyclones, tornadoes, droughts, heavy snowfall, unseasonably warm or cool weather, freezing and flooding. In periods when these events occur, 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, such as steel products, paper products and lumber and forest products, as well as product specific economic conditions, such as the availability of lower priced alternative sources of power generation (coal). Other shipments are relatively less affected by economic conditions and are more closely affected by other factors, such as inventory levels maintained at customer plants (coal), winter weather (salt and coal) and seasonal rainfall (grain). As a result of these and other factors, the Company's operating results in any reporting period may not be directly comparable to its operating results in other reporting periods.