UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File No. 0-20847

GENESEE & WYOMING INC.

(Exact name of registrant as specified in its charter)

(203) 629-3722

(Telephone No.)

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

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

Class A Common Stock, $0.01 par value

(Title of Class)

      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.    YES þ         NO o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of the Regulations S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this form 10-K or any amendment to this Form 10-K.    þ

      Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)    Yes þ         No o

      Aggregate market value of Class A Common Stock held by non-affiliates based on closing price on June 30, 2004, as reported by the New York Stock Exchange on the last business day of Registrant’s most recently completed second fiscal quarter: $222,658,016. Shares of Class A Common Stock held by each executive officer, director and holder of 5% or more of the outstanding Class A Common Stock have been excluded in that such persons may be deemed to be affiliates. The determination of affiliate status is not necessarily a conclusive determinant for other purposes.

      Shares of common stock outstanding as of the close of business on March 1, 2005:

      Documents incorporated by reference and the Part of the Form 10-K into which they are incorporated are listed hereunder.

      Unless the context otherwise requires, when used in this Annual Report on Form 10-K, the terms “Genesee & Wyoming,” “we,” “our,” and “us” refer to Genesee & Wyoming Inc. and its subsidiaries and affiliates, and when we use the term ARG we are referring to the Australian Railroad Group Pty Ltd and its subsidiaries. ARG is our 50%-owned affiliate based in Perth, Western Australia. All references to currency amounts included in this Annual Report on Form 10-K, including the financial statements, are in U.S. dollars unless specifically noted otherwise.

      Information set forth in Item 1 as well as in Item 2 should be read in conjunction with Management’s Discussion and Analysis of Financial Conditions and Results of Operations in Item 7, including the discussion of risk factors and the forward-looking statements.

      We make available free of charge, on or through our Internet web site, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after those materials are electronically filed with or furnished to the Securities and Exchange Commission (SEC). Our Internet address is https:www.gwrr.com. Our website also contains hyperlinks to charters for each of the committees of our Board of Directors, our corporate governance guidelines and our Code of Ethics.

PART I

OVERVIEW

      We are a leading owner and operator of short line and regional freight railroads in the United States, Canada, Mexico, Australia and Bolivia. In addition, we provide freight car switching and rail-related services to industrial companies in the United States. Genesee & Wyoming was founded in 1899 as a 14-mile rail line serving a single salt mine in upstate New York. Since 1977, when Mortimer B. Fuller, III purchased a controlling interest in Genesee & Wyoming Railroad Company and became its Chief Executive Officer, we have completed 25 acquisitions and now operate over 8,200 miles of owned, jointly owned or leased track, with access to more than 3,000 additional miles under track access arrangements. Based on track miles, we believe that:

      We intend to increase our earnings and cash flow through the execution of our disciplined acquisition strategy for both domestic and international opportunities. When acquiring railroads in our existing regions, we target contiguous or nearby rail properties where our local management teams are best able to identify opportunities to reduce operating costs and increase equipment utilization. In new regions, we target rail properties that have adequate size to establish a presence in the region, provide a platform for growth in the region and attract qualified management. To help ensure accountability for the projected financial results of our potential acquisitions, we typically include the regional manager who would be operating the rail property after the acquisition as part of our due diligence team.

      We derive our acquisition, investment and long-term lease opportunities from the following four sources:

      From 1977 to 1997, we acquired and integrated ten acquisitions in the United States. From 1997 to 2000, we acquired or made investments in seven railroads internationally, including in South Australia (1997), Canada (1997), Mexico (1999), Western Australia (2000) and Bolivia (2000). Since 2001, we have made six acquisitions in the United States and Canada, including South Buffalo Railway Company (South Buffalo) (2001), Emons (2002), Utah Railway Company (2002), a rail line leased from BNSF in Oregon (2002), Arkansas Louisiana & Mississippi Railroad Company, Chattahoochee Industrial Railroad and Fordyce and Princeton R.R. Co., acquired from GP (December 2003), and most recently, our new subsidiary, Tazewell and Peoria Railroad, Inc., commenced operations under a 20-year agreement to lease the assets of the Peoria and Pekin Union Railway (PPU) (November 2004).

      We believe that acquisition opportunities in the United States exist among the over 500 short line and regional railroads operating approximately 42,000 miles of track, as well as additional lines expected to be sold or leased by Class I railroads. Internationally, we believe that there are additional acquisition candidates in Australia, Canada, South America and other markets. As a result, we believe that we are well-positioned to capitalize on additional acquisition opportunities.

      Our strategy of building regional rail systems through acquisitions is best illustrated by our original U.S. region, the New York-Pennsylvania region, and our Australian operations, ARG.

OPERATING STRATEGY

      We intend to increase our earnings and cash flow through the execution of our operating strategy for both our domestic and international operations. Our railroads operate under strong local management, with centralized administrative support and oversight. Our operations are conducted in nine regions. These regions are, in the United States: Illinois; New York-Pennsylvania; Oregon; Rail Link (which includes industrial switching and port operations in various geographic locations); and Utah, and outside the United States: Australia (50% owned); Bolivia (22.9% owned); Canada; and Mexico. In all of our regions, we seek to encourage the entrepreneurial drive, local knowledge and customer service that we view as prerequisites for us

to achieve our financial goals. At the regional level, our operating strategy consists of the following four principal elements:

FINANCIAL STRATEGY

      We require that each potential acquisition strictly adhere to our return on capital targets. A significant portion of our management performance bonuses, at both the corporate and regional levels, is tied by formula to achieving these financial targets. Starting with bonuses for 2002 performance, our board of directors adopted a new incentive compensation program, the Genesee Value Added Bonus Program, which is designed to create objective standards against which performance can be measured to determine whether we are operating in a manner that generates increased stockholder value. By focusing our corporate and regional management teams on improving our return on invested capital, we intend to continue to increase earnings and cash flow.

INDUSTRY

      According to the Association of American Railroads (AAR), there are 549 railroads in the United States operating over 140,939 miles of track. The AAR segments U.S. railroads into one of three categories based on the amount of revenues and track miles. Class I railroads, those with over $277.7 million in revenues, represent over 90% of total rail revenues. Regional and local railroads operate approximately 42,000 miles of track in the United States. The primary function of these smaller railroads is to provide feeder traffic to the Class I carriers. In terms of revenues, regional and local railroads combined account for approximately 8% of total rail revenues.

      The following table shows the breakdown of railroads by classification.

Source: Association of American Railroads, Railroad Facts, 2004 Edition.

