CHANGES IN OPERATIONS:

Europe

Freightliner Group Limited: On March 25, 2015, the Company completed the acquisition of all of the outstanding share capital of RailInvest Holding Company Limited, the parent company of London-based Freightliner Group Limited (Freightliner), pursuant to the terms of a Share Purchase Agreement dated February 24, 2015. Certain former management shareholders of Freightliner (Management Shareholders) retained an approximate 6% economic interest in Freightliner in the form of deferred consideration. The Company expects to settle the deferred consideration by the end of 2020.

Headquartered in London, England, Freightliner is an international freight rail operator with operations in the U.K., Poland, Germany, the Netherlands and Australia. Freightliner's principal business is located in the U.K., where it is the largest maritime intermodal operator and the second largest freight rail operator, providing service throughout England, Scotland and Wales. In Continental Europe, Freightliner Poland primarily serves aggregates and coal customers in Poland. In addition, Freightliner's ERS subsidiary, based in Rotterdam, provides cross-border intermodal services connecting the northern European ports of Rotterdam, Bremerhaven and Hamburg to key cities in Germany, Poland, Italy and beyond. In Australia, Freightliner currently transports coal and containerized agricultural products for its customers in New South Wales. As of the acquisition date, Freightliner employed approximately 2,500 people worldwide and had a fleet of primarily leased equipment of approximately 250 standard gauge locomotives, including approximately 45 electric locomotives, and 5,500 railcars.

The Company funded the acquisition with borrowings under the Company's Second Amended and Restated Senior Secured Syndicated Credit Facility Agreement, as amended (the Credit Agreement) (see Note 8, Long-Term Debt) and available cash. The foreign exchange rate used to translate the total consideration to United States dollars was $1.49 for one British pound (GBP), the exchange rate on March 25, 2015. The calculation of the total consideration for the Freightliner acquisition is presented below (amounts in thousands):



	GBP		USD
Cash consideration	£	492,083	$	733,006
Deferred consideration	24,200		36,048
Total consideration	£	516,283	$	769,054

As of March 25, 2015, the Company recorded a contingent liability within other long-term liabilities of £24.2 million (or $36.0 million at the exchange rate on March 25, 2015). This contingent liability represents the aggregate fair value of the shares transferred to the Company by the Management Shareholders representing an economic interest of approximately 6% on the acquisition date at the Freightliner acquisition price per share, in exchange for the right to receive cash consideration for the representative economic interest in the future (deferred consideration). The Company will recalculate the estimated fair value of the deferred consideration in each reporting period until it is paid in full by using a contractual formula designed to estimate the economic value of the Management Shareholders' retained interest in a manner consistent with that used to derive the Freightliner acquisition price per share on the acquisition date. Accordingly, a change in the fair value of the deferred consideration could have a material effect on the Company's results of operations for the period in which a change in estimate occurs. As of December 31, 2015, there was no change in the estimated fair value of the deferred consideration (see Note 10, Fair Value of Financial Instruments), resulting in no change to the contingent liability. The Company expects to recognize future changes in the contingent liability for the estimated fair value of the deferred consideration through other expenses within the Company's consolidated statement of operations. These future changes in the estimated fair value of the deferred consideration are not expected to be deductible for tax purposes. Each of the Management Shareholders may elect to receive one third of their respective deferred consideration valued as of March 31, 2018, 2019 and 2020. Any remaining portion of the deferred consideration will be valued as of March 31, 2020 and paid by the end of 2020.

