Segment Information

9 Months Ended

Sep. 30, 2019

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 September 30, 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 and nine months ended September 30, 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 nine months ended September 30, 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 nine months ended September 30, 2019. During the nine months ended September 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 OCI. 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.

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 September 30, 2019 and December 31, 2018:



	September 30, 2019		December 31, 2018
United States dollar per Australian dollar	$	0.67	$	0.70
United States dollar per British pound	$	1.23	$	1.28
United States dollar per Canadian dollar	$	0.76	$	0.73
United States dollar per Euro	$	1.09	$	1.15

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 and nine months ended September 30, 2019 and 2018:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
United States dollar per Australian dollar	$	0.69	$	0.73	$	0.70	$	0.76
United States dollar per British pound	$	1.23	$	1.30	$	1.27	$	1.35
United States dollar per Canadian dollar	$	0.76	$	0.77	$	0.75	$	0.78
United States dollar per Euro	$	1.11	$	1.16	$	1.12	$	1.19

The following tables set forth select financial data for the Company's reportable segments, including operating revenues by commodity group, for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands):



	Three Months Ended
	September 30, 2019
	North American Operations		Australian Operations		U.K./European Operations			Total Operations
Operating revenues:
Freight revenues by commodity group:
Agricultural Products	$	34,574	$	2,631	$	763		$	37,968
Autos & Auto Parts	6,339		—		—			6,339
Chemicals & Plastics	39,518		—		—			39,518
Coal & Coke	18,336		33,187		606			52,129
Food & Kindred Products	8,355		—		—			8,355
Intermodal	461		16,446		56,998			73,905
Lumber & Forest Products	22,862		—		—			22,862
Metallic Ores	4,225		7,036		—			11,261
Metals	28,115		—		—			28,115
Minerals & Stone	41,399		1,979		21,672			65,050
Petroleum Products	19,027		178		628			19,833
Pulp & Paper	30,648		—		—			30,648
Waste	8,278		—		—			8,278
Other	5,888		—		—			5,888
Total freight revenues	268,025		61,457		80,667			410,149
Freight-related revenues	68,129		8,011		65,229			141,369
All other revenues	16,288		2,132		13,756			32,176
Total operating revenues	$	352,442	$	71,600	$	159,652		$	583,694
Operating income/(loss)	$	95,633	$	19,484	$	(2,361	)	$	112,756
Depreciation and amortization	$	39,164	$	13,779	$	10,083		$	63,026
Interest expense, net	$	12,599	$	10,694	$	849		$	24,142
Provision for income taxes	$	16,876	$	2,641	$	458		$	19,975
Cash expenditures for additions to property & equipment, net of grants from outside parties	$	53,239	$	14,845	$	6,336		$	74,420



	Three Months Ended
	September 30, 2018
	North American Operations		Australian Operations		U.K./European Operations		Total Operations
Operating revenues:
Freight revenues by commodity group:
Agricultural Products	$	30,565	$	4,150	$	1,053	$	35,768
Autos & Auto Parts	5,513		—		—		5,513
Chemicals & Plastics	38,436		—		—		38,436
Coal & Coke	23,006		32,357		2,588		57,951
Food & Kindred Products	8,761		—		—		8,761
Intermodal	514		17,538		58,609		76,661
Lumber & Forest Products	24,113		—		—		24,113
Metallic Ores	3,573		8,914		—		12,487
Metals	34,904		—		—		34,904
Minerals & Stone	38,570		2,066		22,344		62,980
Petroleum Products	18,236		224		99		18,559
Pulp & Paper	31,961		—		—		31,961
Waste	8,089		—		—		8,089
Other	7,191		—		—		7,191
Total freight revenues	273,432		65,249		84,693		423,374
Freight-related revenues	66,045		10,136		69,269		145,450
All other revenues	16,232		1,318		16,930		34,480
Total operating revenues	$	355,709	$	76,703	$	170,892	$	603,304
Operating income	$	102,484	$	20,713	$	4,623	$	127,820
Depreciation and amortization	$	41,388	$	14,937	$	9,067	$	65,392
Interest expense, net	$	10,339	$	12,780	$	2,893	$	26,012
Provision for income taxes	$	26,323	$	2,398	$	2,292	$	31,013
Cash expenditures for additions to property & equipment, net of grants from outside parties	$	42,120	$	8,185	$	6,704	$	57,009