      The railroad industry in the United States has undergone significant change since the passage of the Staggers Rail Act of 1980, which deregulated the pricing and types of services provided by railroads. Following the passage of the Staggers Act, Class I railroads in the United States took steps to improve profitability and recapture market share. In furtherance of that goal, Class I railroads focused their management and capital resources on their long-haul core systems, and some of them sold branch lines to smaller and more cost-efficient rail operators willing to commit the resources necessary to meet the needs of the shippers located on these lines. Divestiture of branch lines enabled Class I carriers to minimize incremental capital expenditures, concentrate traffic density, improve operating efficiency, and avoid traffic losses associated with rail line abandonment.

      Although the acquisition market is competitive, we believe that we will continue to find opportunities to acquire rail properties in the United States and Canada from Class I railroads, industrial companies, and independent local and regional railroads. We also believe that we will continue to find additional acquisition opportunities in international markets.

MANAGEMENT

      Our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer have responsibility for overall strategic and financial planning, including acquisitions. The Chief Executive Officer is responsible for our global operations, including our equity investments in Australia and South America, while the Chief Operating Officer manages operations in North America. We believe that through our decentralized management structure, we have developed a culture that encourages employees to take initiative and responsibility, which is rewarded through performance-based bonus programs.

NORTH AMERICAN OPERATIONS

      Our North American operations served over 910 customers in 2004 compared with approximately 850 customers in 2003. The ten largest North American customers accounted for approximately 27% of our North American revenues in 2004, 2003 and 2002. In 2004, our largest North American customer was a company in the paper and forest products industry, which accounted for approximately 8% of our North American revenues. In 2003 and 2002, our largest North American customer was a coal-fired electricity generating plant, which accounted for approximately 5% of our North American revenues. We typically handle freight pursuant to transportation contracts among us, our connecting carriers and the shipper. These contracts are in accordance with industry norms and vary in duration, with terms of up to 20 years. These contracts establish price but do not typically obligate the shipper to move any particular volume.

      Our North American railroads transport a wide variety of commodities. Some of our railroads have a diversified commodity mix while others transport one or two principal commodities. In 2004, coal, coke and ores, and pulp and paper products were the two largest commodity groups, constituting 19.9% and 17.9%, respectively, of total North American freight revenues, and 30.2% and 14.9%, respectively, of total North American carloads. The following table compares North American freight revenues, carloads and average freight revenues per carload for the years ended December 31, 2004 and 2003:

North American Freight Revenues and Carloads Comparison by Commodity Group

Years Ended December 31, 2004 and 2003

      Coal, coke and ores consists primarily of shipments of coal to power plants and industrial customers.

      Pulp and paper consists primarily of inbound shipments of pulp and outbound shipments of kraft and finished papers and container board.

      Lumber and forest products consists primarily of finished lumber, plywood and particleboard used in construction and furniture manufacturing, and wood chips and pulpwood used in paper manufacturing.

      Petroleum products consists primarily of fuel oil and crude oil.

      Metals consists primarily of scrap metal, finished steel products and coated pipe.

      Minerals and stone consists primarily of cement, gravel and stone used in construction, and salt used in highway ice control.

      Chemicals-plastics consists primarily of various chemicals used in manufacturing, particularly in the paper industry.

      Farm and food products consists primarily of sugar, molasses, rice and other grains and fertilizer.

      Autos and auto parts consists primarily of finished automobiles and stamped auto parts.

      Intermodal consists of various commodities shipped in trailers or containers on flat cars.

      The primary components of our North American non-freight revenues are railcar switching revenues, car hire and rental services, demurrage and storage, car repair services, management fees and other operating income. Railcar switching revenues primarily consist of intra-plant switching revenues, which are revenues earned by providing services dedicated to the movement of railcars within industrial plants, and intra-terminal switching revenues, which are revenues earned for the movement of customer railcars from one track to another track on the same railroad. Car hire and rental revenues primarily include charges paid by other railroads for use of our railcars for moving freight. Demurrage and storage are charges to customers for holding or storing railcars. Car repair services are charges for repairing freight cars owned by others, either under contract or in accordance with AAR rules. Management fees are charges for managing rail-related facilities. Other operating income primarily consists of the following: trackage rights fees, which are charges to other railroads for running over our railroads; terminal services, which are freight transfer and trucking services; and scrap metal sales. In 2004 and 2003, non-freight revenues constituted 25.5% and 25.4%, respectively, of our total North American operating revenues with railcar switching representing 51.0% and 53.6%, respectively, of total North American non-freight revenues. The following table compares North American non-freight revenues for the years ended December 31, 2004 and 2003:

North American

Non-Freight Revenues Comparison

Years Ended December 31, 2004 and 2003

      The following table compares total North American revenues by geographic area for the years ended December 31, 2004 and 2003:

North American

Revenues Comparison by Geographic Area

Years Ended December 31, 2004 and 2003

      For additional financial information with respect to each of our geographic areas, see Note 17 to our Consolidated Financial Statements set forth in Part IV, Item 15 of this Annual Report on Form 10-K.

      Typically, we experience relatively lower revenues in the first and fourth quarters of each year as the holiday season and colder weather tend to reduce shipments of certain products such as construction materials. In addition, due to adverse winter weather conditions, we also tend to incur higher operating costs during the first and fourth quarters. We typically initiate capital projects in the second and third quarters when weather conditions are more favorable. However, certain of our traffic, such as coal for electricity generating facilities and salt for road de-icing, often benefits from particularly cold weather.

      As of December 31, 2004, our North American railroads and industrial switching locations had 2,045 full-time employees. Of this total, 912 railroad employees are members of national labor organizations. Our North American railroads have 33 contracts with these national labor organizations which have expiration dates ranging to 2009, and 6 of these contracts are currently in negotiations. The Railway Labor Act (RLA) governs the labor relations of employers and employees engaged in the railroad industry. Comprehensive provisions are set forth in the RLA establishing the right of railroad employees to organize and bargain collectively along craft or class lines and imposing a duty upon carriers and their employees to exert every reasonable effort to make and maintain collective bargaining agreements. The RLA also contains detailed procedures that must be exhausted before a lawful work stoppage may occur. We have also entered into employee bargaining agreements with an additional 67 employees who represent themselves, which have renewal dates ranging to 2007. We believe that our relationship with our employees is good.

