Genesee & Wyoming Reports Results for the First Quarter of 2014

DARIEN, Conn.--(BUSINESS WIRE)--May 1, 2014-- Genesee & Wyoming Inc. (G&W) (NYSE:GWR)

First Quarter Highlights

  • Severe winter weather in North America resulted in significant disruptions to several G&W operating regions, reducing diluted earnings per share (EPS) in the first quarter of 2014 by an estimated $0.23 to $0.26 from a combination of lower revenues and higher operating costs.

  • Estimated revenue reduction due to weather was approximately $15 million to $20 million, primarily driven by temporary line closures, congestion in the North American rail network which impeded interchange with connecting carriers, and reduced supply of available freight cars. Lost profit margin from the lower revenues reduced diluted EPS by approximately$0.10 to $0.13.

  • Estimated higher operating costs due to weather were approximately $12 million, primarily due to increased overtime, higher diesel fuel consumption, higher car hire and extensive snow removal. The increased winter expenses reduced diluted EPS by approximately $0.13.

  • Including the negative impact of the winter weather noted above, G&W’s financial results for the first quarter of 2014, as reported and as adjusted for certain significant items described under Financial Results, were as follows:

  • Adjusted diluted EPS were $0.70, a 12.5% decrease in adjusted diluted EPS; Reported diluted EPS were $0.70. (1)

  • Total operating revenues increased 0.4% to $376.3 million.

  • Adjusted income from operations decreased 13.8% to $75.2 million; Reported income from operations decreased 1.7% to $74.9 million. (1)

  • Adjusted operating ratio increased 3.3 percentage points to 80.0%; Reported operating ratio increased 0.4 percentage points to 80.1% (81.4% North American & European Operations; 74.9% Australian Operations). (1)

Jack Hellmann, President and CEO of G&W, commented, “G&W’s financial results for the first quarter of 2014 were significantly impacted by extreme winter weather that disrupted several of our North American operations. Four G&W operating regions, Canada, Midwest, Northeast and Ohio Valley, suffered the most serious weather-related conditions, first from the direct impact of a series of winter storms on the 45 railroads in those geographies and then from congestion at connecting railroads. As a result, rail shipments were reduced and traffic was also diverted to truck. But through all of this, our employees worked tirelessly and safely under extremely harsh winter conditions. The Board of Directors and I are grateful for the efforts of these dedicated men and women over the past several months.”

“With the arrival of spring, we have seen sharp increases in our traffic levels starting in late March. In addition, we expect the Rapid City, Pierre & Eastern Railroad (RCP&E) to commence operations late in the second quarter and remain optimistic about the outlook for this business. However, we do not expect to recover the significant financial shortfall from the first quarter and congestion continues to impact the overall North American rail network. Including the impact of weather and the RCP&E, our revised outlook for growth in pre-tax income in 2014 is now approximately 15%, with expected growth in pre-tax income of more than 20% over the next nine months.”

“Meanwhile, with our integration planning well advanced on the RCP&E, we are actively evaluating new acquisition and investment opportunities worldwide.”

Financial Results

G&W reported net income in the first quarter of 2014 of $39.6 million, compared with net income of $82.7 million in the first quarter of 2013. Excluding the net impact of certain significant items discussed below, G&W’s adjusted net income in the first quarter of 2014 was $39.8 million, compared with adjusted net income of $44.9 million in the first quarter of 2013. (1)

G&W’s reported diluted EPS and adjusted diluted EPS in the first quarter of 2014 were $0.70 with 56.9 million weighted average shares outstanding, compared with diluted EPS of $1.46 and adjusted diluted EPS of $0.80 in the first quarter of 2013 with 56.5 million weighted average shares outstanding. (1) The net depreciation of foreign currencies relative to the U.S. dollar reduced first quarter 2014 diluted EPS by approximately $0.05, compared with the first quarter of 2013.

G&W’s effective income tax rate was 36.6% in the first quarter of 2014. The higher income tax rate in the first quarter of 2014, compared with the first quarter of 2013, was driven primarily by the expiration of the United States short line tax credit on December 31, 2013.

In the first quarter of 2014 and 2013, G&W’s results included certain significant items that are set forth in the following table (in millions, except per share amounts).