	Nine Months Ended
	September 30, 2019
	North American Operations		Australian Operations		U.K./European Operations			Total Operations
Operating revenues:
Freight revenues by commodity group:
Agricultural Products	$	99,383	$	8,684	$	2,011		$	110,078
Autos & Auto Parts	17,905		—		—			17,905
Chemicals & Plastics	116,504		—		—			116,504
Coal & Coke	56,089		91,323		6,195			153,607
Food & Kindred Products	25,559		—		—			25,559
Intermodal	1,439		45,705		174,500			221,644
Lumber & Forest Products	68,238		—		—			68,238
Metallic Ores	9,883		22,177		—			32,060
Metals	87,032		—		—			87,032
Minerals & Stone	111,806		5,834		58,709			176,349
Petroleum Products	56,779		476		2,036			59,291
Pulp & Paper	88,940		—		—			88,940
Waste	23,104		—		—			23,104
Other	16,308		—		—			16,308
Total freight revenues	778,969		174,199		243,451			1,196,619
Freight-related revenues	198,740		23,902		197,385			420,027
All other revenues	49,026		5,137		42,454			96,617
Total operating revenues	$	1,026,735	$	203,238	$	483,290		$	1,713,263
Operating income/(loss)	$	249,209	$	43,642	$	(6,185	)	$	286,666
Depreciation and amortization	$	116,333	$	42,382	$	29,454		$	188,169
Interest expense, net	$	36,871	$	34,618	$	6,291		$	77,780
Provision for income taxes	$	49,103	$	2,711	$	1,287		$	53,101
Cash expenditures for additions to property & equipment, net of grants from outside parties	$	153,959	$	26,797	$	23,523		$	204,279



	Nine Months Ended
	September 30, 2018
	North American Operations		Australian Operations		U.K./European Operations			Total Operations
Operating revenues:
Freight revenues by commodity group:
Agricultural Products	$	91,630	$	15,639	$	3,073		$	110,342
Autos & Auto Parts	16,686		—		—			16,686
Chemicals & Plastics	113,625		—		—			113,625
Coal & Coke	62,038		96,506		8,751			167,295
Food & Kindred Products	25,587		—		—			25,587
Intermodal	1,203		50,613		192,413			244,229
Lumber & Forest Products	70,362		—		—			70,362
Metallic Ores	10,816		24,770		—			35,586
Metals	95,791		—		—			95,791
Minerals & Stone	107,122		6,247		63,849			177,218
Petroleum Products	52,870		560		107			53,537
Pulp & Paper	90,346		—		—			90,346
Waste	21,316		—		—			21,316
Other	19,325		—		—			19,325
Total freight revenues	778,717		194,335		268,193			1,241,245
Freight-related revenues	193,344		32,214		203,491			429,049
All other revenues	48,835		4,017		49,809			102,661
Total operating revenues	$	1,020,896	$	230,566	$	521,493		$	1,772,955
Operating income/(loss)	$	255,918	$	62,585	$	(645	)	$	317,858
Depreciation and amortization	$	123,266	$	46,232	$	27,629		$	197,127
Interest expense, net	$	30,572	$	38,914	$	9,620		$	79,106
Provision for income taxes	$	26,930	$	7,120	$	7,519		$	41,569
Cash expenditures for additions to property & equipment, net of grants from outside parties	$	129,607	$	27,936	$	19,893		$	177,436

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



	September 30, 2019
	North American Operations		Australian Operations		U.K./European Operations		Total Operations
Cash and cash equivalents	$	37,261	$	31,142	$	18,509	$	86,912
Property and equipment, net	$	3,747,047	$	587,793	$	329,997	$	4,664,837



	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