AUSTRALIA OPERATIONS (Equity Accounting)

      ARG, which is 50% owned by Genesee & Wyoming and 50% owned by Wesfarmers, is reflected in our statement of income using the equity method of accounting. In the years ended December 31, 2004 and 2003, ARG contributed $14.2 million, or 37.8%, and $10.4 million, or 36.1%, respectively, of our total net income.

      ARG is composed of three principal subsidiaries, Australia Southern Railroad Pty Ltd (ASR), Australia Western Railroad Pty Ltd (AWR), and WestNet Rail Pty Ltd (WestNet). Both AWR and ASR operate locomotives and rail cars to provide rail freight service to customers in the states of Western Australia and South Australia, respectively. WestNet is the owner and maintainer of most of the standard gauge and narrow gauge track infrastructure in Western Australia and charges track access fees to rail operators that use its track infrastructure, including AWR. ARG is also accredited to operate in all the mainland states of Australia, thereby providing ARG with the ability to provide rail freight service across the Australian continent. In November 2003, ARG added a new customer in the State of New South Wales.

      Under the terms of the ARG shareholders’ agreement, neither shareholder has any capital commitment obligation, any obligation to fund ARG’s operations or any obligation to purchase the shares of the other shareholder, but there are transfer restrictions that limit the ability of a shareholder to sell their shares in ARG to a third party. ARG finances its operations through internally generated cash and a stand-alone Australian dollar debt which has no recourse to either shareholder. At this time, there are no plans for ARG to pay cash dividends, although in July 2004 ARG did repay the remaining outstanding balance on subordinated notes to the shareholders of $5.4 million each. According to the terms of the shareholders’ agreement, each shareholder has the right to appoint certain officers of ARG and half of the number of directors of ARG. Further, certain material and significant decisions require the unanimous consent of the board of ARG or both shareholders.

      ARG currently serves over 75 customers. A significant portion of ARG’s revenues is attributable to customers operating in the grain, ores, minerals and alumina industries. ARG’s ten largest customers accounted for approximately 74%, 70% and 69% of its revenues for the years ended December 31, 2004, 2003

and 2002, respectively. ARG’s largest customer, AWB Limited (a major marketer and exporter of Australian wheat), accounted for 25%, 20% and 22% of its revenues for the years ended December 31, 2004, 2003, and 2002. ARG typically ships freight under transportation contracts which vary from customer to customer including terms which range from one to up to fifteen years, subject to certain review and extension provisions.

      The following table provides ARG’s freight revenues, carloads and average freight revenues per carload for the years ended December 31, 2004 and 2003:

Australian Railroad Group

Freight Revenues and Carloads Comparison by Commodity Group

Years ended December 31, 2004 and 2003

      Grain consists primarily of wheat, barley, lupins, canola and oats, all of which are destined for export markets.

      Other Ores and Minerals consists primarily of shipments of coal to power plants and refineries, nickel and minerals sands destined for export markets, and lime used in the resources industry.

      Iron Ores consists primarily of lump and fine ores destined for export markets and used in the domestic production of steel.

      Alumina is a refined product destined for export markets.

      Bauxite is a raw material used in the production of alumina.

      Hook & Pull service consists of various commodities shipped in containers on flat cars.

      Gypsum is a raw material destined for export markets and used in the domestic production of plasterboard.

      Other commodities consist primarily of caustic chemicals used in the production of alumina, various commodities in containers on flat cars and fuel.

      ARG’s non-freight revenues consist of rail services such as track access fees charged to other railroads, services related to construction and operation of the Alice Springs to Darwin rail line, including operations

management, diesel fuel sales to other railroads and other ancillary revenues. The following table compares ARG’s non-freight revenues for the years ended December 31, 2004 and 2003:

Australian Railroad Group

Non-Freight Revenues Comparison

Years Ended December 31, 2004 and 2003

      As of December 31, 2004, ARG had 1,048 full-time employees. Of this total, approximately 65% are employed under collective bargaining agreements. In each of Western Australia and New South Wales, ARG has a collective enterprise bargaining agreement covering the majority of employees. During 2004, ARG completed a re-negotiation of the Western Australia and New South Wales collective enterprise bargaining agreements, each of which has a term of approximately three years. In South Australia, ARG has one collective bargaining agreement that expired in September 2004. This agreement is currently being renegotiated and is expected to be completed in April 2005. ARG believes that its relationship with its employees is good.

NORTH AMERICAN SAFETY

      Our safety program involves all employees and focuses on the prevention of accidents and injuries. The Senior Vice President of each region is accountable for the results of the program. Each region has an officer responsible for day-to-day program administration. We maintain a corporate-wide safety program facilitated by the Vice President Safety & Environment. A Compliance Officer and a Director of Risk Management report to the Vice President Safety & Environment. Operating personnel are trained and certified in train operations, the transportation of hazardous materials, safety and operating rules, and governmental rules and regulations.

NORTH AMERICAN INSURANCE

      We maintain insurance coverage for losses arising from personal injury and for property damage in the event of derailments or other accidents or occurrences. The liability policies have self-insured retentions ranging from $200,000 to $500,000 per occurrence. In addition, we maintain excess liability policies which provide supplemental coverage for losses in excess of primary policy limits. With respect to the transportation of hazardous commodities, our liability policy covers sudden releases of hazardous materials, including expenses related to evacuation. Personal injuries associated with grade crossing accidents are also covered under our liability policies. We maintain property damage coverage, subject to a standard pollution sub-limit and self-insured retentions ranging from $100,000 to $500,000.

      Employees of our United States railroads are covered by the Federal Employers’ Liability Act (FELA), a fault-based system under which injuries and deaths of railroad employees are settled by negotiation or litigation. FELA-related claims are covered under our liability insurance policies. Employees of our industrial switching business are covered under workers’ compensation policies.

      We believe our insurance coverage is adequate in light of our experience and the experience of the rail industry.

NORTH AMERICAN COMPETITION

      Each of our railroads is typically the only rail carrier directly serving our customers; however, our railroads compete directly with other modes of transportation, principally motor carriers, and, on some routes, ship, barge and pipeline operators. Competition is based primarily upon the rate charged and the transit time required, as well as the quality and reliability of the service provided. Most of the freight we handle is transferred either to or from other railroads prior to reaching its final destination. As a result, to the extent other rail carriers are involved in transporting a shipment, we cannot necessarily control the cost and quality of such service. To the extent that highway competition is involved, the effectiveness of that competition is affected by government policy with respect to fuel and other taxes, highway tolls, and permissible truck sizes and weights.