Income/(Loss) Before Taxes Impact

After-Tax Net Income/(Loss) Impact

Diluted Earnings/(Loss) Per Common Share Impact

Three Months Ended March 31, 2014

Business development and related costs$(1.2)$(0.7)$(0.01)

Net gain on sale of assets$0.8$0.5$0.01

Three Months Ended March 31, 2013

Retroactive 2012 short line tax credit$—$41.0$0.72

2013 short line tax credit$—$4.0$0.07

RailAmerica integration costs$(12.8)$(8.0)$(0.14)

Refinancing and debt prepayment related expenses$(0.6)$(0.4)$(0.01)

Net gain on sale of assets$1.7$1.3$0.02

Explanation of Significant Items

In the first quarter of 2014, G&W’s results included business development and related costs of $1.2 million, including RCP&E related integration costs, and net gain on sale of assets of $0.8 million.

On January 2, 2013, the United States short line tax credit (which had previously expired on December 31, 2011) was extended for fiscal years 2012 and 2013. In the first quarter of 2013, G&W recorded a tax benefit of $45.0 million associated with the short line tax credit. The total tax credit impact during the first quarter of 2013 included $41.0 million for the retroactive fiscal year 2012 tax benefit and $4.0 million associated with the first quarter of 2013.

Also in the first quarter of 2013, G&W incurred $12.8 million of RailAmerica integration costs and $0.6 million of debt refinancing and prepayment-related expenses. In the first quarter of 2013, net gain on sale of assets was $1.7 million.

Quarterly Results

In the first quarter of 2014, although lower than expected due to the impact of extreme winter weather, G&W’s total operating revenues increased $1.3 million, or 0.4%, to $376.3 million, compared with $375.0 million in the first quarter of 2013. Excluding a $13.0 million decrease from the net depreciation of foreign currencies relative to the U.S. dollar, G&W’s operating revenues increased$14.3 million, or 3.8%.

G&W’s freight revenues in the first quarter of 2014 were $287.7 million, compared with $281.1 million in the first quarter of 2013. Excluding a $10.1 million decrease from the impact of foreign currency depreciation, G&W’s freight revenues increased by $16.8 million, or 6.0%.

G&W’s non-freight revenues in the first quarter of 2014 were $88.5 million, compared with $93.8 million in the first quarter of 2013. Excluding a $2.9 million decrease from the net impact of foreign currency depreciation, G&W’s non-freight revenues decreased by $2.4 million, or 2.6%.

G&W’s traffic in the first quarter of 2014 increased 17,075 carloads, or 3.8%, to 467,379 carloads. The traffic increase was principally due to increases of 10,743 carloads of coal and coke traffic (primarily in the Midwest and Ohio Valley regions), 4,062 carloads of metallic ores traffic (primarily in the Australia Region) and 1,939 carloads of traffic from G&W’s Other commodity group (primarily due to overhead Class I shipments). All remaining traffic increased by a net 331 carloads.

G&W’s income from operations in the first quarter of 2014 was $74.9 million, which was lower than expected due to the impact of extreme winter weather, compared with $76.2 million in the first quarter of 2013. G&W’s operating ratio in the first quarter of 2014 was 80.1%, compared with an operating ratio of 79.7% in the first quarter of 2013. Income from operations in the first quarter of 2014 included business development and related costs of $1.2 million, partially offset by net gain on sale of assets of $0.8 million. Income from operations in the first quarter of 2013 included $12.8 million of RailAmerica integration costs, partially offset by net gain on sale of assets of $1.7 million. Excluding these items, G&W’s adjusted income from operations decreased $12.0 million, or 13.8%, to $75.2 million. G&W’s adjusted operating ratio increased 3.3 basis points to 80.0% in the first quarter of 2014, compared with 76.7% in the first quarter of 2013. (1)

Free Cash Flow (1)

G&W’s free cash flow for the three months ended March 31, 2014 and 2013 was as follows (in millions):

Three Months Ended

March 31,

2014 2013

Net cash provided by operating activities$71.7$64.8

Net cash used in investing activities, excluding new business investments(39.0)(21.1)

Net cash used for acquisitions— 5.5

Free cash flow before new business investments32.649.3

New business investments(17.9)(12.0)

Free cash flow (1)$14.7 $37.3

The 2014 period included $27.4 million of net cash payments for 2013 capital projects. The 2013 period included $9.7 million of net cash payments for 2012 capital projects.