The results of operations from Freightliner have been included in the Company's consolidated statement of operations since the March 25, 2015 acquisition date. The results of Freightliner's U.K. and Continental Europe operations are included in the Company's U.K./European Operations segment and the results of Freightliner's Australia operations are included in the Company's Australian Operations segment (see Note 18, Segment and Geographic Area Information). Freightliner contributed $531.3 million of total revenues and $33.4 million of income from operations to the Company's consolidated results since the March 25, 2015 acquisition date. The Company incurred $12.6 million of acquisition costs and $2.6 million of integration costs associated with Freightliner during the year ended December 31, 2015, which were included within other expenses in the Company's consolidated statement of operations. In addition, the Company recorded a loss of $18.7 million on the settlement of foreign currency forward purchase contracts during the year ended December 31, 2015, which were entered into in contemplation of the Freightliner acquisition (see Note 9, Derivative Financial Instruments).

The Company accounted for the acquisition as a business combination using the acquisition method of accounting under U.S. GAAP. The acquired assets and liabilities of Freightliner were recorded at their acquisition-date fair values and were consolidated with those of the Company as of the acquisition date. The foreign exchange rate used to translate the balance sheet to United States dollars was $1.49 for one British pound.

The following acquisition-date fair values were assigned to the acquired net assets (amounts in thousands):



	GBP		USD
Cash and cash equivalents	£	30,030	$	44,733
Accounts receivable	55,530		82,717
Materials and supplies	9,740		14,509
Prepaid expenses and other	19,156		28,535
Property and equipment	198,730		296,028
Goodwill	145,190		216,275
Intangible assets	392,233		584,270
Other assets	179		267
Total assets	850,788		1,267,334
Current portion of long-term debt	17,119		25,500
Accounts payable and accrued expenses	105,531		157,201
Long-term debt, less current portion	67,057		99,888
Deferred income tax liabilities, net	82,137		122,351
Other long-term liabilities	62,661		93,340
Net assets	£	516,283	$	769,054

The following acquisition-date fair values were assigned to the intangible assets (amounts in thousands):



	GBP		USD		Weighted Average Amortization Period (in years)
Operational network rights	£	324,000	$	482,630	100
Customer relationships	57,000		84,907		18
Trade names/trademarks	9,200		13,704		40
Favorable operating leases	2,033		3,029		5
Total intangible assets	£	392,233	$	584,270

The amortizable operational network rights the Company acquired from Freightliner have remaining contractual terms spanning up to 123 years. In addition, the Company assigned £145.2 million (or $216.3 million at the exchange rate on March 25, 2015) to goodwill in its final allocation. The goodwill will not be deductible for tax purposes.

Included in the £17.1 million (or $25.5 million at the exchange rate on March 25, 2015) current portion of long-term debt assumed was a £16.5 million (or $24.5 million at the exchange rate on March 25, 2015) capital lease liability assumed by the Company. In addition, the £67.1 million (or $99.9 million at the exchange rate on March 25, 2015) of long-term debt, less current portion, represents a long-term capital lease liability assumed by the Company. Freightliner enters into operating and capital leases for railcars, locomotives and other equipment as well as real property. In addition, the Company assumed bank guarantees of the acquired entities of €3.4 million (or $3.7 million at the exchange rate on March 25, 2015) and £2.5 million (or $3.6 million at the exchange rate on March 25, 2015) primarily associated with credit and payment guarantees.

The Company assumed a net pension liability of £57.2 million (or $85.2 million at the exchange rate on March 25, 2015) as of the acquisition date, of which, £51.0 million (or $76.0 million at the exchange rate on March 25, 2015) was included in other long-term liabilities and £6.2 million (or $9.2 million at the exchange rate on March 25, 2015) was included in accounts payable and accrued expenses. See Note 11, U.K. Pension Plan, for additional information regarding the Company's U.K. pension program.