      To a lesser degree, we also face competition with similar products made in other areas, a kind of competition commonly known as “geographic competition.” For example, a paper producer may choose to increase or decrease production at a specific plant served by one of our railroads depending on the relative competitiveness of that plant versus paper plants in other locations. In some instances, we face “product competition,” where commodities we transport are exposed to competition from substitutes. For example, our fuel oil traffic in Mexico is used to generate electricity for a power grid where competition from natural gas generation is substantial.

      In acquiring rail properties, we generally compete with other short line and regional railroad operators as well as private equity firms operating in conjunction with short line rail operators. Competition for rail properties is based primarily upon price and the seller’s assessment of the buyer’s railroad operating expertise and financing capability. We believe our established reputation as a successful acquiror and operator of short line rail properties, combined with our managerial and financial resources, effectively positions us to take advantage of acquisition opportunities.

REGULATION

      Our U.S. railroads are subject to regulation by:

      The STB is the successor to certain regulatory functions previously administered by the Interstate Commerce Commission (ICC). Established by the ICC Termination Act of 1995, the STB has jurisdiction over, among other things, freight rates (where there is no effective competition), extension or abandonment of rail lines, the acquisition of rail lines, and consolidation, merger or acquisition of control of rail common carriers. In limited circumstances, the STB may condition its approval of an acquisition upon the acquiror of a railroad agreeing to provide severance benefits to certain subsequently terminated employees. The Federal Railroad Administration has jurisdiction over safety.

      St. Lawrence & Atlantic Railroad (Quebec) is subject to the jurisdiction of the federal government of Canada while Quebec Gatineau Railway and Huron Central Railway are subject to the jurisdiction of provincial governments of Quebec and Ontario, respectively.

      Federally regulated railways fall under the jurisdiction of the Canada Transportation Agency (CTA) and Transport Canada (TC) and are subject to the provisions of the Railway Safety Act. The CTA has power to regulate construction and operation of railways, financial transactions of railway companies, all aspects of rates, tariffs and services, and the transferring and discontinuing of the operation of railway lines. TC

administers the Railway Safety Act which ensures that federally regulated railway companies abide by all regulations with respect to engineering standards governing the construction or alteration of railway works and the operation and maintenance standards of railway works and equipment.

      Provincially regulated railways operate within the boundary of one province and hold a Certificate of Fitness delivered by a provincial authority. In the Province of Quebec, the Fitness Certificate is delivered by the Transport Commission of Quebec, while in Ontario, under the Short Line Railways Act, a license has to be obtained from the Registrar of Short Line Railways. Construction, operation and discontinuance of operation are regulated, as well as railway services.

      In Australia, regulation of rail safety is generally governed by State legislation and administered by State regulatory agencies. Regulation of access is governed by overriding Federal legislation with State based regimes operating in compliance with that legislation. ARG’s assets are therefore subject to the regulatory regimes governing safety in each of the states in which it operates. In addition, with respect to access to rail infrastructure, ARG’s Australian assets are subject to state-based access regimes and Part IIIA of the Trade Practices Act 1974.

      ARG’s interstate access includes the standard gauge tracks linking Wodonga (in Victoria), Melbourne (in Victoria), Adelaide (in South Australia), Broken Hill (in New South Wales), Tarcoola (in South Australia) and Kalgoorlie (in Western Australia). The interstate network is part of the larger standard gauge network linking all capital cities in Australia from Brisbane to Perth, as well as Broken Hill in New South Wales and Alice Springs in the Northern Territory. Those parts of this larger standard gauge network which are not covered by the interstate network are governed by the various State access regimes and the national access regime.

      In Mexico, the Secretary of Communications and Transport (SCT) has jurisdiction over, among other things:

      A Mexican railroad is also subject to the Mexican Foreign Investments Law and the Federal Law of Economic Competition. The Foreign Investments Law governs the ownership of Mexican Railroads, such as our Mexican railroad, by foreign entities while the Law of Economic Competition is an antitrust statute.

ENVIRONMENTAL MATTERS

      Our operations are subject to various federal, state, provincial and local laws and regulations relating to the protection of the environment. In the United States, these environmental laws and regulations, which are implemented principally by the Environmental Protection Agency and comparable state agencies, govern the management of hazardous wastes, the discharge of pollutants into the air and into surface and underground waters, and the manufacture and disposal of certain substances. Similarly, in Canada, these functions are administered at the federal level by Environment Canada and the Department of Transport and comparable agencies at the provincial level. In Mexico, these functions are administered at the federal level by the Secretary of Environment, Natural Resources and Fisheries and the Attorney General for Environmental Protection, and by comparable agencies at the state level. In Australia, these functions are administered

primarily by the Department of Transport at the federal level and by environmental protection agencies at the state level. There are no material environmental claims currently pending or, to our knowledge, threatened against us or any of our railroads. In addition, we believe that the operations of our railroads are in material compliance with current laws and regulations. We estimate that any expenses incurred in maintaining compliance with current laws and regulations will not have a material effect on our earnings or capital expenditures.

      In Mexico, our wholly-owned subsidiary, Compañía de Ferrocarriles Chiapas-Mayab, S.A. de C.V., was awarded a 30-year concession to operate certain railways owned by the government-owned rail company. Under the terms of the concession agreement, the federal railway company remains responsible for remediation of all contamination that occurred prior to the execution date of the concession agreement.

      The Commonwealth of Australia has acknowledged that certain portions of the leasehold and freehold land acquired under the Sale and Purchase Agreement by ASR contains contamination arising from activities associated with previous operators. The Commonwealth has carried out certain remediation work to meet existing South Australian environmental standards which reflect the purpose for which the land was used at the date of the Sale and Purchase Agreement.

RISK FACTORS

      Our operations and financial condition are subject to certain risks that could cause actual operating and financial results to differ materially from those expressed or forecast in our forward-looking statements. For a complete description of our general risk factors including risk factors of foreign operations, see Item 7 Management’s Discussion and Analysis elsewhere in this Annual Report on Form 10-K.

FORWARD-LOOKING STATEMENTS

      The information contained in this Annual Report on Form 10-K, including Management’s Discussion and Analysis Item 7 contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, regarding future events and future performance of Genesee & Wyoming Inc. Words such as “anticipates,” “intends,” “plans,” “believes,” “seeks,” “expects”, “estimates,” 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. Actual results may differ materially from those expressed or forecast in these forward-looking statements. These risks and uncertainties include those noted under the caption “Risk Factors” in Item 7, as well as those noted in documents that we file from time to time with the Securities and Exchange Commission, which contain additional important factors that could cause actual results to differ from current expectations and from the forward-looking statements contained herein.