RCP&E Financing

G&W expects to amend and expand the size of its senior secured syndicated credit facility from approximately US$2.0 billion to US$2.4 billion in conjunction with financing the $210 million RCP&E cash purchase price for the western end of Canadian Pacific’s Dakota, Minnesota and Eastern rail line. G&W anticipates that the amended credit facility will be comprised of a US$1,520 million dollar term loan, an A$220 million term loan and a US$625 million revolving credit facility, of which approximately US$600 million would be undrawn at closing. In addition, G&W plans to extend the maturity of the amended credit facility from October 1, 2017 to May 31, 2019. As of March 31, 2014, pro forma for the debt financing associated with the $210 million cash purchase price for the expected RCP&E transaction, G&W’s total debt to capitalization would be approximately 45%.

Conference Call and Webcast Details

As previously announced, G&W’s conference call to discuss financial results for the first quarter of 2014 will be held on Thursday, May 1, 2014, at 11:00 am EDT. The dial-in number for the teleconference in the U.S. is (800) 553-5260; outside the U.S. is (612) 288-0340, or the call may be accessed live over the Internet (listen only) at www.gwrr.com/investors, by selecting “First Quarter Earnings Conference Call Webcast.” Management will be referring to a slide presentation that will also be available at gwrr.com/investors. The webcast will be archived at www.gwrr.com/investors, until the following quarter’s earnings press release. Telephone replay is available for 30 days beginning at 1:00 p.m. EDT on May 1, 2014 by dialing (800) 475-6701 (or outside the U.S., dial 320-365-3844). The access code is 309988.

About G&W

G&W owns and operates short line and regional freight railroads in the United States, Australia, Canada, the Netherlands and Belgium. In addition, G&W operates the 1,400-mile Tarcoola to Darwinrail line, which links the Port of Darwin with the Australian interstate rail network in South Australia. Operations currently include 111 railroads organized in 11 regions, with nearly 15,000 miles of owned and leased track, 4,600 employees and over 2,000 customers. We provide rail service at 37 ports in North America, Australia and Europe and perform contract coal loading and railcar switching for industrial customers.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains 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, management’s beliefs, and assumptions made by management. Words such as “anticipates,” “intends,” “plans,” “believes,” “could,” “should,” “seeks,” “expects,” “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: risks related to the operation of our railroads; severe weather conditions and other natural occurrences, which could result in shutdowns, derailments or other substantial disruption of operations; consummation and integration of acquisitions; economic, political and industry conditions (including employee strikes or work stoppages); customer demand and changes in our operations, retention and contract continuation; legislative and regulatory developments, including changes in environmental and other laws and regulations to which we 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 various legal claims and lawsuits; increase in, or volatility associated with, expenses related to estimated claims, self-insured retention amounts, and insurance coverage limits; consummation of new business opportunities; exposure to the credit risk of customers and counterparties; decrease in revenues and/or increase in costs and expenses; susceptibility to the risks of doing business in foreign countries; our ability to realize the expected synergies associated with acquisitions; and others including, but not limited to, those noted in our 2013 Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q 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 press release or as of the date they were made. G&W does not undertake, and expressly disclaims, 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.

1.

Adjusted net income, adjusted diluted earnings per common share, adjusted income from operations, adjusted operating ratio and free cash flow are non-GAAP financial measures and are not intended to replace financial measures calculated in accordance with GAAP. The information required by Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934, including a reconciliation to their most directly comparable financial measures calculated in accordance with GAAP, is included in the tables attached to this press release.

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

March 31,

20142013

OPERATING REVENUES$376,279$374,950

OPERATING EXPENSES301,404 298,750

INCOME FROM OPERATIONS74,87576,200

INTEREST INCOME1,0341,043

INTEREST EXPENSE(13,641)(20,120)

OTHER INCOME, NET266 673

INCOME BEFORE INCOME TAXES62,53457,796

(PROVISION FOR)/BENEFIT FROM INCOME TAXES(22,900)24,932

NET INCOME39,63482,728

LESS:NET (LOSS)/INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST(370)165

LESS:SERIES A-1 PREFERRED STOCK DIVIDEND— 2,139

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS$40,004 $80,424

BASIC EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS$0.73 $1.57

WEIGHTED AVERAGE SHARES - BASIC54,841 51,332

DILUTED EARNINGS PER COMMON SHARE ATTRIBUTABLE TO GENESEE & WYOMING INC. COMMON STOCKHOLDERS$0.70 $1.46

WEIGHTED AVERAGE SHARES - DILUTED56,905 56,496

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2014 AND DECEMBER 31, 2013

(in thousands)