Pro Forma Financial Results (Unaudited)

The following table summarizes the Company's unaudited pro forma operating results for the years ended December 31, 2015 and 2014 as if the acquisition of Freightliner had been consummated as of January 1, 2014. The following pro forma financial information does not include the impact of any costs to integrate the operations or the impact of derivative instruments that the Company has entered into or may enter into to mitigate foreign currency or interest rate risk (dollars in thousands, except per share amounts):



	December 31,
	2015		2014
Operating revenues	$	2,157,020	$	2,417,709
Net income	$	248,922	$	316,459
Basic earnings per common share	$	4.39	$	5.72
Diluted earnings per common share	$	4.30	$	5.55

The unaudited pro forma operating results include historical operating results of Freightliner adjusted, net of tax, for depreciation and amortization expense based on the fair values of the acquired property and equipment and amortizable intangible assets, the inclusion of interest expense related to borrowings used to fund the acquisition, the amortization of debt issuance costs related to the Company's entry into the Credit Agreement and the elimination of Freightliner's interest expense related to debt not assumed in the acquisition. Since the pro forma financial results assume the acquisition was consummated on January 1, 2014, the 2015 unaudited pro forma operating results for the year ended December 31, 2015 excluded $12.6 million ($9.5 million, net of tax) of costs incurred by the Company related to the acquisition of Freightliner, $12.2 million ($9.1 million, net of tax) of transaction-related costs incurred by Freightliner and an $18.7 million ($11.6 million, net of tax) loss on settlement of foreign currency forward purchase contracts directly attributable to the acquisition of Freightliner. The 2014 unaudited pro forma operating results for the year ended December 31, 2014 included $12.6 million ($9.5 million, net of tax) of costs incurred by the Company related to the acquisition of Freightliner and $15.9 million ($11.9 million, net of tax) of transaction-related costs incurred by Freightliner. In addition, the 2014 unaudited pro forma operating results include $53.7 million ($48.8 million, net of tax) from a gain on disposal of lease rights by Freightliner that the Company does not believe qualifies for elimination under the treatment and presentation of pro forma financial results.

Prior to the acquisition, Freightliner's fiscal year was based on a 52/53 week period ending on the nearest Saturday on or before March 31. Since Freightliner and the Company had different fiscal year end dates, the unaudited pro forma operating results were prepared based on comparable periods. The unaudited pro forma operating results for the year ended December 31, 2015 were based upon the Company's consolidated statement of operations for the twelve months ended December 31, 2015 and Freightliner's historical operating results for the 12 weeks ended March 28, 2015, adjusted for the five days already included in the Company's first quarter results. The foreign exchange rate used to translate Freightliner's historical operating results to United States dollars was $1.51 for one British pound (which was calculated based on average daily exchange rates during three month period ended March 31, 2015). The unaudited pro forma operating results for the year ended December 31, 2014 were based upon the Company's consolidated statement of operations for the twelve months ended December 31, 2014 and Freightliner's historical operating results for the 48 weeks ended December 5, 2014. The foreign exchange rate used to translate Freightliner's operating results to United States dollars was $1.58 for one British pound for the three months ended December 31, 2014, $1.67 for one British pound for the three months ended September 30, 2014, $1.68 for the three months ended June 30, 2014 and $1.66 for one British pound for the three months ended March 31, 2014 (which were calculated based on average daily exchange rates during each of the respective periods).

The pro forma financial information does not purport to be indicative of the results that actually would have been obtained had the transactions been completed as of January 1, 2014 and for the periods presented and are not intended to be a projection of future results or trends.

United States

Pinsly's Arkansas Division: On January 5, 2015, the Company completed the acquisition of certain subsidiaries of Pinsly Railroad Company (Pinsly) that constituted Pinsly's Arkansas Division (Pinsly Arkansas) for $41.3 million in cash. The Company funded the acquisition with borrowings under the Company's Amended and Restated Senior Secured Syndicated Credit Facility Agreement (the Prior Credit Agreement). The results of operations from Pinsly Arkansas have been included in the Company's consolidated statements of operations since the acquisition date within the Company's North American Operations segment. Pinsly contributed $14.5 million of total revenues and $2.6 million of income from operations to the Company's consolidated results since the acquisition date.