      Genesee & Wyoming, through our subsidiaries and unconsolidated affiliates, currently has interests in thirty-three railroads of which twenty-five are in the United States, three are in Canada, three are in Australia, one is in Mexico and one is in Bolivia. These rail properties typically consist of the track and the underlying land. Real estate adjacent to the railroad rights-of-way is generally retained by the seller, and our holdings of such property are not material. Similarly, the seller typically retains mineral rights and rights to grant fiber optic and other easements in the properties acquired by our railroads. Several of our railroads are operated under leases or operating licenses in which we do not assume ownership of the track and the underlying land.

      Our railroads operate over approximately 8,200 miles of track that is owned, jointly-owned or leased by us or our affiliates. We or our affiliates’ railroads also operate, through various trackage rights agreements, over more than 3,000 miles of track that is owned or leased by others. The track miles listed below exclude sidings and yard tracks consisting of 444 miles in the U.S., 85 miles in Canada and 76 miles in Mexico.

      The following table sets forth certain information as of December 31, 2004 with respect to our railroads:

EQUIPMENT

      As of December 31, 2004, rolling stock of our North American operations consisted of 365 locomotives of which 251 were owned and 114 were leased, and 9,105 freight cars, of which 728 were owned and 8,377 were leased.

      On March 31, 2004, Messrs. Chambers and Wheeler filed a complaint against Genesee & Wyoming Inc. in the Chancery Court of Delaware. The complaint relates to the sale by the plaintiffs in April of 1999 to us of their ownership interests in certain of our Canadian operations. Under the terms of the purchase agreement, among other things, the plaintiffs were granted options to purchase up to 270,000 shares of our Class A Common Stock at an exercise price of $2.56 per share if certain of our Canadian operations had achieved certain financial performance targets in any annual period between 1999 and 2003. The complaint alleges that these financial performance targets have been met, and the plaintiffs are seeking, among other things, a declaratory judgment that the options granted under the purchase agreement have vested and are exercisable. On January 5, 2005, after conducting discovery, Plaintiffs filed a motion for summary judgment. We have determined that the Canadian operations at issue failed to achieve these financial performance targets in any of the required years. Consequently, we believe the claim is without merit, and we intend to vigorously defend this lawsuit.

      In addition, we are a defendant in certain lawsuits resulting from our operations. Management believes that we have adequate provisions in the financial statements for any expected liabilities which may result from disposition of such lawsuits. While it is possible that some of the foregoing matters may be resolved at a cost

greater than that provided for, it is the opinion of management that the ultimate liability, if any, will not be material to our operating results, financial condition or liquidity.

PART II

      The tables below show the range of high and low actual trade prices for our Class A Common Stock during each quarterly period of 2004 and 2003.

      Our Class B Common Stock is not publicly traded.

      Dividends. We did not pay cash dividends in 2004 and 2003. We do not intend to pay cash dividends for the foreseeable future and intends to retain earnings, if any, for future operation and expansion of our business. Any determination to pay dividends in the future will be at the discretion of our Board of Directors and will be dependent upon our results of operations, financial condition, contractual restrictions and other factors deemed relevant by the Board of Directors.

      Number of Holders. On March 2, 2005 there were 170 Class A Common Stock record holders and 10 Class B Common Stock record holders.

      See Item 12 below for the equity compensation plan table required by this Item 5.

      We sold or issued shares of our Common Stock during the past three years in private transactions that were not registered with the Securities and Exchange Commission as follows:

      These shares were sold or issued in transactions that were exempt from registration requirements because they were private placements under Section 4(2) of the Securities Act of 1933, as amended. All of the shares issued in 2004, 2003 and 2002 were issued to various directors, officers and other executives of Genesee & Wyoming pursuant to compensation plans. The consideration we received for these shares was determined to be at least equal to the market value of the shares at the time of the transactions.

      On November 2, 2004, we announced that our Board has authorized the repurchase of up to 1,000,000 shares of our common stock. We intend to use the repurchased stock to offset dilution caused by the issuance of shares in connection with employee and director stock plans that may occur over time. Purchases may be made in the open market or in privately negotiated transactions from time to time at management’s discretion.

      The following selected consolidated income statement data and selected consolidated balance sheet data of Genesee & Wyoming as of and for the years ended December 31, 2004, 2003, 2002, 2001, and 2000, have been derived from our consolidated financial statements. All of the information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. See also Item 7.

      The following discussion should be read in conjunction with the Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K.

General

      We are a leading owner and operator of short line and regional freight railroads in the United States, Canada, Mexico, Australia and Bolivia. We also provide freight car switching and related services to United States industrial companies with railroad facilities within their complexes. We generate revenues primarily from the movement of freight over track owned or operated by our railroads. We also generate non-freight revenues primarily by providing rail car switching, car hire associated with our railcars and other ancillary rail services.

      Our operating expenses include wages and benefits, equipment rents (including car hire associated with other railroads’ railcars), purchased services, depreciation and amortization, diesel fuel, casualties and insurance, materials, net (gain) loss on sale and impairment of assets, and other expenses. Car hire is a charge paid by a railroad to the owners of railcars used by that railroad in moving freight. Other expenses generally include property and other non-income taxes, professional services, communication and data processing costs, and general overhead expense.

      When comparing our results of operations from one reporting period to another, you should consider the fact that we have historically experienced fluctuations in revenues and expenses due to one-time freight moves, customer plant expansions and shut-downs, sales of land and equipment, accidents and derailments. In periods when these events occur, results of operations are not easily comparable to other periods. Also, we have completed a number of recent acquisitions. Because of variations in the structure, timing and size of these acquisitions our operating results in any reporting period may not be directly comparable to our operating results in other reporting periods.

      Certain of our commodity shipments are sensitive to general economic conditions in North America, including paper products in Canada, chemicals in the United States, and cement in Mexico. However, shipments of other important commodities such as coal and salt are less affected by economic conditions and are more closely affected by the weather.

Expansion of Operations

      Pawnee Transloading Company Inc.: On December 31, 2004, our newly formed subsidiary, Pawnee Transloading Company Inc. (Pawnee) acquired the assets of a coal and slag unloading facility in Kincaid, Illinois from LeGere Investors, Inc. The facility serves one of our freight customers in our Illinois Region. The purchase price of the unloading facilities and related assets was $785,000, net of cash received, all of which was allocated to the assets of the facility. Pawnee commenced operations on January 1, 2005.