(unaudited)

March 31,December 31,

20142013

ASSETS

CURRENT ASSETS:

Cash and cash equivalents$32,187$62,876

Accounts receivable, net326,160325,453

Materials and supplies31,78831,295

Prepaid expenses and other48,89652,584

Deferred income tax assets, net75,610 76,122

Total current assets514,641 548,330

PROPERTY AND EQUIPMENT, net3,462,0743,440,744

GOODWILL629,545630,462

INTANGIBLE ASSETS, net606,615613,933

DEFERRED INCOME TAX ASSETS, net3,1172,405

OTHER ASSETS, net70,620 83,947

Total assets$5,286,612 $5,319,821

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Current portion of long-term debt$94,837$84,366

Accounts payable205,603242,010

Accrued expenses125,502 130,132

Total current liabilities425,942 456,508

LONG-TERM DEBT, less current portion1,484,7221,540,346

DEFERRED INCOME TAX LIABILITIES, net872,706863,051

DEFERRED ITEMS - grants from outside parties266,590267,098

OTHER LONG-TERM LIABILITIES42,92143,748

TOTAL EQUITY2,193,731 2,149,070

Total liabilities and equity$5,286,612 $5,319,821

GENESEE & WYOMING INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

(in thousands)

(unaudited)

Three Months Ended

March 31,

2014 2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income$39,634$82,728

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization37,64134,223

Compensation cost related to equity awards3,3147,525

Excess tax benefits from share-based compensation(3,580)(4,314)

Deferred income taxes16,118(33,866)

Net gain on sale of assets(838)(1,707)

Insurance proceeds received—9,315

Changes in assets and liabilities which (used) provided cash, net of effect of acquisitions:

Accounts receivable, net(8,559)(8,766)

Materials and supplies131(3,404)

Prepaid expenses and other2,181(2,215)

Accounts payable and accrued expenses(15,582)(15,328)

Other assets and liabilities, net1,200 628

Net cash provided by operating activities71,660 64,819

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment(71,618)(37,908)

Grant proceeds from outside parties12,8002,848

Insurance proceeds for the replacement of assets300—

Proceeds from disposition of property and equipment1,555 2,011

Net cash used in investing activities(56,963)(33,049)

CASH FLOWS FROM FINANCING ACTIVITIES:

Principal payments on long-term borrowings, including capital leases(96,287)(139,475)

Proceeds from issuance of long-term debt46,54673,362

Debt amendment costs—(1,543)

Dividends paid on Series A-1 Preferred Stock—(2,139)

Proceeds from employee stock purchases4,6475,903

Excess tax benefits from share-based compensation3,5804,314

Treasury stock acquisitions(3,374)(7,237)

Net cash used in financing activities(44,888)(66,815)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS(498)(391)

DECREASE IN CASH AND CASH EQUIVALENTS(30,689)(35,436)

CASH AND CASH EQUIVALENTS, beginning of period62,876 64,772

CASH AND CASH EQUIVALENTS, end of period$32,187 $29,336

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

Three Months Ended March 31,

20142013

Amount% of RevenueAmount% of Revenue

Revenues:

Freight$287,73476.5%$281,10475.0%

Non-freight88,545 23.5%93,846 25.0%

Total revenues$376,279 100.0%$374,950 100.0%

Operating Expense Comparison:

Natural Classification

Labor and benefits$116,75130.9%$109,30629.2%

Equipment rents19,0605.1%18,7085.0%

Purchased services27,9077.4%28,9967.7%

Depreciation and amortization37,64110.0%34,2239.1%

Diesel fuel used in operations41,93511.1%39,18510.5%

Casualties and insurance9,6332.6%7,9512.1%

Materials16,1194.3%19,3295.2%

Trackage rights12,2663.3%10,8572.9%

Net gain on sale of assets(838)(0.2)%(1,707)(0.5)%

Other expenses20,9305.6%19,1355.1%

RailAmerica integration costs— —%12,767 3.4%

Total operating expenses$301,404 80.1%$298,750 79.7%

Functional Classification

Transportation$119,03531.6%$110,32629.4%

Maintenance of ways and structures41,40811.0%38,31610.2%

Maintenance of equipment43,42211.5%40,26310.8%

General and administrative56,46815.1%56,76015.2%

Construction costs4,2681.1%7,8022.1%

RailAmerica integration costs——%12,7673.4%

Net gain on sale of assets(838)(0.2)%(1,707)(0.5)%

Depreciation and amortization37,641 10.0%34,223 9.1%

Total operating expenses$301,404 80.1%$298,750 79.7%

GENESEE & WYOMING INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(dollars in thousands)