Headquartered in Jones Mill, Arkansas, Pinsly Arkansas serves the Hot Springs and Little Rock areas, as well as the southwestern and southeastern portions of Arkansas and includes: (1) Arkansas Midland Railroad Company, Inc. (AKMD), which is comprised of seven non-contiguous branch lines; (2) The Prescott and Northwestern Railroad Company (PNW); (3) Warren & Saline River Railroad Company (WSR); and (4) two Arkansas transload operations. Operations are comprised of 137 miles of owned and leased track, 77 employees and 16 locomotives. The railroads currently haul approximately 35,000 carloads per year and serve a diverse customer base in industries including aluminum, forest products, aggregates, energy and carton board.

Rapid City, Pierre & Eastern Railroad, Inc.: On May 30, 2014, the Company's new subsidiary, Rapid City, Pierre & Eastern Railroad, Inc. (RCP&E), purchased the assets comprising the western end of Canadian Pacific Railway Limited's (CP) Dakota, Minnesota & Eastern Railroad Corporation (DM&E) rail line for a cash purchase price of $218.6 million, including the purchase of materials and supplies, railcars, equipment and vehicles. RCP&E commenced freight service on the line on June 1, 2014. The results of operations from RCP&E have been included in the Company's consolidated statement of operations since the acquisition date within the Company's North American Operations segment. RCP&E contributed $69.9 million of total revenues and $17.2 million of income from operations to the Company's consolidated results since the acquisition date.

RCP&E operates approximately 670 miles of rail line between Tracy, Minnesota and Rapid City, South Dakota; north of Rapid City to Colony, Wyoming; south of Rapid City to Dakota Junction, Nebraska; and connecting branch lines as well as trackage from Dakota Junction to Crawford, Nebraska, currently leased to the Nebraska Northwestern Railroad Inc. (NNW). Customers on the RCP&E ship approximately 63,000 carloads annually of grain, bentonite clay, ethanol, fertilizer and other products. RCP&E has the ability to interchange with CP, Union Pacific Railroad, BNSF Railway Company and NNW. RCP&E has approximately 180 employees, most of whom were hired from the DM&E operations.

The Company accounted for the acquisition as a business combination using the acquisition method of accounting under U.S. GAAP. The following acquisition-date fair values were assigned to the acquired net assets (dollars in thousands):



	Amount
Materials and supplies	$	3,621
Prepaid expenses and other	116
Property and equipment	217,032
Deferred income tax assets	325
Total assets	221,094
Current portion of long-term debt	1,121
Accounts payable and accrued expenses	108
Long-term debt, less current portion	1,260
Net assets	$	218,605

Australia

Arrium Limited: Between 2011 and 2014, the Company's subsidiary, Genesee & Wyoming Australia Pty Ltd (GWA) invested a total of A$78.0 million (or $77.7 million at the exchange rates on the dates the spending occurred) to purchase locomotives and railcars, as well as to construct a standard gauge rolling-stock maintenance facility to support iron ore shipments from Arium's Southern Iron mine and Whyalla-based operations, which include the Middleback Range iron ore mines and the Whyalla steelworks.

Arrium mothballed its Southern Iron mine in April 2015, citing the significant decline in the price of iron ore, while the mines in the Middleback Range continued to operate. During 2015, GWA carried approximately 8,300 carloads of iron ore from the Southern Iron mine and, in total, generated approximately A$83 million in freight and freight-related revenues (or approximately $62 million, at the average exchange rate for the year ended December 31, 2015) under the fixed and variable payment structure that is customary in large contracts in Australia. GWA expects to receive only the fixed portion of the revenue following the mothballing of the Southern Iron mine and both the fixed and variable portion from the Whyalla-based operations. GWA could lose some or all of this revenue if Arrium continues to suffer from declines in commodity prices or other economic and financial conditions. In February 2016, Arrium announced a recapitalization plan with GSO Capital Partners LP. The recapitalization plan is subject to a variety of closing conditions, including approval by Arrium’s existing lenders, as well as regulatory and other approvals.