      Tazewell & Peoria Railroad, Inc.: On November 1, 2004, our newly formed subsidiary, the Tazewell & Peoria Railroad, Inc. (TZPR) commenced operations under a 20-year agreement to lease the assets of the Peoria and Pekin Union Railway (PPU) located in Peoria, Illinois. Rent is payable annually in advance and the first year’s rent was $3.0 million. Future lease payments are subject to adjustment based on certain economic indicators and customer operations stipulated in the agreement. The owners of the PPU include NS, UP and Illinois Central Railroad Company. The TZPR is operated by our Illinois Region and is contiguous to that region’s existing railroad operations.

      Savannah Wharf Branch: On August 30, 2004, we completed the purchase from CSX of the Savannah Wharf Branch rail line located in Savannah, Georgia for approximately $1.6 million. The transaction included the acquisition of 6.5 miles of track and related assets and a twenty year lease of the related real estate along the line. The $1.6 million purchase price was allocated to the track and related assets. The Savannah Wharf

Branch is operated by our Rail Link Region and is contiguous to one of two existing Rail Link operations in the Savannah area.

      Homer City Branch: On January 27, 2004, we completed the purchase from CSX of the Homer City Branch rail line located in Homer City, Pennsylvania for approximately $600,000. The transaction included the acquisition of 16 miles of track and related assets including land and property rights. Operations of the Homer City Branch are expected to begin in the second quarter of 2005 upon completion of track rehabilitation, a portion of which will be funded through government grants. The Homer City Branch rail line will be operated by our New York-Pennsylvania Region and is contiguous to that existing railroad operation.

      Georgia Pacific Railroads: On December 31, 2003, we completed the purchase from Georgia-Pacific Corporation (GP) of all of the issued and outstanding shares of common stock of the GP Railroads for approximately $54.9 million in cash. The purchase price was allocated to current assets ($2.7 million), property and equipment ($37.6 million), and intangible assets ($27.1 million), less current liabilities assumed ($12.5 million). As contemplated with the acquisition, we implemented a severance program. The aggregate cost of the severance program was considered a liability assumed in the acquisition, and as such, was included in the purchase price. In conjunction with the acquisition, we entered into two Transportation Services Agreements (TSAs) which are 20-year agreements for the GP Railroads to provide rail transportation service to GP. One of the TSAs has been determined to be an intangible asset and approximately $27.1 million of the purchase price has been allocated to this asset. This TSA asset is being amortized on a straight-line basis over a 30-year life, which is the expected life of the plant being served, beginning January 1, 2004. No value was assigned to the other TSA.

      Oregon Lease: On December 30, 2002, we expanded our Oregon region by commencing railroad operations over a 76-mile rail line between Salem and Eugene, Oregon previously operated by BNSF. The rail line is contiguous to our existing Oregon railroad operations and increased that region’s annual carloads and enhanced operations through more efficient routing of existing traffic. We are operating the rail line under a 15-year lease agreement with BNSF. Under the lease, no payments to the lessor are required as long as certain operating conditions are met. Through December 31, 2004, no payments were required under this lease.

      Utah Railway Company: On August 28, 2002, we acquired all of the issued and outstanding shares of common stock of Utah Railway Company (URC) for approximately $55.7 million in cash, including transaction costs. The purchase price was allocated to current assets ($4.3 million), property and equipment ($18.1 million), and intangible assets ($35.9 million), less current liabilities assumed ($2.6 million). As contemplated with the acquisition, we implemented a severance program. The aggregate cost of these restructuring activities was considered a liability assumed in the acquisition, and as such, was included in the purchase price.

      Emons: On February 22, 2002, We acquired Emons Transportation Group, Inc. (Emons) for approximately $29.4 million in cash, including transaction costs and net of cash received in the acquisition. We purchased all of the outstanding shares of Emons at $2.50 per share. The purchase price was allocated to current assets ($4.0 million) and property and equipment ($33.7 million), less assumed current liabilities ($4.5 million) and assumed long-term liabilities ($3.8 million). As contemplated with the acquisition, we implemented a severance program. The aggregate cost of these restructuring activities was considered a liability assumed in the acquisition, and as such, was included in the purchase price. The majority of these costs were paid in the three months ended March 31, 2002.

      ARG is composed of three principal subsidiaries, Australia Southern Railroad Pty Ltd (ASR), Australia Western Railroad Pty Ltd (AWR), and WestNet Rail Pty Ltd (WestNet). Both AWR and ASR operate locomotives and rail cars to provide rail freight service to customers in the states of Western Australia and South Australia, respectively. In Western Australia, WestNet is the owner of the standard gauge and narrow gauge track infrastructure and charges track access fees to rail operators that use its track infrastructure, including AWR.

      ARG is also accredited to operate in all the mainland states of Australia, thereby providing ARG with the ability to provide rail freight service across the Australian continent. In November 2003, ARG added a new customer in the State of New South Wales. We account for our 50% ownership in ARG under the equity method of accounting.

Results of Operations

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

      North American operating revenues (which exclude revenues from our equity investments) were $303.8 million in the year ended December 31, 2004 compared to $244.8 million in the year ended December 31, 2003, an increase of $59.0 million or 24.1%. The $59.0 million increase in operating revenues consisted of $27.6 million in revenues from the new GP railroads, TZPR and Savannah Wharf operations and an increase of $31.4 million, or 12.8%, in revenues on existing North American operations. The following table sets forth North American operating revenues by acquisitions and existing operations for the years ended December 31, 2004 and 2003 (dollars in thousands):

      The $43.7 million increase in freight revenues consisted of $18.9 million and $1.0 million in freight revenues from the new GP railroads and TZPR operations, respectively, and $23.8 million in freight revenues on existing North American operations. The $15.3 million increase in non-freight revenues consisted of $6.1 million, $909,000 and $721,000 in non-freight revenues from the new GP railroads, TZPR and Savannah Wharf operations, respectively, and $7.6 million in non-freight revenues on existing North American operations. The following table compares North American freight revenues, carloads and average freight revenues per carload for the years ended December 31, 2004 and 2003:

North American Freight Revenues and Carloads Comparison by Commodity Group

Years Ended December 31, 2004 and 2003

      Coal, Coke and Ores revenues increased by $7.2 million, or 19.1%, due to an increase of $1.1 million from the new GP Railroads and TZPR, and an increase of $6.1 million from hauling carloads of coal on existing operations, primarily for electricity generating facilities.