(unaudited)

Three Months Ended March 31, 2014

North American & European Operations

Australian OperationsTotal Operations

Amount% of RevenueAmount% of RevenueAmount% of Revenue

Revenues:

Freight$228,98776.3%$58,74777.0%$287,73476.5%

Non-freight71,000 23.7%17,545 23.0%88,545 23.5%

Total revenues299,987 100.0%76,292 100.0%376,279 100.0%

Operating expenses:

Labor and benefits100,54233.5%16,20921.3%116,75130.9%

Equipment rents16,7725.6%2,2883.0%19,0605.1%

Purchased services15,7255.1%12,18216.0%27,9077.4%

Depreciation and amortization30,57910.2%7,0629.3%37,64110.0%

Diesel fuel used in operations34,73411.6%7,2019.4%41,93511.1%

Casualties and insurance7,1322.4%2,5013.3%9,6332.6%

Materials15,5115.1%6080.8%16,1194.3%

Trackage rights6,7572.3%5,5097.2%12,2663.3%

Net gain on sale of assets(720)(0.2)%(118)(0.2)%(838)(0.2)%

Other expenses17,2655.8%3,6654.8%20,9305.6%

RailAmerica integration costs— —%— —%— —

%

Total operating expenses244,297 81.4%57,107 74.9%301,404 80.1%

Income from operations$55,690 $19,185 $74,875

Carloads409,53757,842467,379

Net expenditures for additions to property & equipment$53,985$4,833$58,818

Three Months Ended March 31, 2013

North American & European Operations

Australian OperationsTotal Operations

Amount% of RevenueAmount% of RevenueAmount% of Revenue

Revenues:

Freight$220,84673.8%$60,25879.4%$281,10475.0%

Non-freight78,249 26.2%15,597 20.6%93,846 25.0%

Total revenues299,095 100.0%75,855 100.0%374,950 100.0%

Operating expenses:

Labor and benefits92,69730.9%16,60921.9%109,30629.2%

Equipment rents16,0935.4%2,6153.4%18,7085.0%

Purchased services16,7065.6%12,29016.3%28,9967.7%

Depreciation and amortization27,4119.2%6,8129.0%34,2239.1%

Diesel fuel used in operations31,60810.6%7,57710.0%39,18510.5%

Casualties and insurance5,8011.9%2,1502.8%7,9512.1%

Materials18,7696.3%5600.7%19,3295.2%

Trackage rights6,7182.2%4,1395.5%10,8572.9%

Net gain on sale of assets(1,707)(0.6)%——%(1,707)(0.5)%

Other expenses17,4385.9%1,6972.2%19,1355.1%

RailAmerica integration costs12,767 4.3%— —%12,767 3.4%

Total operating expenses244,301 81.7%54,449 71.8%298,750 79.7%

Income from operations$54,794 $21,406 $76,200

Carloads394,97155,333450,304

Net expenditures for additions to property & equipment$16,218$18,842$35,060

GENESEE & WYOMING INC. AND SUBSIDIARIES

RAILROAD FREIGHT REVENUES, CARLOADS AND AVERAGE REVENUES PER CARLOAD

COMPARISON BY COMMODITY GROUP

(dollars in thousands, except average revenues per carload)

(unaudited)

Three Months Ended March 31, 2014North American & European OperationsAustralian OperationsTotal Operations