      Pulp and Paper revenues increased by $9.5 million, or 30.9%, due to an increase of $7.2 million from hauling carloads of Pulp and Paper from the new GP Railroads, and an increase of $2.3 million from existing North American railroad operations serving pulp and paper customers located in our Canada Region.

      Lumber and Forest Products revenues increased by $8.2 million, or 48.0%, due to an increase of $5.5 million from the new GP Railroads, and an increase of $2.7 million on existing operations in our Oregon, New York-Pennsylvania and Canada Regions.

      Metals revenues increased by $6.0 million, or 34.5%, due to an increase of $738,000 from the new GP Railroads and TZPR, and an increase of $5.3 million on existing operations, primarily in our Oregon, New York-Pennsylvania and Canada Regions.

      Chemicals-Plastics revenues increased by $5.2 million, or 47.0%, due to an increase of $3.1 million from the new GP Railroads and TZPR, and an increase of $2.1 million on existing operations.

      Farm and Food Products revenues increased by $4.1 million, or 33.5%, due to an increase of $596,000 from the new GP Railroads and TZPR, and an increase of $3.5 million on existing operations, primarily due to existing customers in our Canada Region and new customers in our Mexico Region.

      Freight revenues from all remaining commodities increased by $3.4 million, or 6.1%, due to an increase of $1.6 million from the new GP Railroads and TZPR, and an increase of $1.8 million on existing operations.

      Total North American carloads were 633,349 in the year ended December 31, 2004 compared to 529,753 in the year ended December 31, 2003, an increase of 103,596 carloads or 19.6%. The increase consisted of 54,552 carloads from the new GP Railroads and TZPR, and an increase of 49,044 carloads, or 9.3%, on existing operations.

      The overall average revenues per carload increased 3.5% to $357 in the year ended December 31, 2004, compared to $345 per carload in the year ended December 31, 2003.

      North American non-freight revenues were $77.5 million in the year ended December 31, 2004, compared to $62.3 million in the year ended December 31, 2003, an increase of $15.3 million, or 24.5%. The $15.3 million increase in non-freight revenues consisted of $6.1 million, $909,000 and $721,000 in non-freight revenues from the new GP Railroads, TZPR and Savannah Wharf operations, respectively, and $7.6 million in non-freight revenues on existing North American operations. The following table compares North American non-freight revenues for the years ended December 31, 2004 and 2003:

North American

Non-Freight Revenues Comparison

Years Ended December 31, 2004 and 2003

      Railcar switching revenues increased $6.2 million, or 18.4%, due to an increase of $950,000 from the new GP Railroads, TZPR and Savannah Wharf operations, and an increase of $5.2 million on existing North American operations of which $4.1 million was in our Rail Link Region. The $4.1 million increase in our Rail Link Region was attributable to a $2.0 million increase in industrial switching, of which $1.0 million was from new customers, and $2.1 million in railroad switching, primarily from growth of Rail Link’s port operations.

      Car hire and rental income increased $4.8 million, or 68.1%, due to an increase of $3.8 million from the new GP Railroads and TZPR operations, and an increase of $1.0 million on existing North American operations.

      Demurrage and storage revenues increased $1.4 million, or 22.9%, due to an increase of $1.4 million from the new GP Railroads, TZPR and Savannah Wharf operations.

      Car repair revenues increased $1.0 million, or 22.8%, due to an increase of $356,000 from the new GP Railroads, and an increase of $657,000 on existing North American operations.

      Management fee revenues increased $571,000, or 21.3%, due to an increase on existing North American operations primarily attributable to our management of a coal unloading facility in our Illinois region.

      Other operating income increased $1.3 million, or 15.1%, due to an increase of $1.1 million from the new GP Railroads and TZPR, and an increase of $232,000 on existing North American operations.

      North American operating expenses were $253.7 million in the year ended December 31, 2004, compared to $208.5 million in the year ended December 31, 2003, an increase of $45.2 million, or 21.7%. The increase was attributable to increases of $15.1 million, $2.0 million and $357,000 from the new GP Railroads, TZPR and Savannah Wharf operations, respectively, and an increase of $27.7 million on existing North American operations.

      Our operating ratio, defined as total operating expenses divided by total operating revenues, improved to 83.5% in the year ended December 31, 2004 from 85.2% in the year ended December 31, 2003.

      The following table sets forth a comparison of our North American operating expenses in the years ended December 31, 2004 and 2003:

North American

Operating Expense Comparison

Years Ended December 31, 2004 and 2003

      Labor and benefits expense increased $17.8 million, or 20.3%, due to an increase of $5.8 million from the new GP Railroads, TZPR and Savannah Wharf operations and an increase of $12.0 million on existing operations. The $12.0 million increase on existing operations consisted of $8.0 million in labor expense and $4.0 million in benefits expense. The labor increase was primarily attributable to $5.0 million of labor expense related to ninety-five new hires and increased work hours for all employees resulting from higher shipment levels on existing operations and $3.0 million from regular wage increases for all employees. The $4.0 million increase in benefits expense consisted of $3.0 million in benefits expense related to the new hires and increased work hours on existing operations for all employees and $1.0 million of increased health and welfare benefits for all employees. As a percentage of total revenues, labor and benefits decreased by 1.1% to 34.6% in 2004 from 35.7% in 2003.

      Equipment rent expense increased $9.3 million, or 50.4%, due to an increase of $4.4 million from the new GP Railroads and TZPR, and an increase of $4.9 million on existing operations. The $4.9 million increase on existing operations was primarily attributable to an increase of $2.2 million in car hire and an increase of $2.7 million in freight car, locomotive and other equipment rental expense, primarily due to a 9.3% increase in

carloads in 2004. As a percentage of total revenues, equipment rents increased to 9.1% in 2004 from 7.5% in 2003, due principally to freight car lease expense on the new GP Railroads.

      Depreciation and amortization expense increased $3.8 million, or 24.4%, due to an increase of $2.3 million from the new GP Railroads and TZPR, and an increase of $1.5 million on existing operations. As a percentage of total revenues, depreciation and amortization remained constant at 6.3%.

      Diesel fuel expense increased $7.1 million, or 38.8%, due to an increase of $600,000 from the new GP Railroads and TZPR, and an increase of $6.5 million on existing operations. The $6.5 million increase on existing operations was primarily attributable to a $5.0 million increase resulting from higher fuel prices in 2004 as the average price per gallon of fuel increased 27.4%, and secondarily attributable to a $1.5 million increase resulting from a 6.7% increase in fuel consumption due to higher traffic levels. As a percentage of total revenues, diesel fuel increased to 8.4% in 2004 from 7.5% in 2003.

      Casualties and insurance increased $1.9 million, or 13.6%, due to an increase of $297,000 from the new GP Railroads and TZPR, and an increase of $1.6 million on existing operations. The $1.6 million increase on existing operations was primarily attributable to an increase in derailment expense in our Oregon Region. As a percentage of total revenues, casualties and insurance decreased to 5.2% in 2004 from 5.6% in 2003.

      All other expenses combined (purchased services, materials, gain on asset sales and other expenses) increased $5.4 million, or 9.8%, due to an increase of $4.1 from the new GP Railroads, TZPR and Savannah Wharf operations and an increase of $1.3 million on existing operations. As a percentage of total revenues, all other expenses combined decreased to 19.9% in 2004 from 22.6% in 2003.

      Interest expense in the year ended December 31, 2004, was $11.1 million compared to $8.6 million in the year ended December 31, 2003, an increase of $2.5 million, or 28.9%. The $2.5 million increase was primarily due to a non-cash $1.6 million write-off related to unamortized deferred financing costs of the refinanced debt (see Note 9 to Consolidated Financial Statements), a cash expense of $257,000 for the termination of interest rate swaps related to the former debt, and a slightly higher average outstanding debt balance resulting from the GP Railroads acquisition in December 2003.

      Other expense, net, was $131,000 in the year ended December 31, 2004, compared to Other income of $986,000 in the year ended December 31, 2003, a decrease of $1.1 million. Other (expense) income, net, in the years ended December 31, 2004 and 2003 consisted primarily of currency gains and losses on Australian dollar denominated cash and receivable balances, and interest income.

      Our effective income tax rate in the years ended December 31, 2004 and 2003 was 41.4% and 36.9%, respectively. The increase in 2004 was primarily due to the tax rate used to compute our U.S. income taxes being stepped up to the highest corporate bracket of 35% based on our current and projected level of profitability. As a result, we increased our fourth quarter tax accrual by $1.0 million, of which $257,000 related to the first three quarters of 2004 and $785,000 related to a revaluation of our pre-2004 net U.S. deferred tax liabilities.

      Equity earnings of unconsolidated international affiliates in the year ended December 31, 2004 were $14.9 million compared to $10.6 million in the year ended December 31, 2003, an increase of $4.3 million, or 40.1%. Equity earnings in the year ended December 31, 2004, consisted of $14.2 million from ARG and $677,000 from South American affiliates. Equity earnings in the year ended December 31, 2003, consisted of $10.4 million from ARG and $270,000 from South American affiliates.

      Net income for the year ended December 31, 2004 was $37.6 million compared to net income in the year ended December 31, 2003 of $28.7 million, an increase of $8.9 million, or 31.0%. The increase in net income was the result of an increase from North American operations of $4.6 million and an increase in equity earnings of unconsolidated affiliates of $4.3 million.

      Basic Earnings Per Share increased by $0.38, or 32.8%, to $1.54 in the year ended December 31, 2004 from $1.16 in the year ended December 31, 2003. Diluted Earnings Per Share increased by $0.33, or 32.0%, to $1.36 in the year ended December 31, 2004 from $1.03 in the year ended December 31, 2003. Weighted average shares for basic and diluted were 24.1 million and 27.4 million, respectively, in the year ended December 31, 2004, compared to 23.7 million and 26.8 million, respectively, in the year ended December 31, 2003. As a result of the retroactive restatement of earnings per share due to the adoption of EITF 03-06, basic and diluted earning per share were reduced by $.05 and $.04, respectively, for the year ended December 31, 2003.

Supplemental Information — Australian Railroad Group

      ARG is 50% owned by Genesee & Wyoming and 50% owned by Wesfarmers, a public corporation based in Perth, Western Australia. We account for our 50% ownership in ARG under the equity method of accounting. As a result of the strengthening of the Australian dollar in 2004, the average currency translation rate for the year ended December 31, 2004 was 11.3% more favorable than the rate for the year ended December 31, 2003, the impact of which should be considered in the following discussions of equity earnings, freight and non-freight operating revenues, and operating expenses.

      In the years ended December 31, 2004 and 2003, we recorded $14.2 million and $10.4 million, respectively, of equity earnings from ARG, which is reported in the accompanying consolidated statements of income under the caption Equity in Net Income of International Affiliates — Australia. The following table provides ARG’s freight revenues, carloads and average freight revenues per carload for the years ended December 31, 2004 and 2003.

Australian Railroad Group Freight Revenues and Carloads by Commodity Group

Years ended December 31, 2004 and 2003

      ARG’s freight revenues were $278.9 million in the year ended December 31, 2004, compared to $206.9 million in the year ended December 31, 2003, an increase of $72.0 million or 34.8%. In local currency,

freight revenues increased 21.1% in the year ended December 31, 2004, compared to the year ended December 31, 2003.

      Total ARG carloads were 985,321 in the year ended December 31, 2004 compared to 847,730 in the year ended December 31, 2003, a net increase of 137,591 carloads, or 16.2%. The net increase resulted primarily from an increase in grain of 107,250 carloads due to a record grain harvest in Western Australia and a new customer in New South Wales, an increase in other ores and minerals of 2,161 carloads due to stronger shipments of sulphuric acid and nickel in Western Australia, an increase in iron ore of 21,901 carloads due to a new customer and additional production from existing customers, an increase in alumina of 3,483 carloads due to higher production in Western Australia and an increase in gypsum of 4,846 carloads. These gains were partially offset by a decrease in hook and pull (haulage traffic) of 5,923 carloads due to certain non-recurring shipments in the preceding year. All other commodities combined increased by a net 3,873 carloads.

      The average revenues per carload increased to $283 in the year ended December 31, 2004, compared to $244 per carload in the year ended December 31, 2003, an increase of 16.0%, primarily due to the strength of the Australian dollar relative to the U.S. dollar in 2004 versus 2003. In local currency, the average revenue per carload increased 4.2% in the year ended December 31, 2004, compared to the year ended December 31, 2003.

      ARG’s non-freight revenues were $54.7 million in the year ended December 31, 2004 compared to $42.6 million in the year ended December 31, 2003, an increase of $12.1 million, or 28.3%. In local currency, non-freight revenues increased 15.5% in the year ended December 31, 2004, compared to the year ended December 31, 2003.

      The following table compares ARG’s non-freight revenues for the years ended December 31, 2004 and 2003:

Australian Railroad Group

Non-Freight Revenues Comparison

Years Ended December 31, 2004 and 2003