Commodity Group

Freight Revenues

Carloads

Average Revenues Per Carload

Freight Revenues

Carloads

Average Revenues Per Carload

Freight Revenues

Carloads

Average Revenues Per Carload

Agricultural Products$25,90248,055$539$9,76516,979$575$35,66765,034$548

Chemicals & Plastics32,74940,272813———32,74940,272813

Coal & Coke31,25086,303362———31,25086,303362

Metallic Ores *4,4945,57980625,17913,2951,89429,67318,8741,572

Metals29,58241,329716———29,58241,329716

Pulp & Paper27,66242,211655———27,66242,211655

Minerals & Stone19,52036,2405392,14012,79716721,66049,037

442

Intermodal **10287911621,37114,7121,45321,47315,5911,377

Lumber & Forest Products19,17932,547589———19,17932,547589

Petroleum Products16,29427,776587292594,94916,58627,835596

Food or Kindred Products8,06113,847582———8,06113,847582

Autos & Auto Parts5,4587,736706———5,4587,736706

Waste4,3339,446459———4,3339,446459

Other4,401 17,317 254— — —4,401 17,317 254

Totals$228,987 409,537 $559$58,747 57,842 $1,016$287,734 467,379 $616

Three Months Ended March 31, 2013North American & European OperationsAustralian OperationsTotal Operations

Commodity Group

Freight Revenues

Carloads

Average Revenues Per Carload

Freight Revenues

Carloads

Average Revenues Per Carload

Freight Revenues

Carloads

Average Revenues Per Carload

Agricultural Products$23,85647,769$499$11,17015,672$713$35,02663,441$552

Chemicals & Plastics32,08040,908784———32,08040,908784

Coal & Coke26,49275,560351———26,49275,560351

Metallic Ores *4,0385,07479623,2419,7382,38727,27914,8121,842

Metals29,24641,623703———29,24641,623703

Pulp & Paper26,46140,778649———26,46140,778649

Minerals & Stone19,22834,7395533,09115,48620022,31950,225444

Intermodal **1921,80110722,25314,3751,54822,44516,1761,388

Lumber & Forest Products19,74633,625587———19,74633,625587

Petroleum Products16,66127,151614503628,11317,16427,213631

Food or Kindred Products7,82513,594576———7,82513,594576

Autos & Auto Parts5,8547,956736———5,8547,956736

Waste5,0159,015556———5,0159,015556

Other4,152 15,378 270— — —4,152 15,378 270

Totals$220,846 394,971 $559$60,258 55,333 $1,089$281,104 450,304 $624

* Includes carload and intermodal units

**Represents intermodal units

Non-GAAP Financial Measures

This earnings release contains references to adjusted net income, adjusted diluted earnings per common share, adjusted income from operations, adjusted operating ratio and free cash flow, which are “non-GAAP financial measures” as this term is defined in Item 10(e) of Regulation S-K under the Securities Act of 1933 and the Securities Exchange Act of 1934 and Regulation G under the Securities Exchange Act of 1934. In accordance with these rules, G&W has reconciled these non-GAAP financial measures to their most directly comparable U.S. GAAP measures.

Management views these non-GAAP financial measures as important measures of G&W’s operating performance or, in the case of free cash flow, an important financial measure of how well G&W is managing its assets and a useful indicator of cash flow that may be available for discretionary use by G&W. Key limitations of the free cash flow measure include the assumptions that G&W will be able to refinance its existing debt when it matures and meet other cash flow obligations from financing activities, such as principal payments on debt.

These non-GAAP financial measures are not intended to represent, and should not be considered more meaningful than, or as an alternative to, their most directly comparable GAAP measures. These non-GAAP financial measures may be different from similarly-titled non-GAAP financial measures used by other companies.

The following tables set forth reconciliations of each of these non-GAAP financial measures to their most directly comparable GAAP measure (in millions, except percentages and per share amounts).

Reconciliations of Non-GAAP Financial Measures

Adjusted Net Income and Adjusted Diluted Earnings Per Common Share

Three Months Ended March 31, 2014Net IncomeDiluted Shares

Diluted Earnings/(Loss) Per Common Share Impact

As reported$39.656.9$0.70

Add back certain items, net of tax:

Business development and related costs0.70.01

Net gain on sale of assets(0.5) (0.01)

As adjusted$39.8 56.9 $0.70

Three Months Ended March 31, 2013Net IncomeDiluted Shares

Diluted Earnings/(Loss) Per Common Share Impact

As reported$82.756.5$1.46

Add back certain items, net of tax:

Retroactive 2012 short line tax credit(41.0)(0.72)

2013 short line tax credit(4.0)(0.07)

RailAmerica integration costs8.00.14

Refinancing and debt prepayment related expenses0.40.01

Net gain on sale of assets(1.3) (0.02)

As adjusted$44.9 56.5 $0.80

Adjusted Income from Operations and Adjusted Operating Ratio